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Posted: Tuesday, 09 November 2010 17:07

Oversupply Worries Kiwi Wine Producers

The battle of values vs. volumes that dogs the New Zealand wine industry causing a glut of wines and an intense pressure carries on, with the owner of a Central Otago Winery insisting that the relentless pursuit of growth will plunge the wine industry into another crash while the volume producers insisting they are driving the market with value and not volume

Speaking at the Wine Discovery New Zealand conference in Christchurch last week, the Felton Road owner Nigel Greening blamed the industry's oversupply problems on the unrealistic obsession with growth. A proliferation of cheap bulk wine, backed by big corporate players, had eroded the price of New Zealand wine and the wine industry had been over-eager to cash-in on perceived growth in global demand, Greening said.

"People look at the market and see the trend and say `I'll have that' and forget there's a hundred people also intending to have that same hunk of the market."

The situation is quite similar to India where many foreign producers and even the domestic counterparts have burnt their fingers thinking the market is very lucrative, forgetting that there are many, many more producers and countries chasing the same small market, event though the growth rate is rather high.

Jim Robertson, the global business relations manager for wine giant Pernod Ricard New Zealand, on the other hand insisted that there was still a growing demand in emerging markets like India and China, where New Zealand wines still commanded a premium price.

The company owns the flagship wine brand, Montana, which was globally re-named as Brancott Estate this year, in honour of Brancott Vineyard, the brand's original Marlborough vineyard and home. The winery was owned earlier by Allied Domecq. It has not been very successful in promoting the brand in India but the Indian operations claim that they will soon start promoting their New Zealand portfolio-now that the ‘restructuring’ has been completed.

"Pernod Ricard is going into the global market place and driving the business much more aggressively," Robertson, adding, "But we are not talking driving volume, we are talking driving value."

Meanwhile, a New Zealand Shanghai wine retailer and importer said at the Conference that wine industry faces a tough sell in China, where a new generation of drinkers have never heard of Kiwi Sauvignon Blanc. "New Zealand Sauvignon Blanc doesn't have the halo there that it has everywhere else in the world. Don't just rely on sauvignon blanc in China, try something else," he said. The importer Mr Zhou reportedly poured cold water on much of the hype around opportunities for New Zealand wines, saying, "Everyone is targeting China at the moment." However, despite the almost total ignorance of New Zealand among Chinese, he admitted that the Kiwi wines were doing well in China.

The conference was organised with a budget of NZ $200,000 to be funded by the Ministry of Economic Development in order to invite over a hundred international guests and eight journalists who are expected to write about the conference.


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