It seems just about everybody is investing in vineyards. The wine industry has drawn in big investors and hobbyists. Unfortunately, people do not think before they jump in. They are seeking to fulfill a dream: there is a certain amount of glamour involved in saying I am a wine maker, a vintner.
|Too much drinking not enough thinking|
There is a world glut of wine, particularly the cheap ones. Nations have pushed to establish new vineyards. It has the aura of a local car industry or airline. Newcomers enter the industry all the time without doing any research and little training.
It is no surprise to hear that the oldest wine club in Australia founded in 1946 is in the red, by a shocking amount. It owes a staggering $4.2 million to its wine producers. It operates as a distributor, buy and selling, though ostensibly not-for-profit. Supermarket chains sell nearly all wine in Australia and in a situation of oversupply they don't pay much for it. These major players "do" their homework, unlike the suppliers.
The Wine Society is in deep trouble. Things are so bad that membership of the prestigious club has fallen by a quarter over the last three years. Demand for premium wines which used to have a high, profitable markeup has dramatically decline. Consumers buy more of the cheap stuff.
To clear the debt a complicated "splitting" of the business is taking place. However, selling the wholesale section to the Fogarty Wine Group for a measly $75,000 will not help its finances are all. This will allow the society to borrow $3 million. Taking on more debt is folly.
◆ Society by Ty Buchanan ◆
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