Grower profitability is under siege and many growers are asking what the future holds for their business, says New Zealand Grape Growers’ Council president Stuart Smith.
Mr Smith was speaking to a handful of growers at the council’s annual meeting, held at Winegrowers New Zealand’s Romeo Bragato conference in Auckland last week.
For a significant number of growers it had become more profitable and less financially risky to supply the bulk rather than the bottled market, Mr Smith said.
"It can be questioned whether this market structure really matches our aspirations as an industry."
The 2011 average grape price fell to $1172 per tonne from $1293 the previous year, forcing growers to rely heavily on cut-backs and efficiencies, as well as off-farm income, Mr Smith said. Prices peaked in 2008 at $2061 per tonne.
In Marlborough, total income improved for many growers because of larger crops and the bulk wine market which acted as a backstop. However, in regions where crops were smaller and management costs higher, grower incomes took another hit.
"As winery incomes improve as sales grow, I would hope the question of whether growers are receiving the right price incentives to produce high quality fruit is given serious consideration," Mr Smith said.
The growth in markets which saw 2010 wines oversold and strong demand for the 2011 vintage was heartening. However, it was important to retain control of the supply and demand balance because the risk of a production spike remained.
Most vineyards were growing to yield caps and fruit was being left on the vine. Factor in the smaller vintage seen in most North Island regions and there was no room for complacency, Mr Smith said.
There was no going back to the golden days before 2008 but this was not necessarily a bad thing. Recent troubles were caused by the gold-rush that governed grape and wine prices in the mid-2000s.
The future should be built on innovation and adapting to changing circumstances, the understanding that every grower and winery shared an interest in the reputation of the national brand and the importance of quality wines, he said.
Mr Smith is also the president of Winegrowers New Zealand which brings together the Grape Growers Council and the Wine Institute of New Zealand representing wine companies.