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Size counts for wineries

THE profitable performance of Australia’s mid-tier wineries comes in stark contrast to those at the smaller end of the scale, according to a recent Deloitte Touche Tohmatsu survey.

The survey, Winning Strategies in the Wine Industry – Benchmarking for Success, examined the financial performance of wineries across Australia in 2002 and found that profitability peaked for wineries recording between $10 million and $20 million in annual revenue.

However, smaller sized wineries with revenue under $1 million incurred trading losses.

According to Deloitte Growth Solutions partner Luke Martino, the results highlight an increasingly competitive Australian wine market.

“Competition is growing as more wineries strive to establish themselves and the bigger listed companies step up product discounting,” Mr Martino said.

“Unfortunately the survey shows that many small wineries, with annual revenue of less than $1 million a year, are struggling to get ahead.

“The losses made by some of them are pretty high. They are really struggling.

“In this sector wineries recorded trading losses with earnings before tax being negative.”

According to The Wine Industry Association of WA chief executive Sarah Dent, the results point to severe problems faced by the industry.

“Growth is limited in the domestic market and that is due to the inequities of the wine equalisation tax and also the competition in the retail sector,” Ms Dent said.

“The major growth is in the export market but in reality many smaller players are not at the level to be exporting.”

Mr Martino said Australian wineries needed to be more sophisticated with database management and developing better on-sell strategies.

“Wineries in WA and across Australia need to get their exports up and the cellar door needs to be advanced,” he said. “And they need to incorporate merchandising.”

The survey also showed that wineries with revenues in the $1 million to $5 million bracket generated earnings before tax of 1.9 per cent of revenue.

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