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Large wineries drive financial performance

Whilst Australia’s large wineries have substantially trimmed their costs to achieve improved financial performance small and medium sized wineries have not achieved similar cost savings. These are the key findings of the 2004 Annual Financial Benchmarking Survey, released by Deloitte and the Winemakers’ Federation of Australia.

The study examines the financial performance of wineries located across Australia for the 2004 financial year, and provides the wine industry with real data upon which to benchmark results.

According to Deloitte Partner and leader of the Deloitte Wine Industry Group, Mr Stephen Harvey, “Wineries with greater than $20m revenue and the large listed wine companies enjoy a cost advantage over small and medium wineries in terms of grape cost, wine cost, overhead cost per litre and packaging costs. They are also better placed in terms of distribution.

“Fierce competition, the high levels of production and greater consolidation within the retail sector are some of the factors that have forced the larger wineries to look at their costs to reposition themselves in a very competitive marketplace.

“Consistent with the results reported in the 2003 survey, wineries of all sizes have recorded losses for the 2004 financial year,” Mr Harvey continued. “Almost half of the wineries that participated in the survey generated a loss before tax. However, while many wineries reported losses, there were several wineries in each category which generated excellent returns in excess of 20% of revenue.

“Effectively managing all aspects of the business cost-effectively, matching production volumes to demand (not sales budget) and establishing a point of difference for your brands are critical factors for survival.”

Stephen Strachan, Chief Executive Officer of the Winemakers’ Federation of Australia, said the survey results are indicative of the difficult trading conditions.

“Some wineries may be able to justify high costs if their sales revenue per case is sufficient to support these costs, however, many wineries will need to re-examine their costs and their brand strategies in order to survive the difficult period ahead and to remain competitive and profitable,” Mr Strachan said.

“The Federal Government’s recent WET rebate of up to $290,000 for wineries should help to ease the financial pressures experienced by smaller wineries for the 2005 financial year end.

“Wineries need to address their inefficiencies and aim for best practice. We hope the information contained in this report helps wineries to benchmark their strengths and weaknesses and to achieve these outcomes.”

Further information about the significant findings of the 2004 Annual Financial Benchmarking Survey is available from http://www.deloitte.com.au.

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