Australian Vintage Limited (AVL) has reported its results for FY23, saying that despite one of the toughest external operating environments in decades, the group’s strategic plan is working, and has shored up its platform for future growth.
AVL reported revenue of $258.6m, in line with last year, underlying EBITDAS of $26.1m, EBITS of $10.6m and net profit after tax of $4.2m, which is in line with market guidance and after absorbing $18m in pre-tax hyper-inflationary costs, largely sea freight and energy.
The group said that tough trading conditions have come with the value of wine exports from Australia declining 10 per cent, with Europe and North America recording declines of 15 per cent and 14 per cent respectively. China tariffs and inflationary pressures in the UK resulted have also impacted the sale of Australian wine.
In addition, AVL reported the oversupply of grapes from the prolific 2021 and 2022 vintages coupled with shrinking export markets has seen unsustainable grape sourcing and marketplace pricing behaviour from key competitors.
AVG’s Chief Executive, Craig Garvin said, “Our strategic plan is working. The relentless pursuit to drive our pillar brands, innovate and expand geographically has shored up our platform for future growth. FY23 saw us absorb significant inflationary costs and realign our business to be a lower cost producer. This sets us up well for FY24 and beyond.
“We have continued to invest in our brands and innovation. Our people remain our number one priority with engagement, safety and diversity improvements versus prior year.”
He added: “Given the trading environment, I am very encouraged we have been able to maintain revenue in line with the prior year of $258.6m, as we continue to improve our mix of higher margin business. As cost reductions occur, I am very confident in our future performance.
“Our pillar brand revenue of $202.1m was 78 per cent of our mix (65 per cent FY20). We are the global leaders in no-and-low, reflected through substantial increases in product ranging and increased market share and supported by our world leading technology. Innovation now represents 15 per cent of our total margin, which did not exist 3 years ago. When the growth in premiumisation is added, margin contribution now represents 35 per cent of our business. I am also pleased, despite severe cost pressures, we have been able to grow our emerging business. Asia grew by 14 points, Ireland 9 points.
“In our traditional markets we took price and pleasingly held market share. Through focussed resourcing, our ingredients business, Austflavor, is growing at double-digits versus the prior year.
“Our environmental, social and governance (ESG) strategy is well advanced with our submission for B-Corp certification undertaken during the year, and our winery and our vineyards have achieved Sustainable Winegrowing Australia certification.”
Reporting on its performance in ANZ markets, AVL said that despite strong competition is all categories Australia has grown share by one percentage point. The growth was “driven by premiumisation and innovation, where the Australian market has seen overall value segment reductions post covid, reinforcing the importance of premiumisation and innovation”.
The innovation from AVL saw the launch of its new Tempus Two spirits range as well as a number of collaborations including Sevenly by Sarah Jessica Parker, The Butchers Cellar, and Johnny, Vince & Sam’s Vino by Sooshi Mango.
AVL reported: “This innovation is strategically important in the move towards a more diverse and higher margin business, led by consumer needs. These new revenue streams will continue to grow margin and contribution over the coming few years. Australia is the test market for these products, however the intention is for them to become global.”
Looking ahead AVL said its continued investment in brands, innovation and people “to premiumise the portfolio and improve mix to higher margin products, driven by consumer needs”, is crucial.
Adding: “The ambition is to drive a global drinks and ingredients business over the coming years. Asia presents significant growth opportunity outside of China which is anticipated to show improved contribution in the FY24 numbers. AVL anticipates China opening in the next 12 months with the Company working closely with existing Chinese partnerships.”