Hawke's Bay backs wine industry benchmarking survey

The annual wine industry benchmarking survey produced by national accountancy firm, Deloitte, is “on the nail”, says Lyn Bevin, Executive Officer of Hawke’s Bay Winegrowers.
Deloitte's sixth annual benchmarking survey says the industry is showing early signs of a largely export-led recovery, despite the high exchange rate in key markets.

Ms Bevin agreed that Hawke’s Bay wineries were seeing a recovery, but cautioned that it was slow to translate through to increased profitability for Hawke’s Bay wineries and growers. Looking into the recovery, Hawke’s Bay was positioning itself to make the most of improving conditions, she believes.

In Hawke’s Bay Winegrowers’ 2011 annual report, Chairman Nicholas Buck highlighted the region’s drive for quality as the reason behind increasing sales. Over the last five years, Hawke’s Bay wineries have reduced yields per hectare by 21 percent, improving ripeness and concentrating flavours. For the same period, Hawke’s Bay red wine exports have increased 48 percent.

“But don’t expect our region’s wineries and growers to be throwing the cash around,” cautions Ms Bevin. “There is a long way to go – most of our Hawke’s Bay wineries fall into the smaller categories of under $5million in total revenue, and these wineries are barely gaining profitable returns. From the report, bigger wineries are able to lower prices and combine bulk wine exports to their income mix. Smaller wineries also have proportionately higher administration costs to deal with and often owners don’t reimburse themselves at the rate of a commercial salary.”

She noted that in line with the Deloitte’s report, Hawke’s Bay Winegrowers remained concerned about the management of bulk wine exports and had brought this to the attention of the national body NZ Winegrowers, several times this year.

Across all the wineries surveyed, Deloitte reports that over 50 percent of case sales of branded wine are exported. “While we don’t have this sort of information for Hawke’s Bay, this could also be true for the region,” responded Ms Bevin. “Having said that, Hawke’s Bay also has a significant number of very small wineries producing less than 5,000 cases per annum and these are more dependent on cellar door sales and wine tourism.”

The report also encourages collaboration between wineries in international markets.

“We have been told this several times going back to the BCG (Boston Consulting Group) study in 2000, a Massachusetts’ Institute of Technology Entrepreneurship Center project in 2007, and the same message was delivered to regional wineries by Steve Green, NZWG Deputy Chair.

“Our Hawke’s Bay wineries aren’t competing against each other in the global market; we are too small for that. Instead the individual wineries must work together to gain critical marketing mass. We are a very diverse wine-making region, unlike any other in the world. What we have in common is Hawke’s Bay,” says Ms Bevin.

According to the report, exchange rates are the biggest issue across most wineries but the second biggest issue is marketing our wine overseas. Again, Nicholas Buck in his Chair’s Report agrees.

“Collaborative marketing is vital but can only be done in tandem with the industry’s own ability to fund activity. NZ Winegrowers has recently undergone a strategic review and we look forward to seeing what will be done to address these marketing concerns within the industry and management of bulk shipments.”

In summary, Ms Bevin feels Hawke’s Bay Winegrowers is well positioned but adds, “Only through collaboration will we maintain the premium brand image and red wine positioning of Hawke’s Bay. This is the road to profitability for Hawke’s Bay wine in today’s global market.”