Wine industry digs in for long-term survival

Wine industry digs in for long-term survival

Two-thirds of New Zealand wineries who participated in a national business confidence survey believe they will be trading profitably in 10 years time and despite acknowledging a tough time ahead are determined to do what they must to ensure long-term business survival.

The overriding commentary of wineries studied in the recent Markhams wine industry survey is that there is pain to come but they are actively seeking out new export markets and implementing better management strategies.

“There is no question that the industry is facing some tough issues and the short-term trading environment ahead will mean there will be some who will have to exit the industry but the majority are digging in for the long-term and are confident that profitability will come right in five to 10 years,” says Sam Bassett, Markhams national wine spokesperson.

Nationally, respondents report that the 2010 year was more positive than they had anticipated in January 2010, with 44 percent believing trading conditions had improved. There is reasonable confidence that conditions will continue to improve over the coming year, but only half of respondents believe they will be trading profitably in a year’s time.

There is a significant jump in confidence for profitability in the mid to longer term, with 64 percent of respondents being highly confident of profits in five years, increasing slightly to 67 percent having strong confidence of viability in 10 year’s time.

While the $NZD is not reported as a significant threat, it has made the USA and UK markets less competitive for many. Exporters are expanding their search for new sales opportunities with Scandinavia featuring as a potential market for the first time in nine years of Markhams’ business confidence surveying.

The Rugby World Cup 2011 and organic certification are two opportunities identified across the nation as being positive for growth. Asia remains a stable area for export growth, while Europe, Canada, and Eastern European countries, in particular Russia, feature strongly.

Respondents say they have grown their brands through increased marketing efforts, both nationally and internationally. They have been planning better to meet the needs of the market by reducing stock levels, decreasing production, discounting stock and implementing more regular export shipments.

On the negative side, respondents believe there will be forced sales, wineries retrenching, wineries becoming growers only, and increased consolidation.

Nationwide the majority of respondents see themselves as long-term industry participants, few are planning to pull out grapes and even less are intending to sell their land.

However for those who are forced to sell, the outlook is not positive with soft sales reported by rural valuers and the few buyers present are very discerning and price conscious. Vineyards located away from the traditional grape growing regions are likely to be hardest to sell at desired prices.

The Markhams wine business confidence survey is conducted twice yearly by the national wine industry business development unit of the Markhams chartered accountancy group. It is conducted in Hawke’s Bay, Wairarapa, Marlborough, Nelson, Canterbury, Central Otago and Auckland and covers topics such as sales and distribution, capital investment, branding and profitability.

The survey report is made available free to industry participants and is published on the Markhams website www.markhams.co.nz

ENDS

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