WET rebate not expected to provide winery boost

The Wine Equalisation Tax rebate, which comes into effect this weekend, will do little to improve the performance of many small Margaret River wineries according to Deloitte partner Luke Martino.

Mr Martino said the local sector was still struggling with a glut of red wine and needed to boost performance in key distribution channels.

The comments were made to WA Business News this week after the release of the Deloitte and Wine Makers’ Federation of Australia annual financial benchmarking survey regional report.

The annual survey compares data from the Hunter Valley, Margaret River and Adelaide’s Fleurieu Peninsula in 2003 with the results of Australian wineries with revenue of up to $10 million.

And while the news was generally positive, the average performance of Margaret River was stronger than the national average, more sophistication was needed from wineries with less than $5 million turnover if they were to survive, Mr Martino said.

“I think the smaller wineries are struggling with a lot of them recording losses and I don’t think the WET is going to make a big difference because it’s deeper than that in terms of sales and getting costs down and getting exports up,” he said.

The survey found that 53 per cent of wineries, from across Australia, with a $1 million to $ 5 million turnover were making a loss. Overall 29 per cent of Margaret River wineries are making a loss.

Mr Martino said small to medium-sized wineries needed to focus on boosting exports, retail sales, cellar door sales and merchandising sales in order to boost their performance in the sector.

The report shows that the Margaret River wineries surveyed reported red wine inventory of 89.6 per cent compared to 65.7 per cent from the Hunter Valley region and 62 per cent from the Fleurieu Peninsula.

However, compared to those two regions, Margaret River accounts for the highest gross margin at 46.8 per cent.

Margaret River wineries also attributed 8.9 per cent of assets to purchased goodwill and other intangibles, compared to just 0.6 per cent in the Hunter Valley and only 0.4 per cent in Fleurieu.

This figure excludes the listed wineries in the region.

“This might indicate that many of the smaller Margaret River wineries may have had their brand names valued in recent years,” Mr Martino said.