New Zealand Winegrowers Say Excise Hike Aggravates Difficult Situation

Dan Marsteller
Posted: July 2, 2010

Despite an excise increase on wine taking effect July 1st, 84% of New
Zealand wineries surveyed by the New Zealand Winegrowers trade group
will not raise prices. Excise is rising by 4 NZ cents per bottle, with
most wineries planning to absorb the difference rather than pass it on
to consumers because, as New Zealand Winegrowers ceo Philip Gregan
puts it, “The simple fact is the market will not accept price
increases.”

New Zealand Winegrowers’ survey pointed to eroding margins for the
kiwi wine industry over time, with 80% of the 170 wineries surveyed
reporting that they had not raised prices in the past three years, and
48% indicating they hadn’t raised prices in five years. This despite
an aggregate excise increase of 11.6% since June 2006. In fact, nearly
one-third of respondents said they had decreased prices in recent
years.

“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.”

New Zealand has battled oversupply issues of late despite the fact
that exports have jumped from 60 million liters in 2006 to 110 million
liters in 2009. The relatively smaller 2010 grape harvest, down 7%
from 2009, should help ease the glut, which has weighed on the results
of even some larger wineries such as Oyster Bay.

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