Wineries Press on with Cautious Optimisim
August 2010.
Wineries nationwide report that although the 2010 year has not met predicted expectations for most, overall business confidence has improved since last year. Moving stock and significant lowering of excess wine stocks coupled with new market opportunities are producing some positive glimmers.
Over three quarters of wineries studied in a recent Markhams wine business conditions survey report that they are optimistic expecting trading conditions to improve or remain the same over the next 12 months. For the first time, Central Otago and Canterbury wineries have been included in the survey.
Throughout the country, respondents report margin pressure, oversupply and the high exchange rate as the biggest threats to the industry. Wineries have indicated overwhelming concern over the impending GST rate increase and the expectation those supermarkets will demand that wineries absorb the increase in order to maintain current price points.
Markhams national spokesperson Graeme Rhodes comments, “Overall improvements in confidence results from lower excess stock levels compared to last year and lower prices paid for grapes. Sales at lower price points however, see profitability as tenuous and a continual challenge. The huge increase of bulk wine exports into overseas supermarket house branded wines is pushing down prices.
“Cash flow is a priority for much of the industry, and while stock is being sold it is at the expense of profit,” Mr Rhodes says.
“For most wineries this is a time of consolidation and there is growing need for wineries to refine their business models. With 21 percent of respondents suggesting worse times ahead, the industry continues to remain under huge pressure.
“There are a large number of wineries for sale around the country and further receiverships can be expected.”
A majority of respondents cite that developing new markets, particularly in Australia, China and other Asian countries, is the strongest opportunity.
Lower price points for New Zealand wines are making them more attractive to ‘new end customers’, particularly in Australia. The ability to upsell more expensive quality New Zealand wines to a small percentage of these customers is an opportunity Markhams believes needs to be realised.
An initiative of a national wine industry business development unit of the chartered accountancy group, the regular Markhams survey, conducted in Auckland, Canterbury, Hawke’s Bay, Marlborough, Otago and Wairarapa covers topics such as sales and distribution, capital investment, branding and profitability.
For more information contact:
Graeme Rhodes, Markhams Christchurch
Phone 03 379 6710
graeme.rhodes@markhams.co.nz
