Big profits elude small wineries

New Zealand's wine industry will face greater consolidation as smaller vintners struggle to make decent profits.

A new report released by Deloitte and New Zealand Winegrowers has found small growers with turnover between $1 million and $5m registered a lowly pre-tax return of 1.4 percent. However, the 2007 benchmarking survey found wineries in the $5m to $10m range had an 8.2 percent return, the $10m-$20m gained 18 percent and wineries with a revenue of more than $20m had a 24 percent return.

The report found the smaller wineries were struggling to cope with exchange rates, compliance costs and excise levies.

Christchurch-based Deloitte corporate finance partner Paul Munro said larger wineries continued to show the advantage of size and economies of scale.