11 May 2006 
 
Almost one in every two wineries is losing money* is the dire reality exposed at the Institute of Chartered Accountant’s Business Forum in Adelaide.  
In a presentation by John Hart CA, Partner, Ferrier Hodgson (SA) and Will Taylor, Partner, Finlaysons, delegates to the Institute’s forum yesterday learned about the declining financial health of the Australian wine industry, post the 2005-06 wine glut, as well as strategies for survival. 
With the effect of the drought, frost and heavy water restrictions seeing grape production down 30 to 50 per cent on 2006 levels, the forecast for the coming vintage is dire. 
Grape prices, however, are likely to improve by 20 to 30 per cent, subject to variety and region, but that will not compensate growers who have suffered reduced yields. 
‘The key to success,’ John Hart advised, ‘are long-term supply agreements, preferably with minimum grape price thresholds. However, there has been a recent shift to bulk wine contracts to take advantage of the glut.’ 
A large proportion of recent losses in the wine industry were attributed to high debt levels and stock write-offs, delegates to the Institute’s forum were told. However, Hart did highlight a perennial failing of those in the wine industry that rely on a production push rather than a consumer pull approach in their business. 
‘We visit wineries all across the region and time and time again we see that what they’re producing is what they’ve got in their vineyards, not what the consumers want to drink,’ Hart warned. 
In addition, Hart and Taylor identified the following pitfalls or reasons for failure for winery owners, as a warning to forum attendees:

• No established brands
• Sales based on high volumes at low price points and heavy discounting
• A lack of distribution channels
• Cash flow problems with money tied up in non performing vineyards and stock
• Onerous grower contracts (contracts in but not out)
• No business plan and/or unrealistic forecasts
• Poor management information systems (particularly cash flow and costing)
• Unable to adapt to a changing market