By Andy Young

Australian Vintage Limited has reported an 11 per cent drop in its annual profit to $9.4 million amid tough conditions for the industry globally.

Revenue for the business increased 7.5 per cent on the previous year to $230.9m, which the company said “reflected higher branded sales despite anticipated lower bulk and processing sales”.

AVL chief executive Neil McGuigan said: “Our branded business continues to impress with ongoing growth in our three key brands, McGuigan, Tempus Two and Nepenthe. Total sales of these three brands has increased by 43 per cent over the last three years and sales of all branded products now comprise 72 per cent of our total sales compared to 62 per cent in 2012.

“Over the same period we have reduced our reliance on bulk wine sales and processing to the extent that these sales have declined by $29m.”

He added: “Our business has evolved into a respected branded wine business with a very clear focus on quality and growing branded sales. In the UK, McGuigan is the fourth largest wine brand by volume and value. In Australia, McGuigan Black Label Red is the number one selling bottled red wine.”

McGuigan has been a strong voice in the alcohol tax reform debate and in reporting on the company’s result he added: “Industry conditions remain tough due to ongoing margin pressure and the widespread use throughout the industry of the WET rebate to achieve bulk wine prices that are below cost. The sooner the WET rebate is removed on bulk wine the better and more sustainable the Australian Wine Industry will be.”

In looking forward to the next 12 months AVL chairman Richard Davis said: “The business continues to focus on the core strategies of quality, growing branded sales particularly in both existing and evolving export markets and in maintaining a low cost position.

“We continue to face short-term challenges due to our high cost from the 2014 vintage and the ongoing margin pressure. The reduction in the Australian dollar has had a positive impact and will assist in margin improvement. The strategy of increasing branded sales and improving operational efficiencies is critical to our continued success therefore investment in these areas will be increased.”

The company added that “the 2015 vintage cost is significantly lower and will help improve margins in the second half of the 2016 financial year.”

The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

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