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Smaller Australian winemakers face greater difficulties

Smaller and medium-sized Australian wineries are losing money at a far greater rate than their bigger peers, a report says.

The 2004 Annual Financial Benchmarking Survey, released today by analysts Deloitte and the Winemakers Federation of Australia, warns that wineries will either merge or go out of business, just-drinks.com reports.

‘Some wineries may choose to merge…while others may be forced to exit the market,’ Stephen Harvey of Deloitte said.

Harvey blamed the current climate on ‘fierce competition, high levels of production and greater consolidation with the retail sector.’

He added that it was the smaller and medium-sized wineries that were feeling the pinch most.

‘Wineries with greater than AUS$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.’

According to the report, almost half the wineries taking part generated a loss before tax.

The smallest wineries – those in the AUS$1m-AUS$5m bracket – did best, generating Earnings Before Tax (EBT) of 8% of revenue after losses of 7.9% in 2003.

The wineries in the AUS$5m-AUS$10m bracket made losses, and the wineries in the AUS$10m-AUS$20m bracket also struggled.

Harvey said the wineries in the larger bracket competed with the biggest operators for market share but did not have their economies of scale.

Written by Agencies

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