Study: No Profit in Small Vineyards

22 January, 2008 by

By Ian Neubauer

A government study of 60 wine grape growers in South Australia’s Riverland Region has illustrated that vineyards smaller than 20 hectares in size cannot make a profit.

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The Australian Bureau of Agricultural and Resource Economics (ABARE) report showed that vineyards in the region smaller than 20 hectares in size faced expenses that were equal to or greater than their cash receipts.
The study was released in September last year and does not take into account rising water costs and a downturn in the price of grapes in the commodities market.

Other factors predicted to further downgrade profitability in the sector include a slump in export revenues as a result of oversupply, a higher Australian dollar and changing international perceptions of Australia as a source of unique and exotic wine. According to ABARE, competition from Chile, the US, South Africa, Argentina and France, particularly in the UK market, will intensify as new plantings from these countries come into full production.

Murray Valley Vinegrowers CEO Mike Stone believes these developments will change the size and nature of viticulture in Australia. “At the moment there are a lot of small to mid-sized players in that commercial sector, but the pressure they have been under the last few years is going to see them leave,” Stone told The Australian.

However, experts believe opportunities still exists for vineyards that focus their efforts on producing boutique wines for the premium end of the market.

“We now need to complete in quality terms and price terms in a way that we haven’t in our recent history,” Australian Wine and Brandy Corporation general manager, market development, Paul Henry, told the national daily. “To an extent we have been giving it away. That doesn’t build a credible premium for your brand franchise in the medium to long term.”