Wineries ignore trend and invest

Adelaide Hills master of wine Michael Hill Smith at Shaw + vineyard at Balhannah.
Source: AdelaideNow
 

Domestic wine sales are slowing and exports heading south - but it's not all bad news.

The wine industry might still be doing the sums in its heads after a fortnight of troubling accounts, but there's no stopping a couple of South Australia's best known company names forging ahead with bold expansion plans.

Barossa-based Grant Burge has announced a multimillion-dollar, destination-venue makeover of the ageing Krondorf Winery he's had an on and off love affair with for more than 30 years.

Adelaide Hills-based Shaw and Smith have signed contracts to buy one of Tasmania's elite vineyards and expand their regional base in the production in fine chardonnay and pinot noir table wines.

Both have chosen what on the surface appears to be an unsettling time to invest in the wine industry, but from where leading business analysts stand is the perfect moment to capitalise.

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After the global financial crisis when the wine business slowed markedly, investment activity has picked up in the past six to 12 months according to specialist wine industry broker Toby Langley from SA firm Gaetjens Langley.

"It's indicative that long-term players like Grant Burge and the Shaw and Smiths see this as a time of opportunity," Mr Langley says.

Both have invested in new businesses on the home front, which is where industry experts are convinced the most potential lies.

"There's a lot of upside in the domestic market," says Deloitte's wine industry expert Stephen Harvey.

 "It's a good time for smart investors who have the right business model and the right approach to marketing the products they're taking on," Mr Langley says.

 Despite all the industry's reports that don't bode well for current accounts, Grant Burge is certain his long term approach is on the right path.

"If you listen to all the economic figures it's a struggle out there," Mr Burge says.

"But we're long-term players.

"The latest downturn in the wine industry is another bump in the road, but after six generations you tend to have a long view of history."

 The Burges' major Krondorf winery renovations include a two-storey wine destination venue with indoor and outdoor function areas, private tasting rooms and cafe serving regional Barossa food. The original winery at the site also will be updated.

The work will result in the Burge company cutting back on its Barossa cellar door sites from three to two after departing its long-standing, high-profile Jacob's Creek venue mid next year.

The Illaparra Fortified Wine Store cellar door will be retained.

Building is due to start at Krondorf in Spring and planned to be finished around July, 2012.

Hills based Shaw and Smith also have invested in new infrastructure with the purchase of the 20 hectare Tolpuddle vineyard in Tasmania's respected Coal River Valley 20 minutes outside Hobart.

It's the first move out of SA by the high-profile, fine wine company known mostly for its leading sauvignon blanc white.

 Planning to develop a new range of Tasmanian chardonnay and pinot noir, company partner Michael Hill Smith says their domestic sales are strong and there's a huge unfulfilled potential in Tasmania which has just begun to attract a lot of interest in top-end sparkling wines as well as climate-compatible, varietal table wines.

The way forward for the Australian wine industry should be fine regional wine, Mr Hill Smith says.

"One of the problems has been we've always judged the health and vitality of the Australian wine industry by how how many millions of litres we produce," he says.

"The bottom line is the branded commodity wine market is very different to the fine wine segment," he says.

"We're eternal optimists and believe if you make exciting wine people will want to drink it."

The acqusitions follow growth in other regions including the announcement of five new boutique cellar doors in McLaren Vale.

Chalk Hill, Battle of Bosworth, Dowie Doole, Gemtree and Angove are all moving into new premises taking the region's cellar door count to 75.

Their investments confirm Deloittes's Stephen Harvey's view that there is great potential in several segments of the $15-$50 per bottle market for Australian wine.

"There are a lot of people looking for really good value that are both cheap and cheerful as well as something a bit better they can take to a dinner party," he says.

"We've neglected the domestic market and there's a lot of opportunity for wine companies to reconnect with the domestic consumer.

"The domestic market is ripe for the picking," he said.