Wine industry profitability plummeted further due to larger than expected recent vintages and the global economic recession, according to a new survey. The fourth annual survey for the wine industry - Vintage 2009 – which was released today by De
Wine industry profitability plummeted further due to larger than expected recent vintages and the global economic recession, according to a new survey.
The fourth annual survey for the wine industry - Vintage 2009 – which was released today by Deloitte and New Zealand Winegrowers, shows while most winemakers are managing to make positive returns, profitability has been declining since 2007.
A more concerning trend the survey revealed was increasing debt levels, particularly in smaller-scale $1m to $5m operations.
Philip Gregan, New Zealand Winegrowers chief executive, said the turbulent past year has had an impact on every sector of the industry, from grape growers and wineries to the many companies supplying goods and services to it.
“Certainly many of our members are feeling the pinch right now, as trading conditions are the toughest in the past two decades.
“However it is important to remember that the industry has built a solid international reputation for producing unique, premium quality wines, and that hasn’t diminished even in these difficult times.”
Deloitte partner Paul Munro said that despite the tough international trading conditions, export volumes do not seem to have been too adversely affected, with smaller wineries in particular experiencing a significant increase in the proportion of export sales.
But the challenge many exporters are facing is making sure they get paid, as the financial pressures that customers and distributors along the supply chain are experiencing ultimately flow back to New Zealand producers.
The ability of larger players to maintain increased inventories of wine until more favourable market conditions prevail has benefited the entire industry. The smaller vintage 2010 harvest should also help ease the situation.
In terms of the performance of different segments of the industry, the $1 million to $5 million category continues to be the least profitable, this year showing a 6.7% loss before tax.
The larger segments continue to be the most profitable, with the $10m to $20m category recording an average profit return before tax of 12.8% and the over $20m category returning 17.5%.
But all categories were several percentage points down on the 2008 vintage survey.
