McGuigan Zero & Tempus Two drive record profits for AVL

Australian Vintage Limited has announced a record 79% rise in net profit for the 12 months to June 2021. The result is the highest AVL has achieved over the last 10 years and has been driven by the runaway success of brands including McGuigan Zero non-alcoholic wine range.

Net profit after tax was $19.6 million, while total revenue was up $6.8 million to $274 million.

AVG’s Chief Executive Craig Garvin said: “The record result was very pleasing with continued growth in our portfolio of key brands. During the 12 month period, sales of our pillar brands of McGuigan, Tempus Two, Nepenthe and BVWC grew by 12% to $195.1 million.

“This growth, together with the efficiencies generated from our recent capital spend, investment in our people and the favourable 2020 and 2021 vintages have underpinned the 79% growth in NPAT. We are committed to our
strategic plan, and it is showing positive signs for our future.

“During the year we have increased the investment in our brands with marketing spend up 46% with most of the increased marketing spend occurring in the second half of FY21. What is also pleasing is that because of increased investment in our staff and our continued focus on our customers, the company was recently awarded the number one wine supplier to the Australian retail industry by the Advantage Survey.

“This survey is a comprehensive balance scorecard rating of all suppliers across the marketplace as rated by the customer. On top of that award, we also received the Supply Chain Manager of The Year Award at the Australian Drink Awards. These awards are a significant achievement for AVL’s market reputation and credibility.

The impact of COVID-19

Garvin said COVID-19 had a mixed impact on AVL, with some increased sales through the major retail chains but has added costs to our production facilities through segregation of shifts and some challenges with supply chain operations.

“Whilst it is difficult to calculate the impact of COVID-19 on the business, our key strategies should continue growth post COVID-19. Increased distribution, innovation and consumer engagement is key to this growth, and we have seen this in our Australian and UK business where we are working hard with our customer partners to drive our portfolio,” he said.

Non-alcoholic wine sales boom

AVL said the McGuigan Zero range had been an “outstanding success and demonstrated the importance of innovation to the portfolio long term”.

The brand now represents 5% of all McGuigan brand sales into the UK, Europe and Americas, with sales growing $5 million over the prior period.

The McGuigan Zero range includes a sparkling, sauvignon blanc, rosé, chardonnay and shiraz.

“The Australian zero alcohol wine category is worth more than $5.6million and growing at 500%, and with this we expect the category to be worth $15milion per year before the end of 2021,’’ AVL told The Australian recently.

AVL is also active in the low-alcohol space – Tempus Two launched ‘Lighten Up’ in June, comprising Prosecco, Rosé and Pinot Noir, all 750ml with an ABV of 6.8%.

Results by region

The UK, Europe and Americas segment performed “exceptionally well”, with their contribution to the AVL bottom line up 55% to $17.2 million.

AVL said the Americas “remains a challenge”, with this division reporting a slight loss for the period but an improvement on last year. With changes to the leadership structure of the Americas division and a change in strategy we expect Americas to improve in the next 12 months.

The Australian and New Zealand segment also performed very well, with its contribution up 48% to $9 million. The McGuigan brand has grown by 3% due mainly to the performance of the McGuigan Zero range. Tempus Two continues to grow with sales up 15%, Nepenthe grew by 8% and Barossa Valley Wine Company grew by 19%.

The direct-to-consumer division, which includes AVL’s cellar doors and clubs, increased contribution by $1.3 million as a result of the company’s investment in technology and the refurbishment of the McGuigan and Tempus Two Hunter Valley cellar doors. In the next 12 months the Company expects to undertake a major upgrade to the Adelaide Hills Nepenthe cellar door.

The New Zealand division result decreased by 16% to $0.6 million due to the significant logistic issues experienced in sending wine to New Zealand. AVL said the problem was ongoing and will provide challenges in the near future.

AVL described its direct exposure to the China market as small, with less than 1% of all sales going into China prior to the increase in tariff. With the significant increase in China tariff, sales to mainland China have stopped. Sales to other regions within Asia have been pleasing with sales up 6%.

AVL said it remains committed to the China market with the support from its major China based distribution company, and revealed that it is currently examining several options to continue the sale of its pillar brands into China.

The 2021 vintage

The 2021 vintage has been estimated at 2 million tonnes, which is 31% up on last year and 17% above the 10-year average. All regions experienced a substantial increase in tonnes with the biggest increase coming from premium regions such as the Barossa, which was up 112% on the prior year.

“The record 2021 vintage together with the loss of sales to China, which was as high as 176 million litres (approximately 240,000 tonnes) in 2018, will put pressure on the Australian wine industry in terms of excess wine supply and reducing grape prices,” AVL said.

“As China was predominately a red wine market, the impact will be mainly on red wine and red grape prices.”

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