New Zealand winegrowers enjoyed a record harvest in 2013 but are well placed to avoid the oversupply issues that have hampered them in the past, accounting giant Deloitte said Thursday.
Deloitte reported winegrowers produced a grape harvest of 345,000 tonnes in 2013, the biggest on record and a 28 percent increase on the previous year.
Previous bumper harvests in 2008 and 2009 resulted in a wine glut, forcing down prices, but Deloitte said the industry had learned its lessons and put plans in place to deal with a rise in volumes.
Tim Burnside, associate director of corporate finance at Deloitte Christchurch, said the last surplus occurred after an influx of new entrants into the booming industry and caught the market by surprise.
“The market wasn’t set up for that in 2008-09, so there was a lot of selling of bulk wine and offloading at bargain basement prices,” he told AFP.
“There are now markets available… winegrowers have ensured they have an accurate register of how much land is planted, what it’s producing and how much wine is coming onto the market.”
Burnside said the tough times caused by the glut had also forced winegrowers to cut costs and operate on lower margins, resulting in a leaner industry that was gradually increasing its profitability.
A Deloitte report this week said there was “a level of optimism that was not present three to four years ago” in the industry, which generates exports of about NZ$1.2 billion ($1.0 billion) annually.
The report said that larger wineries were proving more financially stable than smaller ones in New Zealand, paving the way for consolidation in the industry.
“With the financial difficulties faced by the smaller wineries, it opens a door of opportunity for those larger and more financially stable competitors to increase their holdings by either merging with or acquiring the struggling wineries, potentially improving their own economies of scales,” it said.
“This is a trend that we have begun to witness in recent years. It also aligns with the interest in the industry from wealthy overseas investors.”
The report said New Zealand’s high exchange rate was the top issue facing wineries, forcing some of them to shift their focus from exports to the domestic market.