South Australian wine businesses grow increasingly optimistic

Bentleys, together with industry partner the South Australian Wine Industry Association (SAWIA), has released the second wine industry snapshot – a study which aims to inform business decision making and to facilitate business performance measurement.

The results of this year’s study show that business confidence is strong and continues to improve across the South Australian wine sector, a reflection of the increased demand for South Australian wine and the prices being achieved throughout the supply chain.

This year’s participants, who are mostly in the growth or mature stage of their business life cycles, have expressed a clear desire to improve business performance and practices. The priority areas identified as needing a focus in the short to medium term are profitability, which has improved for many, and the development of a number of business skills.

The key challenges for wine businesses relate to costs and security in energy, water and labour, where both availability and costs are impacting on operations.

Mr Brian Smedley, Chief Executive, SAWIA, was very pleased with the participation rate this year and the willingness of wine businesses to provide their views about the challenges and opportunities for the South Australian wine industry.

“The wine industry has many varied and complex business models. The results of this study will provide a valuable resource for our state’s wine businesses, as they seek to grow and be the best that they can be. SAWIA will use this information to respond to the issues raised.” said Mr Smedley.

“In recent times, with a greater focus on premiumisation and with strong demand from existing and emerging markets, industry profitability has shown improvement,” said Mr Tim Siebert, Partner, Bentleys SA.

“Despite this, sustained profitability continues to be a significant concern for our state’s wine businesses,” said Mr Siebert.

“Increased focus on the key metrics that are relevant to their business, may help wine businesses measure and monitor their success,” he said.

Water access and security remain key issues to be managed, however these concerns are not deterring the redevelopment of some vineyards over the next five years.

Continued demand for South Australian wines is considered a key success factor for the industry.

“I would encourage all South Australian wine businesses to maintain a strong focus on product development, promotion and engagement with an emphasis on building relationships. Brands need to ensure there is an engaging story about their wines, people and place. With participants identifying the value of free trade agreements, there are many countries where opportunity awaits,” said Mr Smedley.

Key findings of the report:
• 126 wine businesses participated, with 71% having assets in the major wine regions of the Barossa Valley, Adelaide Hills or McLaren Vale.
• There are improving levels of business confidence among wine businesses, with 78% expressing they are somewhat, very or extremely confident about their business prospects.
• Two thirds (66%) of respondents have expressed a need to improve the profitability of their businesses.
• Free trade agreements are valued by the industry, with 65% of wine businesses recognising they are having a positive impact on their business.
• Energy costs are recognised as having a negative impact by 80% of respondents.
• Labour costs are recognised as having a negative impact by 69%, however staff numbers are expected to remain stable for the year ahead.
• Operating capacity of grape processing plants is lower compared to last year, however this is not surprising given lower tonnage in 2018.
• Inventory levels of white and red wine appear to be in balance.
• There is still significant potential for more wine businesses to understand their obligations and to ensure compliance with changing legislation.
• Almost 2,000 hectares are currently flagged for redevelopment, with the primary motivation to improve varietal mix.
• Projected water demand is expected to increase over the coming decade.
• There is significant interest from wine businesses to develop capability in the areas of marketing and business planning.

Click here to access the SA Wine Industry Snapshot. Participating wine businesses will receive their personalised reports over the coming weeks. With any questions, please do not hesitate to contact Tim Siebert at Bentleys SA on +61 8 8 372 7900 or tsiebert@adel.bentleys.com.au