New Zealand's wine industry is looking beyond its biggest export market Australia as the "kiwi" dollar's unprecedented strength against its Australian counterpart dents export earnings from the island nation's closest trading partner.
Australia sources more than half of its foreign wine from New Zealand. The popular Marlborough Sauvignon Blanc dominates around 70 percent of Australia's Sauvignon Blanc market. But as New Zealand's buoyant economy outperforms its larger neighbour's, the kiwi has climbed versus the Australian dollar , just as wine consumption in Australia plateaued.
Last year, New Zealand's wine exports to Australia fell for the first time since 2003, easing 7.5 percent to NZ$356 million ($269.03 million) from 2013. In contrast, shipments to the United States rose 13.6 percent to NZ$343 million. After more than doubling since 2007, exports to the U.S. may overtake shipments to Australia this year if they continue to grow at their current pace, according to people in the industry.
"The key is for wineries to have a balanced portfolio of markets and always be able to react to the market, and a number of them are doing that right now by looking at the U.S.," said Chris Yorke, global market director at industry body New Zealand Wine. "Wineries are realising that the No.1 growth opportunity for New Zealand in the next five years is the United States."
Kiwi winemakers shipping to the U.S. have strong currency headwinds to contend with. But the picture is more optimistic, as the kiwi has retreated to around $0.7500 from highs near $0.8800 in mid-2014. Dan Taylor, general manager at Forrest Wines, tells Reuters that his company has begun stocking its Sauvignon Blanc at Whole Foods supermarkets in California. The Marlborough-based firm is building up its presence in the U.S., he says.