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Record Sauvignon Blanc Grape Harvest in New Zealand may cap Global prices

A record Sauvignon Blanc grape harvest in New Zealand may cap prices of the wine for as much as three years as recessions slow demand growth in the nation’s key export markets, according to winemaker Villa Maria Estate Ltd.

The crop, New Zealand’s biggest export variety, climbed 5 percent to 177,000 metric tons even after heavy pruning to reduce volumes, New Zealand Winegrowers said today in a statement. Across all varieties, production was unchanged at 285,000 tons, with Pinot Noir down 16 percent to 27,500 tons, the industry group said in an end-of-harvest assessment.

Australia, the U.K. and the U.S. are New Zealand’s biggest wine markets, accounting for about 86 percent of shipped volumes. Sauvignon Blanc makes up more than three-quarters of New Zealand’s trade, with Pernod Ricard SA’s Montana unit, Constellation Brands Inc.’s Nobilo arm and Villa Maria producing more than half.

“It’ll take a while for the oversupply to come back into balance,” Villa Maria Managing Director George Fistonich said today from Auckland, referring to Sauvignon Blanc. “There probably will be an element of discounting until it comes back into balance,” possibly by 2012, Fistonich said.

New Zealand growers pruned heavily this season as the global recession cut demand and winemakers warned growers in December not to produce more than their contracted volumes. Still, good growing weather in New Zealand and a rise in vineyard acreage helped to offset the impact of the pruning.

Marlborough Output

Sauvignon Blanc output from New Zealand’s Marlborough region, where LVMH Moet Hennessy Louis Vuitton SA’s Cloudy Bay is produced, rose 5 percent from last year, Winegrowers Chief Executive Officer Philip Gregan said today. The “fantastic” quality of the latest crop should help shield winemakers from weaker prices, Villa Maria’s Fistonich said.

Volumes in the U.K., New Zealand’s second-largest market, are “buoyant” in part due to supermarkets offering house-brand Sauvignon Blanc at less than four pounds ($6.55) a bottle, Fistonich said. So far, that seems to have cut into sales from Spain, France, Chile and South Africa, rather than New Zealand brands which typically sell for around six pounds.

Sales are slowing in the U.S., though demand remains strong in Australia, Fistonich said. Some producers are cutting prices in the U.S. to maintain volume, in a risky long-term strategy, he said.

Planting in Marlborough, New Zealand’s largest wine region, has more than doubled the past five years. Nationwide, planting in New Zealand increased to 31,000 hectares the past year, up about 7 percent from 2008, Winegrowers said.

‘Crop Thinning’

“A large amount of crop thinning went on and we know there were grapes left on the vines,” Winegrowers Gregan said by phone after a meeting with growers in Marlborough. “We’re on the right track but we’re not out of the woods yet.”

The global recession is likely to drive French wine exports at least 20 percent lower this year, Claude de Jouvencel, head of the French Federation of Wine and Spirits Exporters, said June 2.

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Wine consumption in the U.K., New Zealand’s second-largest market, declined for the first time since 1995 last year. Sales fell 2 percent to 1.16 billion liters, the Independent reported June 12, citing a report by market research house Mintel.

New Zealand’s wine exports rose 21 percent to 103.5 million liters in the year ended March 31, according to New Zealand Winegrowers. Sales jumped 23 percent to NZ$945 million ($601 million), with per liter sales gaining 1.7 percent to NZ$9.13.

More on this at Reuters, New Zealand here:

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Thursday, November 23, 11:22 am

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