Barossa Valley businesses are weighed down by an increase in energy and labour costs against the backdrop of prevailing market conditions.
According to Regional Development Australia, Barossa’s wine production accounts for 27% of the total value of South Australia’s wine and grape sector.
The region is Australia’s top premium wine producer, with data from Wine Australia showing 12.5 million litres were sent offshore in the 12 months leading up to September 2019.
China’s 218% tax imposed on Australian wine in 2020 has been diabolical for the wine industry. One business owner said it will be the death knell for his region’s wine producers if China does not lift the trade tariffs.
According to preliminary results of the South Australian Business Chamber Regional Voice survey, most businesses consider labour costs, energy costs and economic infrastructure to be their most prevalent issues. Increases in wages and supplier prices are also proving challenging.
Keith Hentschke, owner of Hentley Farm a wine producer in Barossa Valley, agreed that increased labour costs have had a significant impact on his business’s profitability. The availability of skilled workers was an additional challenge.
“We have been unable to fill our finance position for a long time.”
Market conditions and international trade policies also affect the performance of regional businesses with interest rates and low tourism levels significant factors. Keith painted an outlook on the wine and hospitality industry.
“We are seeing a mix of high-interest rates, significant market drop-out (China) and decreased tourism activities.”
The wine estate owner said that lifting China’s wine tariffs would be a game changer: “The estate’s exports to China made up 20% of the farm’s total sales. It now accounts for 0%.”
The South Australian Business Chamber CEO, Andrew Kay cautiously agreed. “We remain hopeful China will soften its stance on wine soon. While this will be welcome news for many wine producers, we doubt that exports will return to the levels they were previously .”
As the cost of living is in the sights of the State and Federal Governments for the next budget cycle, they must remember that costs are just as challenging for businesses. The Regional Voice survey results will guide where they should focus their spending.
At the time of writing, most survey respondents have prioritised government investment in infrastructure to address the poor roads in the region.
The preliminary results presented in this article are collected through the South Australian Business Chamber Regional Voice Survey.
If you are a regional business, let your voice be heard by responding to the survey here.
