KEY POINTS:
Small New Zealand winemakers are driving viticulture's phenomenal export growth, but are failing to turn a profit, sparking fresh calls for Government support as further industry consolidation looks likely.
However, a review of the sector's economic health shows the romance of owning a vineyard is still alive and well, with an increasing number of producers setting up despite the sector's financial difficulties.
After announcing that wine exports for the year to this June 30 were up 36 per cent in value and 34 per cent in volume, New Zealand Winegrowers last week revealed it was the smaller wineries that had achieved the fastest rise in volume, despite perceptions to the contrary.
However, Deloitte's annual wine industry benchmark survey, unveiled at an Auckland wine conference on Thursday, showed that while winemakers with less than $1 million in revenue were managing to break even at the earnings before interest and tax level, they were losing money after interest was taken into account. Losses at wineries in the $1 million to $5 million category were around 6.3 per cent of revenue, and those in the $5 million to $10 million bracket managed profits of 8.5 per cent.
However, wineries in the $10 million to $20 million turnover category were the standout performers, with ebit averaging 27.5 of total revenue and a profit after interest of 17.3 per cent of total revenue.
The survey noted that just 43 per cent of wineries with less than $1 million in revenue were profitable and collectively the category incurred losses before tax of 4.2 per cent of total revenue. In comparison, Australian wineries in the same category achieved overall earnings before tax averaging 8.1 per cent of total revenue, attributed in part to the introduction of the Wine Equalisation Tax (Wet) producer rebate by the Australian Government.
"Government assistance in the form of excise relief similar to that received in Australia could be beneficial, particularly for smaller winemakers," the report said.
NZ Winegrowers chairman Stuart Smith said the "deadweight of excise tax burden" made small wineries unprofitable and at least part of it had to be lifted.
COST OF WINERIES
* Revenue $1-5 million: losses averaging 6.3 per cent of revenue.
* Revenue $5-10 million: profits 8.5 per cent of revenue.
* Revenue $10-20 million: profits 17.3 per cent of revenue.
