29 Oct 2008

Cautious approach urged on winery expansion

12:56 pm on 29 October 2008

New Zealand grapegrowers and wine makers are advised to take a "softly, softly" approach to increasing their production - especially in the current uncertain economic climate.

A report from Rabobank says the New Zealand wine industry has been able to reap high prices in a world awash with wine, because demand continues to outstrip supply.

But the agribusiness banking specialist warns that another record harvest this year and further production coming on-stream from new vineyard plantings, could tip New Zealand into oversupply if it's not careful.

While the impact of the current financial crisis is uncertain; Rabobank wine industry analyst Adam Morris says past experience has shown that people don't stop drinking wine in tough times.

But buying patterns change and he says New Zealand's position at the higher end of the market might actually benefit from that, eg by buying expensive wine to drink at home instead of going to restaurants.

New Zealand Winegrowers chief executive, Philip Gregan says wine makers need to be careful about matching production to market forecasts, even more so in these troubled economic times.