New data from New Zealand Wine, the country's wine trade body, reveals a sharp decline in both the value and volume of wine exports over the past 12 months, marking a significant downturn following record highs in 2023.
The data underscores the challenging economic environment faced by New Zealand winemakers, as well as broader global market dynamics that have impacted demand and export volumes.
A Decline in Value and Volume
According to the annual report by New Zealand Wine, in the year ending June 2024, the value of New Zealand wine exports dropped by 12.2% year-on-year, falling to NZD 2.1 billion (USD 1.33 billion). Export volumes mirrored this trend, with a 12.5% decrease to 276.2 million litres, compared to the previous year.
The report attributes these declines to reduced replenishment orders from international importers, distributors, and retailers. While global demand for New Zealand wine surged in 2023, winemakers have since faced a "rollercoaster ride," as New Zealand Wine put it, with factors like inflation, economic pressures, and higher taxes in key markets contributing to the fall in demand.
Major Markets Impacted: US and UK
The US and the UK, New Zealand’s top two export markets, were both hit hard by the downward trend. Exports to the US dropped by 9.9% in both volume and value, totaling NZD 787.5 million and 97 million litres, respectively. Meanwhile, in the UK, sales fell even further. Export volumes dropped by 12.9% to 69 million litres, while the value of exports fell 17.9% to NZD 440 million. These markets, which have long been cornerstones of New Zealand’s wine export strategy, are now showing signs of reduced demand due to ongoing economic challenges and market disruptions.
Sauvignon Blanc and Pinot Gris Exports Suffer
The decline in export volumes also impacted New Zealand's flagship wine varieties, particularly Sauvignon Blanc and Pinot Gris. Sauvignon Blanc, which accounts for the majority of the country's wine exports, saw volumes drop by 11.4% to 247 million litres. Pinot Gris exports experienced an even larger decline, with volumes down 14.5% to 8.8 million litres. These reductions reflect broader challenges within the global wine market, as demand slows amid changing economic conditions and consumer preferences.
Domestic Market Challenges
While New Zealand’s wine export sector faces international hurdles, the domestic market is not immune to difficulties. The country’s wine sector has been affected by demographic changes, migration patterns, and shifts in local consumer behavior. Estimated figures indicate that total domestic sales volumes dropped 8% to 78.9 million liters in 2024, the lowest level in 20 years. Sales within the domestic market are projected to continue declining, with a 5.8% drop anticipated for 2024, totaling 39.9 million liters.
Market Dynamics and Outlook
The challenging global economic environment, coupled with elevated taxation in some key markets, has forced importers and distributors to scale back orders, contributing to the decline in New Zealand wine exports. Inflationary pressures have weakened consumer purchasing power in major markets like the US and UK, while geopolitical uncertainties have further complicated the wine trade. In this context, the New Zealand wine industry has had to navigate a combination of reduced consumer demand, higher costs of production, and logistical challenges.
Source: Yahoo Finance