Coronavirus: 'Challenging' year ahead for New Zealand winemakers with global recession looming

A high-quality vintage is expected after the dry summer.
A high-quality vintage is expected after the dry summer. Photo credit: Getty

With the world's economy struggling amid the fallout of COVID-19, it's likely to be a challenging year ahead for New Zealand winemakers.

Despite a dry summer across much of the country helping to produce high-quality wine, many growers might encounter a dip in prices in the coming months.

Hayden Higgins, Rabobank's senior wine analyst, says although the economic impact of COVID-19 has yet to flow on to New Zealand winemakers it's likely demand will drop towards the end of the year.

"It could be a challenging year," Higgins told Newshub. 

With New Zealand's biggest markets the UK and North America hit hard by COVID-19, exporters may find there is less money for premium New Zealand wines, Higgins said.

"We are signalling we would expect that there will be a potential slowdown in those markets and therefore that's likely to flow back to a softening in wine prices."

Philip Gregan, chief executive of New Zealand Winegrowers, says he is hopeful that Kiwi wine remains popular around the globe.

"The world has changed, but what has not changed is the love that consumers have for New Zealand wine," Gregan told Newshub. 

"We are hopeful that demand will continue to be strong."  

With New Zealand and much of the world in lockdown due to coronavirus, consumer habits have changed, meaning more people are buying their alcohol without leaving their homes.

"We have seen an increase in online sales due to COVID-19, but this increase will not replace the sales lost from winery cellar doors and restaurants which have not been able to open. The huge reduction in demand across the hospitality industry, due to lockdown, has impacted a lot of our producers."

Gregan said the reopening of the hospitality trade "is going to be critical" to much of the industry bouncing back.

"Currently we are seeing two situations happening in markets; there has been strong demand for New Zealand wine in supermarkets and online retail, which has benefited our industry, but on the other hand many small and medium-sized wineries who are focused on hospitality trade and cellar doors have been negatively impacted." 

Higgins says while people are generally drinking the same amount of wine, they tend to opt for cheaper bottles as their income takes a hit. And with New Zealand wine largely competition in the premium category on the world stage, that means demand could drop.

One positive for growers has been the dry summer just past, which is expected to produce a high-quality vintage.

"That gives you an advantage in a market where you're looking to maintain your point of difference," Higgins said.