Theatre's accountant goes off-script with 'dire' wine predictions

The next few years are going to be "so dire" for the wine industry, and the effects will be felt throughout Marlborough, an accountant has warned councillors.

By Kira Carrington for Local Democracy Reporting

An ongoing oversupply of wine on the market coupled with falling demand has led to a drop in the value and volume of wine exports.

Anton James & Co managing partner Anton James said, as a result, every grapegrower he spoke to was looking at cutting production, such as by mothballing vines.

James was presenting the Marlborough Civic Theatre Trust’s annual financial report to the Marlborough District Council’s Strategy and Community Partnerships committee on March 12. He was the trust’s treasurer, but his accounting firm also had clients in the wine industry.

Just before leaving the council table, James offered his take on the Infometrics report on Marlborough’s economy presented earlier in the meeting.

The report wasn't "grim enough" on what was Marlborough’s largest industry, compared to what he was hearing from his clients, he told the councillors.

"Sorry, this is not related to the trust, but it affects the trust," James said.

"The next three years plus is going to be so dire.

"If you’re a grapegrower, you’re not paying tax for the next five to six years. Because the losses you’re making this year, next year, and the following year will take five years to unwind in terms of the prices they get per tonne and what they can produce.

"No grapegrower can afford to spend money on anything extra, they’ll be looking at how they can cut costs. That affects everything, every person in the economy."

He said he would be interested in how upcoming rating valuations could impact his clients’ rates bills, particularly if their properties were valued lower.

In the past few years their property values had nearly doubled, and they had been paying up to 40% more rates to the council as a result, James said.

"But those land values are coming back 40% from what they were ... without a doubt."

James said if ratings values were not pared back, his clients would be “doomed” and the impact on Marlborough’s economy would be "worse than after [the] GFC [Global Financial Crisis]".

"I don't know how you square that on the ratings things, I’ll be very curious to see ... that's your issue as councillors to work out."

Kevin Moseley, chairman of the Civic Theatre Trust, quipped: "I told you he was the Grim Reaper."

Councillor Gerald Hope, who chaired the committee, thanked James for his comments.

"This is the reality of what we’re dealing with with, when we start to finalise our budgets," Hope said.

Wine Marlborough general manager Marcus Pickens told Local Democracy Reporting on Wednesday that the industry had been very open with the council about its challenges.

"I would be surprised if anyone in that audience found anything that [James] said as a surprise," he said.

"There's some challenges for us to rebalance that supply and demand."

Pickens said he also expected ratings values on vineyard land would come down, but by how much would be up to the council.

"Land values are very closely tied to market performance and that is under pressure at the moment.

"We've been signalling this to council for a period of time as well because that rating model is based on land values."

But the long-term outlook was positive, Pickens said.

"There are signals that there is a lot of demand for New Zealand wine at the moment, which is great," he said.

This year’s harvest had benefited from good weather in the past month, he said.

Similar to last harvest, grape growers would only harvest the very best of the fruit as the industry strived for the "critical factor" of rebalancing of supply with demand.

"There’s going to be a long road to restoring profitability, that is the big challenge. And that does take some time, to work through trying to rebalance, [and] remove unprofitable sales from the system."

– LDR is local body journalism co-funded by RNZ and NZ On Air.