Issues & trends

'The ramifications of climate change on viticulture is a critical environmental issue confronting the industry today as is the use of water in viticulture, winemaking and even wine packaging. The outcome of national water management discussions will have a significant impact on the availability of water, the value of water and the cost of use water in the manufacturing of wine.'
Mike Garrett, Director

'Another critical issue is the need to expand exporting strategies. Domestic market sales growth is generally very sluggish and subject to highly competitive pricing, affecting profit margins. As the global market continues to become more accessible, market development strategies need to be rigorously expanded to grow sales and profit margins and move wine stocks. Now more than ever, wine businesses are being forced to invest in improving overseas brand recognition, expanding distribution channels and finding ways to differentiate their product from that of their competitors.'
Lyall Bear, Partner

'An unquestionably significant issue for wine businesses is managing cash flow. Of course this is true of any businesses, but I believe it is a particular problem for Australian wine businesses given the fierce competitiveness of the industry and the resultant pressure on businesses to operate on lean gross profit margins. As well as reviewing trading terms to speed up the conversion of wine stocks to cash in the bank, we suggest looking more closely at debt collection policies. For example ensuring that the right person is making debtor calls can make a significant difference as some people are better than others in extracting money from slow-paying creditors. In cases where cash flow is a significant and recurring issue, it might also be appropriate to consider a formal cash flow analysis - they are relatively inexpensive and can quickly bring out some of the less obvious issues affecting cash flow in your business.'
Lyall Bear, Partner

'All industry segments go through tough times but the wine industry is more susceptible than many others to economic swings. Wine businesses in 2007 are grappling with the impact of oversupply of grapes and wine in both domestic and international markets on their profit margins.

The problem of oversupply really began when the significant plantings made by major industry players in recent years was mirrored by new entrants, many of whom were 'seachange' investors attracted to the Australian wine industry for reasons of lifestyle. The current oversupply is placing significant pressure on margins and there are stories of some producers not bothering to pick their crop. However this year, a number of major wine growing areas have had significantly reduced crop and tonnage due tofrost damage, hail and drought. This is likely to help re-balance supply and demand, and the present conditions are expected to stabilise by 2009.

So is 2007 the year to be in the Australian Wine Industry? Well, quite possibly! If you carry out new plantings this year it will be 3 years before you start seeing results, by which time supply and demand conditions might just be turning back to favour producers.

This is an industry where planning for a number of years ahead is essential. We can help you with the number crunching, financial modelling and business advice but picking the next 'in' grape variety... hey, nobody's perfect!'
Ian Fergusson, Partner

'As they say, 'Necessity is the Mother of invention'. As the industry continues to tackle the significant challenges of climate change and global competition, we see Australia at the forefront of innovation. Innovation in the way water and other resources are brought to bear in the production process, and innovation in the product and how to attract new market segments.'
Rudy Pieck, Director

'We have been working with the industry in a significant way for the past 25 years. These have been formative years, during which we have developed strong relationships with many of the industry's key players. We have seen the great times and not-so-great times and learned to take a realistic approach to the effective management and development of wine businesses. With offices and expertise around Australia, we can bring to bear this experience and the relationships we have in the industry to support other wine businesses.'
Rudy Pieck, Director