Australian wine has built a favourable reputation around the world over past decades and the industry continues to grow, writes Nick Gibson.

The latest industry survey ‘Vintage 2008’ by Deloitte highlights the performance of wineries across Australia. Major results include:

$0-$1 million wineries
Wineries in this group had a lower average earning before tax of -7.4% of revenue in 2008 compared with to an EBT of 1.9% in 2007, in part due to their gross margin decreasing by 7.8%. This category also had an interest expense of -7.7% of revenue compared with a target of 5% of revenue as recommended in the benchmarking guides.

$1 million - $5 million wineries
Reporting an average gross margin of 48.5%, the highest of all categories in the survey, wineries within this group recorded a sharp rise in EBT to 8.2% in 2008, compared with -8.7% in 2007.

$5 million - $10 million wineries
This group recorded an EBT of 0.8% of revenue, compared with 9.8% in 2007. Average gross margin for 2008 of 40.6% of revenue was less than the sustainable level of 50% suggested in the benchmarking guides. The drop can be attributed to an increase in general administration costs from 23.4% to 28.1%.

$10 million - $20 million wineries
The average EBT for the $10-20 million wineries was -7.4% of revenue compared with 7.4% in 2007. Average gross margin for 2008 of 34.7% of revenue was considerably less than the sustainable level of 50% of revenue suggested in the benchmarking guides. Within this category, 60% of the participants recorded a loss for the financial year ending in 2008.

$20 million+ wineries
Wineries with revenue over $20 million had positive EBT growth, up from 18.8% in 2007 to 22.1% in 2008. An average foreign exchange gain of 9.3% of revenue added to the strong EBT results of wineries in this category.

Best performers
Wineries termed ‘Best performers’ represent the top quartile of wineries for the $0-1 million, $1-5 million and $5-10 million categories based on their profitability as a proportion of sales. Wineries in the $0-1 million and $1-5 million categories achieved an average gross margin of more than the suggested 50% of revenue in the benchmarking guides, and earnings before tax of around 20% of revenue. The $5-10 million category had an average gross margin of 45.6% and achieved earnings before tax of 12.7% of revenue.

Domestic wine sales
During 2008, the best performing wineries in both the $0-1 million and $1-5 million categories sold over 75% of their wine volume in Australia for between $15 and $50 per bottle. Best performing wineries in the $5-10 million category sold around 65% of their wine in this price range.

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