Wednesday, June 2, 2010

It's pruning time again!

Started puning this week and guess what!? After one of the very best spells of autumn weather on record, we have just had two weeks of almost solid rain, so the team are doing what they can in the few clear spells we have had. I admire their perseverance as the work solidly in the cold weather. I realise I am very lucky to have a lot of indoor work to do just now!

For me it is annual budget time for the business. It's a hard one this year, as we try to build a robust plan against a background of a global economic crisis, which seems never-ending; yesterday Greece and Spain, tomorrow who knows what. What I do know is that this crunch has had a huge impact on wine prices and has driven a shift on consumption patterns. No more $100 wines on corporate expense accounts, two $9 wines at the supermaret instead of one $20 one, and less dining out are just a few things I've noticed. Result? Less sales of premium wines, which are our main focus.

On top of that costs have increased; excise duty is about to go up to $1.95 per bottleand GST is about to increase to 15%. Think about that when you buy a $7 bottle of wine - nearly half is tax, and after the middlemen take their share, there is not a lot left for the winemaker! In addition, suppliers have increased costs of things like cartons, bottles and labels, and inputs like freight are also on the rise. Result? Slimmer margins and declining profitability.

This puts planning pressure on wineries and their budgets, and we are not immune to that.

All of which makes budgeting a challenge, particularly in a climate where banks are not that sympathetic either. All sounds a bit gloomy, but while things are tough our social media initiatives are really helping offset flat exports and slow domestic sales. Our Facebook, Twitter and Blog activities have introduced a lot of new people to Murdoch James Estate and our wines. We have shared experiences and ideas with lots of folk and made a lot of new friends. While it is hard to show with direct evidence that this contact is helping with sales, it is no coincidence that, since we embarked on our social media journey last year, our direct and internet sales have increased dramatically.

On top of that we have made great contacts to help with things like label designs, names for new wines and potential new distributors. It is all very exciting and stimulating, and certainly lift the cloud of economic gloom off our shoulders!

1 comment:

  1. Budgets are no fun, 'tis true. But sounds like you're up to a lot and things are going well for you. Glad to hear it.