Winemakers see a tough road ahead to return the wine industry to profitability.
The industry says it lowered the volume of grapes harvested in 2010 by 19,000 tonnes - 7% below last year's record of 266,000 tonnes.
Marlborough, the largest producer, lowered production by 10,000 tonnes.
New Zealand Winegrowers chairman Stuart Smith says the industry should be congratulated on cutting grape production, in an effort to balance supply with the export demand for wine.
He says the fact that Marlborough cut production as much as it did, despite an increase in the area of productive vineyards, deserves praise.
But John Buck, who owns Te Mata Estate winery in Hawke's Bay, says long-term damage has been done to the industry's credibility by selling wine cheaply and reducing production now won't reverse that.
Wine writer Keith Stewart says the industry needs to back itself and focus on selling at the top of the market.
Profit some time away - Yealands
Peter Yealands of Yealands Wines in Marlborough says it will be some time before he, and most other winemakers, start to see a profit, but there is light at the end of the tunnel now.
Marcus Pickens from Wine Malborough says the industry will have to keep cutting production to get over-supply under control.
NZ Winegrowers acknowledges it does not want the 2011 and 2012 harvests to be bigger than those of 2008 or 2009.
Chief executive Philip Gregan says no wine-growing regions are exempt from the challenges facing the industry.