The Australian Wine Society is it worth saving?

Why society?

There will be people out there who will be sad to read about the difficulties the Wine Society is going through. One article had the headline: “Australia’s oldest wine club is in a world of hurt.” The article started:

“The Wine Society has lost money for years, squeezed by discount bottle shops and rival online retailers.”

How sad should we really be? The society has been wobbling for years. It pleads circumstance, as can be seen by the quote above. The blame can be spread to all, no doubt including Coles, Woolworths, Aldi, GraysOnline and Vinomofo, plus any other successful online retailer. But it is not the competition dealing the coup de grace; it is the directors’ collective blindness that is prompting euthanasia.

The fact the Wine Society has been losing money for years should have resulted in better actions in the past. The selling of valuable property on a lease-back basis was never going to provide a long-term answer.

The society makes a great deal of its tasting panel selecting the very best wines and so on, but that era ended with the arrival of the 21st century. Buying wine is not difficult. Selling wine is difficult. The society lost touch with its members, failing to provide the service needed to retain and entertain today’s consumer.

It is looking for its members to ratify a restructure in which outside investors would provide a $3 million banking facility. The question members should be asking is: why would outside investors back a $3 million facility? What is in it for them?

The Wine Society is to part with 75 per cent of the issued shares in its wholesale company for $75,000 to Australian Wine Finance. The new set-up is to be renamed TWS. The Wine Society will only buy wine from TWS and only once it has been ordered by customers.

What the society doesn’t talk about are the full logistics. If a panel picks a wine will the wholesale company buy that wine and tie up money in stock? It would then sell that stock as and when needed from orders received by TWS? If this works it would be good for the society, but what would be in it for Australian Wine Finance, which is controlled by Fogarty Wine Group in a partnership with McWilliam’s Wines.

Again, what would be in it for them? Would the panel be truly independent? How long would it survive? Would the Wine Society become a sales vehicle for the many brands that Fogarty and McWilliam’s have in their portfolios?

Fogarty and the McWilliam’s are smart operators with huge and successful experience in the wine industry. They are not getting involved in this unless there is a dollar or three in it for them. Until the true reasons for their involvement are fully disclosed TKR will remain cautious about the future of the Wine Society.

The past three full-years’ profit/loss (audited accounts) and the 10 months (not audited) to April 2016 for the Wine Society are as follows:

  • June 30, 2013: Profit $51,000
  • June 30, 2014: Loss $306,000
  • June 30, 2015: Loss $824,000
  • 10 months to April 2016: Loss $1.01 million

Suppliers are owed $4.2 million, members have dropped from 35,798 in 2013 to 25,337. There is little said on how the society is going to increase membership and on that score we wonder what it has to offer.

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