By Andrew Starke
Winemakers in New Zealand’s renowned Marlborough region are struggling financially with several having already gone into receivership.
According to wine website www.decanter.com, Cape Campbell Wines and its affiliate companies, Brown Sorensen Vineyards and the Brown Family Trust, went into voluntary receivership earlier this month (July), owing creditors millions of dollars.
This follows the demise last month of Awatere Vineyard Estates, a large contract grower owned by Auckland-based Barry Sutton, which was put into receivership alongside the Marlborough wine company Gravitas.
Chairman of Marlborough stalwart Oyster Bay Vineyards, Sandy Maier, predicted early this year that the company would operate at a loss over the 2010 financial year.
The New Zealand Wine Growers Association believes a number of factors are at play including the strong New Zealand dollar, an over-supply of sauvignon blanc, a resurgence of chardonnay in some key markets and, most recently, a government increase in the excise tax on wine.
Despite the government increasing excise on wine by four cents per bottle on July 1, wine producers have been unwilling to raise their prices in the competitive local market.
Winegrowers recently surveyed wineries on whether they intended to pass the tax increase on to consumers and of wineries who responded 84 percent indicated they would be forced to absorb the excise increase.
"Many wineries are already suffering financially and this latest tax increase will make the times that much tougher for them. The simple fact is the market will not accept price increases and wineries have no option but to absorb the tax rise," said New Zealand Winegrowers’ CEO Philip Gregan.
The survey also revealed that this is not the first time wineries have been forced into the position of absorbing annual tax rises.
Of the more than 170 wineries who responded to the Survey, 80 percent indicated they had not increased prices in the past three years, with 48 percent claiming they had not increased prices for at least five years or had never lifted prices, despite excise rising 11.6 percent since June 1 2006.
Additionally, 32 percent of wineries indicated they had in fact lowered prices in recent years despite annual excise increases.
"This Survey highlights the serious financial pain annual excise increases are causing our small and medium wineries because excise is a production and not a consumption tax," said Gregan.
“It also makes abundantly clear that those who want higher rates of excise as part of the Sale of Liquor reform will only succeed in putting wineries out of business. That would be bad news for tourism, bad news for the hospitality sector and bad news for the economy."