New Zealand Winegrowers says the country is carrying unsold wine stocks of around 30 million litres, but the national body which represents the wine industry is predicting there will likely be a “substantial improvement” in that figure by the end of June next year.

Media reports last week put the figure of unsold wine at 70 million litres, but Winegrowers’ chief executive Philip Gregan said that figure was wrong.

Production from the 2008 vintage was about 200 million litres while sales had totalled around 173 million litres, leaving less than 30 million litres. By the end of New Zealand Winegrowers’ financial year in 2010, the position would likely be substantially improved.

Meanwhile a report from Citigroup suggests that New Zealand’s unsold wine stocks may be more of a danger to Australia’s wine industry than to ours.

The popularity of our white wine in particular could mean a greater market share in Australia for New Zealand’s wine industry. While prices could be driven down, Citigroup analyst Andy Bowley says New Zealand wine is gaining share in key export markets including Australia at the expense of domestic Australian producers.

Here at Wine Technology magazine, we believe the New Zealand wine industry’s rapid growth during the past decade – and the astonishing popularity of our sauvignon blanc on the Aussie market - has taken the Australian industry by surprise.

At the same time, the Australian brand has taken a knock on international markets. Droughts and high water prices have further damaged the Aussie industry and low international wine prices have contributed to a situation where many growers are being forced out of business.

The task for New Zealand is to ensure that the same thing doesn’t happen to us. The Citigroup report says in recent years supply growth has outpaced demand as high yields have coincided with the global consumer downturn, raising concerns of a structural oversupply similar to Australia.
However, Citigroup analysts remain less convinced that the situation is structural and expect over time, as yields revert to historical averages, that supply and demand dynamics will improve.

For the Australians, the “New Zealand situation” remains more worrying. An increase in bulk wine currently crossing the Tasman in their direction - inevitably with lower price points - will impact on Aussie producers for the rest of this year and well into the next.

If the New Zealand dollar lowers and export demand growth continues, wine producers in Australia will suffer further discomfort from New Zealand. 
The fact is, Australia remains significantly more oversupplied with wine than us, and exports of wine from Australia to New Zealand have dropped by a significant degree this year.

Among those items of good news is the concern that increased exports of our wine to Australia and discounted prices doesn’t become the norm for future years. Otherwise, the quality of the New Zealand brand could suffer over a much longer term.