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New Zealand's wine industry - gearing up to top $1 billion in exports this season - needs to confront the "new reality" of curbing production volumes.
In the past season some growers left grapes to rot on vines as another 2,000 hectares of grapes came on stream in the 2009 harvest.
"Unmistakable warning signs emerged this year," Winegrowers New Zealand chairman Stuart Smith says.
Increased supplies from the 2008 vintage boosted competition and constrained prices, and the situation was made worse by the global recession.
"Lower profits are the reality for many in the industry this year," says Smith.
Wine exports grew 24%, by $194 million to $992m, and domestic sales of NZ wine grew 29% to 60 million litres as imports fell 18.5% to 33.3 million litres. The current vintage is expected to push export earnings over the billion-dollar mark, a year earlier than expected.
But prices paid to grapegrowers fell as a result of increased supplies, even though the number of wineries lifted by 58 to 643.
The 2009 harvest showed potential to spike at 400,000 tonnes of grapes, far higher than the 285,000 tonnes harvested in 2008.
Growers and wineries "worked together" to bring the crop back into line with market demand, with some growers leaving fruit unpicked.
The "disciplined industry approach to yield management" meant the 2009 vintage also came in at 285,000 tonnes, and average yield of 9.2 tonnes per hectare, down from 9.7 tonnes per hectare in 2008.
Smith says the industry needs to confront the new reality: "Continued effective management of supply is fundamental to our future success."
The fallout from the 2008 vintage included a surge in bulk wine exports, which have historically made up less than 5% of total export volume.
In the past year this quadrupled to nearly 20%.
"While bulk exports may relieve pressure on wineries in the short term, in the longer term they may significantly impact our market positioning and the reputation of New Zealand wine and our brands," Smith warns.
"They need to be managed very carefully".
In the Gisborne region, Constellation Brands Inc, New Zealand's second-largest winemaker which owns Nobilo, in February called for some semillon, reichensteiner and chenin blanc grapes, normally used to blend with sauvignon blanc, to be left on the vines.
In June, Pernod Ricard New Zealand, which owns the Montana and Corbans brands, announced it was dropping some of its Gisborne growers and a substantial amount of grapes because of a decline in the popularity of chardonnay. Pernod Ricard previously accounted for about 60% of contracted grapes in the region.
Chardonnay grapes for both sparkling and table wine were the main variety hit, but there were also effects on other varieties such as pinot noir, pinot gris, merlot, muscat and sauvignon blanc.
Gisborne's harvest was down 3% on last season.
The Marlborough harvest fell 1% because of lower volumes of pinot noir and "close management" of sauvignon blanc, which was up just 5% at 161,000 tonnes (57% of the vintage) despite a big lift in production area for the variety.
Hawke's Bay's harvest rose 20%, returning to "normal" levels after a low 2008 vintage because of problems with frost and poor fruit set - with lifts in chardonnay, merlot and cabernet sauvignon.
There were record crops in the boutique regions of Nelson (up 11%) and Wairarapa (up 8%).
Crop management helped keep the crop in Central Otago down 35% from the bumper 2008 vintage.
