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Life is not a cabernet for d'Arenberg

25 Feb 2013 THE AGE - ELI GREENBLAT


PRESTIGIOUS McLaren Vale wine group d'Arenberg has added its name to the long list of local businesses hurt by the high Australian dollar: its revenue has slumped 25 per cent and profits almost evaporated last year.

It has also confirmed the worst fears of many Australian winemakers: that to cut costs many overseas retailers have been dumping Australian wine in favour of cheaper southern European brands or South American wine.

The 101-year-old family winemaker will focus on premium wines to help battle the escalating dollar and its impact on margins, while in North America it has shared the margin pain with its importers - and in some instances pushed up prices to safeguard earnings.

"The dollar does impact on your ability to drive sales and do other things around that, and we have had to move our prices slightly up [in America] to cover some of the costs of the dollar. And we have worn some of the costs as well," said sales and marketing general manager Philip Jeffries.

Documents filed with ASIC show d'Arenberg recorded sales revenue of $20.15 million for the 2011-12 financial year, down 20 per cent from the $25.06 million the year before.

Sliding sales and margins and a general downturn in wine consumption in key export markets saw profit dwindle to only $170,000 - down 77 per cent.

Owned by the Osborn family, d'Arenberg paid a dividend of $300,000 to ordinary shareholders and a final dividend of $125,000 to B class shareholders.

Mr Jeffries said d'Arenberg exported more than 65 per cent of its wine and that the high dollar created difficulties. "Because of the exchange rate there is very little margin for us and our distributors over there [in America] and it makes it very hard to make things work. But we are fighting hard to maintain our distribution," he said.

The dollar also limited d'Arenberg's ability to participate in promotional activity - its entry-level wine in America would normally sell below $US10 a bottle but that was kept at $US12 to stem losses.

Mr Jeffries said that key markets of the US, Britain and Europe were suffering after the global financial crisis and recessionary conditions.

"There are impacts for our distributors, retailers and restaurateurs in most of those major markets. UK and Europe is difficult with the recession in full swing so people are reducing stocks, running leaner organisations and they are looking at sourcing from other countries."