Wins & woes in food manufacturing: Part three

There are obvious pros and cons to manufacturing wine on a small island off the coast of SA, but Yale Norris, general manager of Islander Estate Vineyards, says he wouldn't change a thing if he had his time again.

Islander Estate's founder and French winemaker, Jacques Lurton, planted the vineyard on Kangaroo Island in 2000, knowing that the island's cool climate, pristine environment and long ripening season, combined with his vast experience in winemaking, would produce some top notch wines. And he wasn't wrong.

"I think the biggest accomplishment that we've achieved as a company is that we're highly rated by Australian wine critics, and we have a five star rating from (James) Halliday, which puts us in around the top four percent of wineries in Australia," Norris told Food magazine.

Despite the brand's loyal following on the island, on the mainland and overseas, in countries including China, Hong Kong, Sweden, Finland, Canada and also in the UK, producing wine on the island, which sits 13km from the coast of Australia, presents a number of challenges.

"Part of the downside of making beautiful wine on Kangaroo Island is that you have to struggle with getting things to and from the island, and that increases our production costs significantly. Everything we have from a parts' perspective for the winery and the vineyard has to come across by ferry and from an export perspective and a bottling perspective everything has to go back off the island by ferry. So our transport costs are exponentially greater than our counterparts on the mainland," said Norris.

The next biggest challenge Islander Estate, and no doubt other manufacturers on the island face is labour.

"That's because a lot of folks come to Kangaroo Island wanting to live here for a very relaxed lifestyle, and vineyard work isn't necessarily relaxing, it's pretty hard yakka. So we certainly have challenges with getting labour, and in getting people who are willing to stay."

Not only is it difficult for the winery to find and then retain good workers, but paying them also presents a problem. And it affects manufacturers across Australia, not just on KI, says Norris.

"The cost of labour is extremely high compared to other places in the world. That certainly makes it less competitive. I don't know the answer to it but it certainly is a challenge we face. A lot of unskilled jobs have very high rates and it makes manufacturing difficult.

"It's not really sensible to pay an unskilled person 200 percent to work on a Sunday," he said.

But unlike other Australian food and beverage manufacturers, Islander Estate isn't threatened by imported products competing for shelf space.

"Imports aren't a problem because of the high tariffs they pay to bring wine into the country. One of the benefits, as a consumer, of the high dollar is the fact that imported wine became more affordable. But the quality of an imported wine compared to what you find domestically in a similar price point is not there."

The bigger concern is one of oversupply, insists Norris. Wineries with more product than they know what to do with are selling in bulk to "the Coles and Woolies of the world", who are then selling it extremely cheaply.

"That's a difficult thing because you have some guys out there making nice wine that they're unable to sell and have excess capacity which is then sold as a clean skin. That's certainly a challenge because people have the perception that wine should cost $3 a bottle."

Norris' concerns were echoed in IBISWorld's recent Wine Manufacturing in Australia 2012-13 report which referenced a 2009 study in stating that 20 percent of bearing vines in Australia are surplus to requirements and at least 17 percent of vineyard capacity is uneconomic. The study also found that Australia is producing 20 million to 40 million cases a year more than it is selling.

"So the challenge for us isn't necessarily the high dollar, it's the amount of Australian wine that's looking for a home somewhere else in the world. The competition we face with domestic competitors looking for new markets outside Australia is certainly a challenge," said Norris.

Despite these challenges, Islander Estate, which produces between 5,000 and 6,000 cases of wine per year, sees great growth opportunities both here and abroad, with the brand's very romantic story proving to be a great selling point.

"The story is the driver of a lot of sales, no matter where you are – even domestically. People want to hear a story, they want to understand the history of the brand, why we're here, why they should like the wine, rather than just buying something off the shelf which has no meaning whatsoever," said Norris.

"The Asian market is certainly big on that and I think that's a huge driver of why we're there, because Jacques has both an extended family history and a personal history of making wine in different parts of the world andhe's got a very romantic story about coming to this small island and having a vision to create beautiful, world-class wine from this little place in the middle of nowhere. I think that adds a lot to the mystique of the brand."

So despite oversupply issues and unreasonable labour expenses, Norris insists Australia is one of the best places in the world to make wine, or more importantly, to make the sort of wine that they want to make.

"We have a lot of government support," he said. "I think the industry as a whole is allowed to have the freedom to make the wines that they want to make. That's one of the main reasons why Jacques [pictured] came here. In different parts of the world you have a lot of restrictions on what you can grow, where you can grow it, how you can blend.

"Like all things Australian, you have this amazing freedom here to go out and plant this here or have a punt, have a go and if it works that's great. If it doesn't, then bad luck. But I think it's really exciting that in Australia you can go out and cut your own path."

Check out part one and part two of this story and hear some other persepctives on today's manufacturing industry from those living and breathing it!


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