Almost half of small Australian wineries losing money

Published: 23 July, 2008

A new report on the Australian wine industry has painted a gloomy picture for mid- and small-sized Australian wineries, with almost one in two wineries reporting a loss in 2004'.

The Annual Financial Benchmarking Survey - Vintage 2004, which is published annually by services group Deloitte in conjunction with the Winemakers' Federation of Australia, surveyed 76 wineries, representing more than 90% of the revenues of the Australian wine industry.

The report states: Across all revenue categories, there were a number of wineries that recorded a loss for the financial year. In fact, almost half of the wineries surveyed with less than A$5 million of revenue generated a loss before tax for the 2003/2004 financial year.'

It continues: Deloitte believes the losses generated by a significant number of wineries in 2003 and 2004 cannot be sustained and continuing poor financial results will cause many wineries to pursue alternate strategies in order to return to acceptable profitability levels. Some wineries may choose to merge to achieve cost and/or distribution efficiencies, while others may be forced to exit the market.'

Of the six revenue groups into which the surveyed wineries were divided, it was the A$20 million plus in revenues' and the listed' categories that performed best. On average, those producers in the former category generated 10.3% earnings before tax (EBT) and those in the latter, 14.3% EBT.

The report adds: The industry continues to face challenges from multiple fronts, including: high Australian dollar exchange rate; production surpluses in many export markets; continued consolidation of retail outlets in both domestic and international markets; [and] consolidation of major corporations in the alcoholic beverage sector.'

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