The challenging landscape of NZ wine.

The current landscape is the most challenging I have seen for a considerable time. We have seen a correction in export demand which has occurred after a step change in supply from Marlborough, with record harvests in 2022 and 2023. The realignment between demand and supply has resulted in higher inventory levels, changing demand patterns, and a new harvest expected to have lower yields. All placing pressure on the future cash flows for winegrower and grape grower businesses.

The changing landscape of NZ Wine.

The Marlborough wine industry celebrates its 50th anniversary as consumers around the globe enjoy more NZ wine than ever before.

The landscape for NZ wine and Champagne share similar trends. Rebounding from a lower 2021 to achieve record global sales in 2022, both have a declining domestic market, with growth in the last decade being export led with USA being the key market.

Record Export growth from a year of two halves.

A respected business commentator highlighted the importance of having a strong NZ agricultural export sector. To achieve this the key areas of focus are; control the cost base, manage the debt levels, and sell like hell.

NZ wine globe demand over the last 12 years has been growing consistently at 3.5–4.0% year on year, it is forecasted to achieve MAT 370ML by June 2023. The upcoming 2023 vintage becomes a key vintage to maintain this steady growth trend.

“Revenue is vanity, profit is sanity, but cash is king”.
This expression highlights the importance of cashflow management, often the domain of the business owner, CEO, or CFO. How it is managed has a broad reach within a business,
impacting capital projects, short term revenue targets, and overheads costs.

This is a post harvest update to understand the impact of the Marlborough 2021 vintage. The insights we share in this paper keep leading back to a recurring question “is the wine industry moving more towards a value led strategy due to constraints on supply”?

In April we predicted the Marlborough 2021 grape harvest would yield a total of between 258 272k tonnes. NZ Winegrowers have confirmed the Marlborough yield was 270k tonnes, 21% below the previous vintage, from 28.5k producing hectares.

As the vintage in Marlborough winds down I became curious about the impact of this grape harvest. Throughout the 2021 vintage my friends and colleagues all had a view on the reasons behind the early timing and lower yields. This fueled the curiosity to understand more about how this vintage will impact the various wine businesses within the industry.