BRANCH OUT TO SURVIVE
By Ed Charles
From The Australian, Entrepreneur:
AGRIBUSINESS
Finding new ventures can help grape growers improve their profitability, writes Ed Charles
THE lot of the winegrower is one of feast or famine. After years of bumper harvests and over-capacity, there’s a drought.
While this will address the supply imbalance, says Mark McKenzie, executive director of Wine Grape Growers Australia (WGGA), the industry still needs to radically restructure. It needs to be entrepreneurial, finding other sources of income or to create bulk selling groups.
The problem is that Australia has too many small wine growers whose costs are too high, increasingly making their businesses uneconomic.
The grape growers of Mudgee, NSW, claim they are already meeting this challenge. According to Mike O’Malley, executive office of the Mudgee Wine Grape Growers, local smaller growers have already been forced to be entrepreneurial to ensure their survival. Mudgee growers have already diversified into winemaking, cellar doors, restaurants and even Wagyu cattle farming to keep their businesses viable.
One such grower is the Smith family. Lance and Gwen Smith first planted vines in 1995 after retiring to Mudgee, naming the vineyard Farmer’s Daughter Wines after his two daughters Vicki and Michelle.
Vicki Smith says: “We planted the grapes in 1995 purely to be a grape grower and sell the grapes off to the wineries, but quickly found out that if you didn’t value-add you were going to be in and out of the game really fast. In the last couple of years if we hadn’t had our extra little investments we would certainly have struggled.”
By 1998 they were making wine that won awards at the Mudgee agricultural show the next year. In 2000 the family turned their three-car garage into a cellar door and started selling what they made.
They also supplied grapes to Tyrrell’s Wines for five years until their contract ran out in 2005.
Now Farmer’s Daughter is diversifying its sales channels. It has a distributor in Sydney selling several hundred cases a year at about $200 each. At the cellar door the vineyard has also built up a wine club where visitors can become members.
But while the Smiths have been building new markets it hasn’t been easy. Vicki Smith says: “This year we are selling to another grower. But this year the tonnage was so small that in hindsight we should probably have made it up as wine as well.” In 2006 Farmer’s Daughter picked 30 tonnes of chardonnay grapes compared with 7 tonnes this year, and the merlot crop fell from 32 to 8 tonnes.
Currently Vicki’s father Lance Smith is marketing the wines to Vietnam. She says: “We’ve branched out into the export markets for the first time. It is still developing.”
The WGGA’s McKenzie says the problem is that most vineyards, up to 60 per cent in some regions, are under 10ha.
“We’ve really got two problems, one of which is scale,” he says.
“We know the cycle will turn. The drought will get us back into gross balance very rapidly, much more rapidly than we’ve predicted. But the problem is that there is going to be a slow recovery in prices and the prices will be at more moderate levels than we saw in the boom time of the late 90s and early 2000.”
In 2006 a bumper harvest of over 2.1 million tonnes created a massive imbalance in supply and demand. In 2006 in some regions grape prices dropped from around $450 a tonne to under $150. The problem this year is that the grape crop is down by about 45 per cent to under 1.2 million tonnes because of the drought. And growers are being paid little more money for their much reduced crops.
This is a situation that wine grower Rod Nokes, from the NSW side of the Murray Valley, saw coming. He diversified into transporting grapes, investing $1 million in trucks and cranes. He now runs five trucks and his son three, moving 20,000 tonnes of grapes a season. “In the last three years if I hadn’t done it I wouldn’t be here now,” Nokes says.
Faced with rock-bottom prices, 30 grape growers have taken the WGGA’s advice and banded together to form a buying group called Vintage Traders Australia, backed by the Murray Valley Winegrowers.
Caption: Value-adding: Vicki Smith of Farmer’s Daughter Wines Picture: Mel Pocknall
Illus: Photo
Column: Entrepreneur
Section: FEATURES
Type: Feature