Wine Business Confidence Survey

At Bentleys Melbourne we have been running a quarterly wine business confidence survey covering Victorian and Tasmanian Wine businesses for over six years.

This survey monitors business activity, viticulture expectations and business issues in the wine industry, and accesses a significant cross section of the industry to provide information on sales trends, new opportunities, expectations and profitability.

Over the six years that we have been running this survey a number of significant factors have been effecting the wine industry; tax driven planting of vines, wine grape oversupply, operating costs (fuel & interest rates in particular) and most recently the effects of the drought and climate change.

In our most recent survey (conducted September 2007) the preliminary results continue the recent trend, highlighting the impact of the drought on not only the current years production but an expectation by growers and producers that this impact will continue for a number of years going forward.

Growers in particular have reported worse trading conditions in the last two quarters when compared to the same periods in 2006 and while the general expectation is for improved trading conditions over the next six months there is a significant sub group of respondents that expect trading conditions to worsen.

Growers and winemakers have also been surveyed on their rating of the 2007 vintage under production and early expectations for the 2008 vintage. Generally producers assessed the 2007 vintage as average or just above average though nearly two thirds of producers could not source all the fruit to meet their expectations for 2007. Many producers also had smoke effected fruit in 2007 which reduced their quality. While it is too early in the growing season to be assessing the actual fruit for the 2008 vintage a majority of producers expect yields from this vintage to again be lower due to the drought.

Our September survey also included a number of questions related to business finance issues that were designed to measure what specific financial conditions have influenced wine businesses over the past three years. Positive responses included the retention of the WET rebate, stable interest rates and export potential. Participants however also noted that while the overall economic climate is good, tourism and cellar door sales have been affected by rising fuel costs and interest rates.

Cash flow continues to be a major issue for wine businesses due to the competitive nature of the wine/ vineyard industry and environmental conditions such as the drought, fuel costs and rising interest rates.

Other general comments raised in the survey included the concern that larger grocery chains would put pressure on smaller vineyards and producers.

Finally our September survey included reference to what wine businesses regarded as the most important issues to the industry in the upcoming federal election. While a range of responses were received, there was a general consensus that the central issue for the Vineyard/ Wine industry will be the ongoing drought and associated water resource management.