wine investment guidelines 04

7/24/2019 Wine Investment Guidelines 04

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T O U R I S M V I C T O R I A

I N V E S T M E N T G U I D E L I N E S F O R W I N E T O U R I S M


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1

MINISTERS FOREWORD

Tourism is a big

contributor to Victorias

economy representing

5% of Victorias Gross

State Product and 6%

of all employment.

There are many factors

behind Victoriasincreasing success in

tourism, but one is the

spectacular growth in

wine tourism. This small but growing segment of our

tourism industry is becoming more and more vis ible

to our domestic and international markets .

Victoria claims to be Australias food and wine capital,

supported by some 22 wine regions and over 400

wineries. Encouraging visitors to Vic toria to experience

our provincial food and wine first-hand, spreads tourism

benefits across the State and generates many flow-on

benefits to regional cities and towns.

Wine-related tourism is not new. Visitor infrastructure at

many regional wine areas is first-class. Many established

vineyards are now upgrading cellar doors and new

projects are under development or being scoped.

These include significant investment in restaurants and

accommodation which are new business activities for

many vineyard owners. In some cases, new investors are

behind these proposals, forming innovative partnerships

with the vineyards and adding to the marketing

of Victorias wine regions. Associated off-vineyard

investment in wine tours, food and accommodation in

regional wine centres, and small town master plans that

highlight wine production are also adding to Victorias

momentum in wine tourism.

While Vic toria is making good progress in wine tourism,

as Tourism Minister, I want to quicken the pace.

Tourism Victoria is receiving more and more inquiries

from vineyards big and small about how to develop

their inves tments into tourism dest inations . We are

also receiving increasing inquiries from medium to small

investors wanting to explore the possibility of investing

in food and accommodation infrastructure in Victorias

wine regions. Inquiries like these provided the basis

for preparing these Guidelines, with wine producers,

investors, developers, local government, and community

groups being the target audience.

The Guidelines are thought to be the fir st of their kind byany Australian tourism agency, thus highlighting Victorias

interest in leading this important segment of Australias

tourism market. The Guidelines summar ise the issues that

need to be considered in investing in wine tourism - from

concept to reality.

I commend the Investment Guidelines for Wine Tourism.

JOHN PANDAZOPOULOS MP

Minister for Tourism and Major Events


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2 Investment Guidelines for Wine Tourism

TABLE OF CONTENTS

Introduction 03

1. Context for Investment in Wine Tourism

05

1.1 International 05

1.2 Whats on Offer - Victorias Wineries

05

1.3 Importance of Tourism at Regional and Local Levels 06

1.4 Strategic Direction

06

2. The Regional Context

073. The Market at a Glance

09

4. Developing the Concept 11

4.1 Assessment of a Wine Tourism Project

11

4.2 Key Factors 12

4.2.1 Regional Character

12

4.2.2 The Customer Base 13

4.2.3 Competition

13

4.2.4 Brand Positioning 13

4.2.5 Financial Resourcing

14

4.2.6 Staff Resourcing 14

4.2.7 Alliances

14

4.2.8 Promotional Support

14

4.2.9 Product Mix

15

5. Financing Wine Tourism 16

5.1 Who is investing in Wine Tourism?

16

5.2 Why invest in Wine Tourism? 16

5.3 Business Planning and Obtaining Finance 18

5.4 Issues for Obtaining Finance 18

5.5 Structural Options 19

6. Planning and Design 21

6.1 The Planning Framework 21

6.2 The Planning Process

22

6.3 Other Approvals

22 6.4 Planning and Design Issues

22

6.5 Local Government 24

7. Case Studies

25

7.1 Red Rock 26

7.2 Hanging Rock Winery

28

7.3 Lyre Bird Hill 30

7.4 Warrenmang

32

7.5 Pettavel 34

7.6 Brown Brothers

36

8. Project Development - Summary Checklist 38

9. Key Contacts

40

10. Selected References 42

Disclaimer

42


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3

Chateau Tahbilk

INTRODUCTION

Writer and humorist, Fran Lebowitz, has noted that: ... food is animportant part of a balanced diet. Increasingly, it seems, wine isbecoming an important part of the Victorian tourist experience.

What is wine tourism?

It is usually not the sole reason we travel yet Vic torias

burgeoning wine (and food) industries are adding

new dimensions to the enjoyment of regional Victoria.

Travellers are increasingly seeking a more rounded

engagement with the characters , places and culture

of their chosen tourist destinations. Wine - its growing,

production, tasting and consumption - provides aneasy social entry point for most of us and an absorbing

enthusiasm for others.

Wine and food seems to focus regional cultural

differences in a way that no other pursuit does.

One thinks of the fortified wine (and characters)

of Rutherglen; the I talian heritage of the King Valley;

Yarra Valley sophistication; Morningtons professionals.

It is also a logical par tner to the other things for which

we travel - rest, business, seeing friends, golf, fishing,landscape, adventure and so on.


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As time goes on it is becoming diff icult to separate

out wine tourism from just tourism. However for

the purposes of these guidelines investment in wine

tourism is taken to mean:

Direct investment in a winery or vineyard to

service tourists. Examples are: cellar door sales,

accommodation, caf/restaurant/epicurean

centre, education, conference facilities, etc.

Investment in infrastructure not at the winery but

developed as an adjunct to a winery experience

or trading in support of a winery experience -

hotels, gourmet foods, restaurants, specialty

shops, attractions.

Investment in promotional ventures designed to

encourage tourism based on the attractiveness of wineimagery or product - trails, festivals, concerts, and so on.

Background to wine tourism in Victoria

Travelling through rural areas has been part of the

Victorian scene since earliest European settlement. In

1846 the Argus notes that visiting Bendigo vineyards to

purchase wine and grapes was a popular part of everyday

provisioning. More recently, W.S. (Sam) Benwells Journey

into Wine (1961) reported the special joys of sampling

the winemakers art on site - even if he was speaking at,

perhaps, the lowest point of the Victorian wine-making

industrys history. He wrote: A list of the wines which

have gone forever from our tables would make mournful

reading ... What is left in Victoria that is drinkable? ... Who

makes it, and how did the vineyard come to be there? ...

To find the answer to these questions, one must make

a journey ... wine is always best when it is drunk near its

own soil. Wine and food writers also encouraged the

gourmet tradition - Peter Smark, Dan Murphy, Len Evans,

David Dunstan, James Halliday and others all contributed

to a new public interest in wines and winemaking. But it

was Rutherglens Wine Festival of 1967 (later the Winery

Walkabout) which heralded the possibilities for a new

relationship between wine, travel and recreation. The

introduction of the Wine Equalisation Tax with subsequent

concessions for cellar door sales has re-enforced the

financial significance of on-site sales to most growers.

Most typically, the development of wine tourism in

Victoria has been an incremental process. Sales from the

winery have led to basic cellar door facilities perhaps with

access to behind the scenes wine-making. Bill Chambers

Rosewood Winery at Rutherglen reta ins the informal

charm of this firs t step whilst places like Chateau Tahbilk

introduced cellar door sales into historic buildings to

provide genuinely world class environments, bursting

with heritage and a real sense of place. Others have gone

on to design purpose-built tasting outlets (matching the

growing sophistication of the new breed of winemakers).

Increasingly, opportunities for gourmet banquets

and functions at the winery were seen as a means ofsupplementing income and expanding awareness of the

label. The Mitchelton development

in 1974 pioneered the concept of a major ground-up

wine tourism complex with restaurants, merchandise,

farmers markets, reception facilities, cellar door, concerts

(and even a model farm) established to lure the visitorto the Goulburn.

As visitation has grown, the question of accommodation

has become increasingly relevant to some wineries

development. Different responses have emerged - B&Bs

have suddenly become part of the Victorian culture

and can now be found as a par t of many wineries

offer; Natalie Pizzini has made the Whitfield pub an

easy way to spend another day in the King Valley; All

Saints specialises in weddings and receptions; Chateau

Yering and the Lancemore Groups hotels have elevated

wine touring to a five star experience and opened up

possibilities for corporate conferences.

Why Invest in Wine Tourism?

The last ten years have seen an explosion in planting and

wine production in Victoria. Competition is fierce and

many small and medium size growers must establish the

next step for their business. Wine and food tourism

gives winemakers an opportunity to relate directly with

their customers building brand loyalty and providing

direct income from restaurants, accommodation and

the other ancilliar y businesses. For the investor, the

growth in regional tourism and the interest in lifestyle

product - especially food and wine - can offer a rewarding

investment vehicle.

Purpose of These Guidelines

Tourism Victoria works to position Victoria as the leader

in attracting investment in quality tourism infrastructure.

It facilitates projects by providing strategic focus and advice

to public and private sectors. Investment Guidelines forWine Tourismis the second in a ser ies, following TourismVictorias Building Tourism from Concept to Realitypublishedin 2000. The establishment of the Victorian Wineries

Tourism Council (VWTC) in 1992 to provide advice

to the Minister has been pivotal to the growth and

importance of wine tourism.

Tourism Victoria assists in the improvement of Victoriastourism assets by identifying economically and socially

sustainable infrastructure opportunities which will maintain

the states competitive edge. The wine industry is rapidly

emerging as an area in which Victoria has special strengths

and potential.

Wine producers and investors both require background

information to make informed assessments of the wide

range of wine tourism options and approaches available to

them. These guidelines are a step in canvassing investment

options with a view to exploring and realising the best

potential tourism outcome.


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5

1 . CONTEXT FOR INVESTMENT

IN WINE TOURISM

1.1 International

Four major structural

challenges are facing

winegrowers around

the world : a shif t in

consumer demand from

small specialist retailers

to modern retai lchains; the emergence

of dominant brands;

increasing international

competition; and changing consumer demand for

different quality and types of wine. All these forces

are leading to larger scale production and distribution

systems with, at the retail outlet, pressures to simplify

brand ranges. In turn, the place of the small producer

is becoming more vulnerable to competition, less stable

contract arrangements and increased diff iculties in

distribution and promotion. In the short term, most

producers are a lso facing oversupply conditions in

certain var ieties that are unlikely to equalise before 2005.

Again, in the short term, the increase in the exchange

rate may curtail overseas expansion and therefore

increase domestic competition.

Inbound (international) tourism directly provided $7.2

billion. towards Australians Gross Domestic Product in

2002-2003. In total export earnings international visitors

spent $16.7 billion. on all goods and services produced

by the Australian economy. The Australian tourism

industry employs over 540,000 people. Importantly,

tourism tends to be a labour intensive industry with

benefits to regional employment.

Identifying the synergies between the tourism and wine

industries is one of the exciting, unfolding, challenges to both.

Internationally, Australias wine has gained recognition.

Recently interest in Victorias wine tourism regions has

started to grow amongst international visitors. The Yarra

Valley wineries have quietly crept up to fifth (behind

Melbourne City, The Great Ocean Road. Sovereign Hill,

and Philip Island) on the Victorian Tourism Operators

rankings of all tourist destinations. But the actual numbers

of international tourists to Victoria (1.21m. or 23.5m.

nights) remains a small fraction of intrastate or interstate

trips (where Tourism Victoria focuses its major wine

tourism marketing effor t). Nonetheless international

visitation can be significant for wineries on existing

touring routes - the South Gippsland wineries near coach

routes to the Penguin Parade, are one example - and the

challenge is to realise the potential of the wine regions

for international visitors.

With it s par ticipation in The Global Network of Great WineCapitalsMelbourne has joined Bordeaux, San Francisco,Bilbao-Rioja, Por to, Cape Town, Santiago and Florence

in promoting business, education and wine tourism on

the world stage and international promotion of short stay

or day trips from Melbourne may in the future includeVictorias outstanding winery experiences.

1.2 Whats on Offer -Victorias Wineries

The regional spread of grape growing over the last ten

years has been phenomenal. Victoria now has 28% of

Australias vineyards and wine tourism is increasingly

being seen as an important s timulator of regional tourism.

In 2002 of some 400 Victor ian wineries, over 200 were

reported as having cellar door facilities and it has been

estimated that the majority of Victorian wineries draw

at least 50% of their revenue from cellar door sales.

In 1994/95 the number of visits to Vic torian wineries

was 1.6 million. By 2001/02 this had ballooned to 3.2

million. 54% of these were to the growing areas close to

Melbourne - Yarra Valley, Mornington Peninsula, Geelong,

Sunbury and Macedon Ranges - reflecting a growth in

visitation to those areas of 19% since 2000.

Tourism infrastructure - accommodation, eating out,

touris t trai ls, even adventure sport - has followed the

growers. For some regions such as the Yarra Valley,

Pyrenees and Rutherglen the wine industry is a major

contributor to tourism. In the emerging wine regions

- including Mornington, Geelong/ Bellar ine Peninsula,

Gippsland, King Valley, Ballarat, Macedon/ Sunbury,Bendigo and Heathcote - wine and food tourism is

becoming a significant component of the regions

attraction. For some towns like Milawa and Oxley the

gourmet traveller is becoming central to their identity

and to local producers of cheese, olives, honey, relishes

and other regional produce.

Equally important, the natureof wine tourism ischanging. The Yarra Valley Grape Grazing Festival has

demonstrated the power of festivals celebrating the

new vintage and others like the King Valleys La DolceVita Fiestaemphasise the increasingly strong culturalrelationship between local food and wine. Over the

last five years winegrowers associations and regionaltourism author ities have generated a rich feas t of festivals

and trails which focus attention on particular local

RochfordonEyton


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products and specialisations. Petanque competitions

have become identified with celebrations in the Pyrenees

and at the Wood, Wine and Roses Festivalat Heywood

somehow wine has found its way into main billing withwoodchopping! Music - from Spray Farms international

concerts to Eytons Summer Music Series - adds another

dimension. The opening of the Besens TarraWarra

Museum of Art will usher in new standards for winery

related activities.

1.3 Importance of Tourism at Regionaland Local Levels

Tourism is an industry which contributes $10.6 billion

a year to the s tates economy, and employs 156,000

Victorians. 2002 f igures estimated that the economic

value of Victorian wine tourism was $412m. and Victorian

Winer ies Tourism Council f igures sugges t that (forvisitors to a cellar door) 53% repor ted that wineries

were the main reason for visiting a region.

It is clear that investment in wine and food tourism

is already having a significant impact on Victorian

regional economies. This is more than an added-value

proposition - wine and food are generating visitation

(seen most clearly in the 40,000+ who visit the Yarra

Valley over the weekend of the Honda Grape Grazing

Festival). Again, the at traction of wine is encouraging not

only increased visitation but also increased length of stay

and, if return visitation is an indicator, increased visitor

satisfaction with the regional experience.

1.4 Strategic Direction

Wine tourism is not new. For many years visitors have

been seduced by the aura of wine and have sought it out

at its source. It is only over the last fifteen years that the

special synergy between winemaking, food and tourism

has been officially recognised and fostered.AustraliasWine Industry Strategy 2025called on the industry to ...Capitalise on wine tourism opportunities by stimulating

wine tourism and improving profitabilit y for wineries. In

1997 the Office of National Tourism provided funding for

the Winemakers Associat ions Nationa l Wine Tourism

Strategy. Now most states have instituted formal

studies to scope and develop wine tourism. Since itsestablishment the Vic torian Wineries Tourism Council

has been instrumental in moving Victoria to the forefront

of national wine tourism through its promotional

publications, market intelligence surveys, public awareness

campaigns and encouragement of wine and food festivals.

Victorias Tourism IndustryStrategic Plan 2002-2006identifieswine and food as a tourism product of s tate-wide

significance and a key segment for development. The

Strategy calls for wine and food to be included ... as

core product strengths in all marketing strategies. It

also identifies the promotion of the Yarra Valley as ...

Victorias hero food and wine destination to national and

international markets. Additionally, the Strategy commitsto improving regional restaurant experiences and restates

the impor tance of the Vic torian Wineries Tourism

Council in providing direct industr y advice to the Minister.

The Strategy maintains the regional structure of planningbut also identifies a shift towards the importance of

focusing attention on ... specific destinations, events

or activities that are the key motivators for visitors...

quality destinations with a strong sense of place offering

boutique accommodation, restaurants, shopping,

galleries, markets and appropr iate quality service.

This approach involves the identification of key

destinations - villages, attractions, and in some cases areas

(such as The Great Ocean Road. and The Grampians).

As a part of its overall approach, Victorias Food and

Wine Tourism Plan 2004-2007 will explore:

Existing strengths Cooperation between regional wine and food groups

Encouragement of quality food and wine festivals

Preferred areas for development

Opportunities for agri-tourism development

Market positioning and strategic direction

Education and accreditation of operators

Ideally, new product development should be closely

aligned to investment attraction and infrastructure

development of these strategic focal points.


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7

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Gippsland

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N E W S O U T H

2. THE REGIONAL CONTEXT

Victoria has eight

tourism regions which

provide a strategic

direction for Marketing,

Infrastructure

Development, Industry

Development, Product

Development andInternational Marketing.

The regions provide a

clear focus for tourism

promotion bodies to co-operate in marketing and

product development.

The regions include The Murray, North-East Victoria ,

Gippsland, Melbourne, Melbourne Surrounds, Great

Ocean Road, Grampians and Goldfields . The general

geographic boundaries of these are identified below:

Regional Tourism Development Plans (RTDPs) have beendeveloped for each of the States tourism regions and

are used to co-ordinate Marketing, Industry and Product

Development and Infrastructure activities.

Victorias Tourism Regions

BrownBrothers


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Many of the RTDPs identify food and wine as a product

strength and /or a product that is a point of difference.

Additionally, food and wine is identified as being a

complementary activity to many other tourism activitiesand therefore adds significant value.

The plans identify that there is a need for quality

accommodation in regional Victoria to leverage the ability

for induced visitation to the regions to increase overnight

stays and yield. Investment in food and wine tourism will

help to achieve this objective and is therefore supported

by the RTDPs.

The tourism regions do not match the emerging

boundaries of wine producing areas (See map below)

however, each region is assessed and charac terised on

the basis of its brand at tributes (key regional features,

destinations, attractions) and brand personality(emotional or intangible attributes). Most often these

identify wine and food as a positive regional attribute.

Wine Regions of Victoria

Wine Regions

AROUND MELBOURNE

Yarra Valley 1

Mornington Peninsula 2

Geelong 3

Sunbury 4

Macedon Ranges 5

WESTERN VICTORIA

Ballarat 6

Pyrenees 7

Grampians 8

Henty 9

NORTH-WEST VICTORIAMurray Valley 10

Swan Hill 11

CENTRAL VICTORIA

Bendigo 12

Heathcote 13

Goulburn Valley 14

Upper Goulburn 15

Strathbogie Ranges 16

NORTH-EAST VICTORIA

Rutherglen 17

Beechworth 18

Alpine Valleys 19

King Valley 20

Glenrowan 21

SOUTH-EAST VICTORA

Gippsland 22


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9

3. THE MARKET AT A GLANCE

Understanding the make

up of the market - the

who, how and why?

- is an essential input

into any investment

decision. The nature

and number of visitors

to winer ies and adjunctbusiness have changed

dramatically since Sam

Benwells travels. As

lifestyle becomes

almost a tangible term for a whole range of consumption

behaviours, customer choices about wine (and food)

can describe quite dif ferent types of people. However,

some general trends are clear - the number of people

interested in travel, wine, food and local exper iences

continue to grow; the young are becoming involved; and

certain regions are gaining suff icient weight to act as

touris t magnets. Building relationships with these markets

is a key to successful wine tourism development.

In 2003 Tourism Victoria with the Victorian Winer ies

Tourism Council (VWTC) conducted the Victorian Cellar

Door Survey (following its 2001 Cellar Door Survey).

This survey was completed by visitors to V ictorian cellar

doors about themselves, their reasons for visiting and

their tour ism habits. In summary, the survey repor ted:

Age

A significant increase in 25-34 year olds and 35-44

year olds over the 2001 Survey. The 25-34 year old

demographic now represents the largest single segment.

Life CycleThe highest lifecycle group was in the family sector (32%)

but the report noted that older couples (28%) and

younger couples (26%) were also strongly represented.

Geographic Profile:

58% of visitors to Victorian cellar doors were from

Melbourne and a further 19% from regional Victoria.

Interstate visitors represented 20% whilst overseas

touris ts represented only 3%.

Repeat Visits

87% of respondents were repeat visitors. On average,

those who were questioned made 3.5 tr ips per year

which included wineries. 80% reported at least one visit

to a winery each year (including 28% who repor ted 2-3

visits per year).

RegionalWith most visitors coming from Melbourne it is not

surprising that the Yarra Valley and Morning ton regions

attracted the highest visitation:

Yarra Valley 48%*

Mornington Peninsula 36%

Rutherglen 18%

Geelong 12%

Pyrenees 11%

* multiple choices allowed

Duration

Over half (51%) of those questioned repor ted that they

were day trippers; one third (35%) were on short trips

of 2-3 days duration; and 14% were part of a tr ip of four

or more days.

Wine Consumption and WineClub Membership

46% of cellar door visitors dr ink wine a few times a

week; 32% every day. 24% belong to a wine club

or society.

Planning and Information Sources

77% repor ted that they planned to visit a winery before

departing on their tr ip. Key reference points were:

recommendations from family and friends (44%) ; Tourism

Victorias Wine Regions brochure (27%) and Tourism

Victorias Jigsaw brochures (26%).

Motivation to Visit

Apart from wine tasting, the key reasons for visiting

a winery included: its surrounding scenery (24%); its

atmosphere (15%); and a food experience (20%) .

SprayFarm


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Main Reason for visiting Region

53% of visitors suggested that visiting wineries was themain reason for visiting a region. Reasons stated were:

visiting friends and relatives (14%) ; a weekend away

(14%) ; and attending sporting or outdoor events (10%).

Reason for Choosing a Particular winery

Wine quali ty was important but not the only

consideration when deciding on which winery to visit.

Respondents noted:

quality of wine (20%)

reputation (19%)

food (17%)

recommendation (17%)

past experience (13%)

ambience (13%)

Other activities

The most mentioned activity par ticipated in by winery

visitors was eating out (73%). Arts and crafts, shopping,

picnics, outdoor activities and events/festivals were also

mentioned.

Most enjoyable aspect of a winery visit

The increasing importance of friendly staff wasemphasised by the VWTC cellar door survey. In 2001

this aspect was repor ted as secondary to the quali ty of

the wine. In 2003 although the quality of wine remained

stable at 31%, friendly staff had lifted from 23% to

36% to be the most signif icant determinant of enjoyment.

The significance of food facilities and ambience also

increased between 2001 and 2003.

In summary, three key trends are clear:

Wine is a significant driver of tourist demand. As

market demand for regional tourism grows, investment

potential of projects associated with wine are

becoming sustainable as attractive investments. Additional activities - particularly food - are sought

after as a par t of the wine experience. Investment in

conjunction with wine enterprises offers strong value

adding to both wineries and new enterprises.

Wine and food tourism is no longer limited to older

demographic profiles - youth (25-34 year olds) is

increasingly important. The market for regional wine

and food experiences is made up of segments with high

disposable incomes. Strong return visitation indicates

that loyalty is high suggesting high yield and strong

word of mouth promotion.


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11

TourismObjectives

StatutoryPlanning

LocalAttractions

Regional Character

Financial Reserves

Cashflow

Capital

TourismType

TouristNumbers

TourismNeeds

Customer Base

Staff Resources

Staff/ContractSelf

Tourism

Wine

Competition

Alliances

OtherAttractions

GrowersAssociation

ExistingLoyalty

Identity/Image

Brand Position

Promotional Support

Paid/Free

RegionalTourism

TourismVictoria Cellar Door

CafeAccommodation

Picnic / BBQWiner y Tour

EventsConferences

FunctionsAdventure

Arts / CraftWine Educatio n

Other

Components

Tourism Product

4. DEVELOPING THE CONCEPT

Figure 1 Wine Tourism Investment Issues

4.1 Assessmentof a WineTourism Project

The investment

opportunities are

there . Victor ias

tourism infras tructure

is developing as fast asany in the country but

grape growing and wine

production has added

a dimension which

has opened up fur ther possibilities for new ventures in

accommodation, restaurants, gourmet ventures, primary

production, events, festivals, adventure sport... and more.

From an investment point of view, developing a successful

wine tourism product requires attention to many aspects

of the existing business and of the adjunct business

under consideration. The same issues must also be

taken into account by an external investor in a project.

Investment in wine tourism is no longer a matter of

shortening the distr ibution chain by opening a cellar door

facility. A range of variables must now be considered

in decision-making to move away from a simple wine

production model.

In every project there are cer tain aspects which

determine success or failure. These key success factors

may relate to demand, margins, or revenue levels.

They may also be dependant on other things happening

- success in a regional wine trail promotion, an upturn

in intrastate tourism, containment of building costs,

differentiation from competitors, etc. Often a projects

success is dependant on its location - near a major cityor destination hub, or perhaps, near a major landmark.

In any case, identification of key success factors and an

analysis of the sensitivity of those factors to change is

important in checking the best case and worst case

possibilities for a project.

Figure 1, below, indicates the principal factors which

should be assessed in preparing a wine tourism

investment proposal. The above the line factors: RegionalCharacter, Customer Base, Competition and Brand Positionrepresent the context for a new venture. The factors

below the line - Financial Reserves, Staff, Alliances, andPromotion- are the resourcing issues which will providedirection particularly in respect to scale and long term

financial viability. Examination of both types of variable

may suggest the most appropriate type of components

for a project - small scale and minimum risk BBQ facilities,

a family-run B&B,... or... a $6m conference centre.

Mitchelton


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Although a for tunate few can enjoy the winemaking

process purely as a pleasurable pastime, investors are

focussed on business outcomes. Establishing the financial

feasibility of any new or ancillary business is a critical s tepin undertaking a project.

Predicting performance of a business is rarely risk free

and any feasibility analysis is only as good as its base

information and assumptions. Nonetheless a careful

approach to feasibility analysis can provide a good way

of exploring the issues which may make the difference

between success and failure. A feasibility analysis will, in

any case, be required as a part of any approach to banks

or other investors for funding.

Feasibility of a project depends not simply on accurately

gauging market-place demand. Financial profitability

is the objective and accurate estimation of the costsand revenues associated with meeting demand is the

real outcome of a feasibility assessment. If feasibility

assessment is not a competence of the grower or

investor it is best that this stage is undertaken by an

independent specialist consultant.

Examination of trends in a particular industry is the

star ting point for any assessment of future performance.

It is important to realise that a wine tourism project

can mean an understanding of many different industries

- each with their own market dynamics. Even basic

cellar door sales can be directly effected by trends

in merchandising. Restaurant fashions are constantly

changing. Accommodation is dependant on disposableincome, and so on.

Assessing past per formance is one aspect of establishing

trends ; predic ting the future is the other. Often

trends , which history suggests are likely to continue ,

can be turned into short term episodes by a larger

trend or one-of f occurrence. Changes in government

policy - for example, water rights - can have a similar

effect. An understanding of broad economic trends is

usually obtainable from banks, government agencies,

or professional consultants. Indust ry associations and

banks usually have data on sector per formance which

can be used to fill in details in particular industries.

Other agencies such as Tourism Victoria, the VictorianWiner ies Tourism Council , the Winemakers Federat ion

of Australia and regional tourism authorities can assist

in providing further specialist insight and statistical

information about visitation levels and market segments .

For more complex projects it may be appropriate to

commission market research to help establish the scale

and type of demand.

While investors are seek ing to maximise the return on

their investment in a tourism-based project, of ten the

goal is not purely immediate revenue. The vision for the

project may embrace such issues as:

Long term brand development - here the numberof people who engage with the brand may be more

important than a financial contribution.

Short term promotion to new markets - investment in

festivals, regional promotions and brand alliances may

be a means of opening the brand to an new audience.

Lifestyle - the grower or investor may simply wish

to enjoy the development of a larger concept .

Capital appreciation of real estate - investment in

buildings, landscaping and facilities can add to long

term at trac tiveness and property value.

A clear understanding of the objectives of the investment

and its contribution to a wider vision of the enterpr ises

future is essential in evaluating feasibility and in

determining its real tests of success.

4.2 Key Factors

(Refer Project Development - Summary Checklist p.36)

4.2.1 Regional Character

Visitors understand regional differences and seek them

out. It may be the terroir[Fr.soil] of the winery orthe impression one has of par ticular places - the

landscape, the people, the climate, attractions,

and special events.

Regional character provides the matrix within which

a tourist offering is made. It can be effected by the

marketing objectives of tourism authorities or by the

approach of local government to development, heritage

protection, environmental objectives, and so on.

The location of the venture is a key consideration

- proximity to local attractions and to key tourism

hubs may be critical to visitation. Already a tourism

trend to wine regions close to Melbourne has

justi fied infras tructure development in restaurants

and accommodation on the Mornington Peninsula

and the Yarra Valley. Macedon Ranges wineries have

found easy alliances with spa and restaurant operators

in Daylesford and Hepburn Springs. As international

interest in Australian wineries grows it is likely that

proximity to Melbourne will become a crucial issue for

inbound tourism. Again, as Tourism Victorias planning

around regional attraction unfolds it is clear that otheropportunities will emerge around those tourism hubs,

particularly for the intra - state and inter-state markets.

Ideally, a wine tourism venture will springboard off

regional character. It has been easy to associate wine with

regional difference (and continuing efforts at appellationcontrols on labelling emphasise the signif icance of terroir);now, associated food, building design, and even the

welcome of staff must reflect local differences. A project

developed without a clear understanding of the regional

constraints and character, risks missing opportunities

to build on these special attractors and to contribute

to them. In some cases - Milawa , Yarra Valley, and

Rutherglen are regional examples - the wine (and food)factor has become a central dr iver in establishing an

identity for the future.


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13

4.2.2 The Customer Base

Any wine tourism project relies on customers.

Understanding the present and potential numbers of

visitors, their needs and aspirations is a critical par t of

any business planning.

In simple terms, visi tor needs can be considered as of

two types:

Functional - the basic requirements: roads, toilets,

shelter, opening hours, signage, wheelchair access, etc.

Aspirational - needs for more emotionally-rooted

desires such as: personal recognition, exploring what

is new, security, peer approval, respect, fun, the best

of good living, and so on.

These issues are the matters that can be defined byrigorous market research or even just by talking to

visitors. Frequently demographic grouping can offer

insight to the way people may behave - age can be a

factor, as can family status, or income. Tourism Victoria

utilizes theMorgan Value Segmentswhich identifylifestyle categories based on the particular segments

approach to spending. Other markets are identified by

the use associated with a venue. For example weddings,

conferences, and celebrations often br ing guests to a

place which they may not otherwise visit.

Targeting particular lifestyle, demographic or other

segments can be impor tant in designing the features of

the project and ef ficient adver tising depends on focusingon the media relevant to a target market.

While it is impor tant to assess the type of vis itor it is

equally important to understand the size of potential

visitation i.e. the number of people that are likely

to come. Some large scale projects and major joint

promotions can begin new tourism trends to a region ;

other projects may improve visitation from special

niches in the market; for others the absolute upper

limit of visitation will be the existing numbers coming to

the region, taking account of trends - up or down - for

the future. However, there is no attr action which will

capture the total potential market. In fact, in estimating

visitation, the investor must star t at zero (and this is whatan existing winery going into a cellar door operation

without any existing reputation, promotion, alliances,

signage, etc. etc. can expect) and build up the project s

visitation profile according to its appeal to its targeted

markets. Accurate estimation of the scale and frequency

of demand is perhaps the hardest but most important

single determinant of a successful business development

exercise.

Understanding the market is not simply a once-off.

Ongoing market reconnaissance is vital to remaining

competitive. Keeping abreast of customer needs can

range from simply requesting postcodes to undertaking

ongoing qualitative or quantitative market research on aregular basis.

4.2.3 Competition

Competition can come in two forms - other wineries;

or other attractions. Although a number of wineries

concentrated in a particular area can provide a certain

weight in the marketplace they can also compete directly

for the tourists dollar. Similarly, other attractions may

bring visitors but they may also consume the travellers

time and money.

Some competition may be beneficial, enhancing the total

regional offer and expanding the overall visitation from

which the new project may draw its patronage. Other

competition may simply dilute a limited visitor pool.

The challenge to investors is to define possibilities for

establishing competitive advantage based on their special

situation, skills, and resources. Imagination in creating

a new concept, improving an existing one, or findingmarket niches which are not being serviced are the keys

to competing successfully.

4.2.4 Brand Positioning

The identity and image of a winery (and its wines)

is a key asset of an enterprise.

Public trust of a brand can mean acceptance of products

at the retail and wholesale level. It can also assist in

financing and it can place a firm or a family in a social or

cultural context. It must be protected and nurtured.

A tourism adjunct to the wine business must positively

contribute to the wine brand. And it can ! Many investors

have actually built their wine brand by entering an

adjunct market. Careful consideration of the implications

of a new venture on the existing brand is central to

building on existing loyalty and to providing access to a

larger patronage base. Usually the new venture should

be congruent with the brand identity of the winery - a

premium wine is not well serviced by a poor restaurant;

strength in an Italian grape may well be enhanced by a

game of bocce; ... and so on.

It is critical to remember that in any brand association

arrangement the business purpose is to enhance the

winery brand image - and therefore profitable sales -by improving:

Awareness of the brand

Preference for the brand

Intention to purchase the brand

Actual purchase of the brands products

Satisfaction with the brand

Respect or loyalty to the brand


15/43


Much of the recent growth in wine tourism products

can be attributed to brand building. Frequently concerts,

restaurants, events, sponsorships, accommodation,

galleries, tours and other initiatives operate at little orno profit but have enormous impact on building or

enhancing brand image.

4.2.5 Financial Resourcing

Ancillary products can be attractive in providing

additional revenue and smoothing seasonal cash f low

variations; however stric t business planning must be the

basis for deciding on a new venture. Institutional f inancing

will be linked to a clear analysis of demand and return

on investment. It is necessary to establish the capital

requirements of a proposal and to justify the cash flow

requirements over a reasonable business horizon. Benefit

can be determined by either an increase in exis tingwinery business or on the basis of a stand-alone adjunct

business. Accommodation, restaurants, events and so on

must be evaluated in terms of that par ticular industry or

in terms of adding brand awareness or image for the

wine label.

Financing expansion of the business depends on:

Ones own funds

Borrowings of loan funds

Securing capital through equity injection,

sharing or raising

Inevitably, tourism also involves issues of public liabilit y

and property damage. Insurance implications must be

carefully assessed and costed in advance.

4.2.6 Staff Resourcing

Running a vineyard and winery is, t ypically, a full time

occupation. Vineyard operations can draw heavily on the

most valuable resource of the owner - time. The decision

to expand operat ions into tour ism ventures must be

undertaken with a clear view of the implications for staff

and the impact on the time resources of the winegrower.

Most of the time running a B&B, for instance, is not in

cleaning or cooking but in attending the phone for bookings.Adjunct businesses have their own needs for exper tise

and generally conform to the f inancial dynamics of

the other industry. Staf f issues including: the owners

expertise, local availability of suitable personnel, and

training requirements should be analysed. Simi larly, the

need for contractors and specialist consultants needs to

be realistically assessed and costed.

Staff costs (including statutory and other on-costs)

are usually a major par t of any enterprises annual

expenditure. Consideration of whether staff are to

be employed on a full time, part time or casual basis

depends on seasonal and daily demands.

Cost is not the only consideration. Staff (especially front

of house staff ) are vital in maintaining strong customer

satisfaction and therefore return visitation and positive

brand impressions.

4.2.7 Alliances

Increasingly, success in developing a tourist resource is linked

to alliances with regional enterprises and associations and

with external brands, which can reinforce awareness of

the growers brands.

Typically, initiatives include taking advantage of economies

of scale in branding, joint marketing initiatives, and

promotions. Growers and tourism associations also

provide the opportunity for consolidation of market

research and network data bases.

Association with other wineries and attractions, growers

associations, accommodation, retail outlets, events,

restaurants, services and retail products can all be

useful in bringing tourists to a winery. The work done

by Browns Brothers and other local wineries in the

North East has been outstanding in generating interest

in the Milawa/King Valley region. The Scotchmans Hill

group has built strong relationships with accommodation

businesses in the Geelong region to assist its wedding

and function clients. There are many other examples.

More generally, industry associations such as the

Victorian Wineries Tourism Council have generated

enormous awareness of wine tourism in the Victorian

context. The Winemakers Federation of Australia has

broad experience in research and advice on wine tourism

and its excellent guides, reports and research resources

are invaluable to any grower seek ing expansion into

wine tourism.

Brand alliance with external corporations is an activit y

which is being used to mutually enhance brand image.

BMW (Aust.) for example has utilised a number of Yarra

Valley winery destinations to re-enforce its image as a

prestige car provider. Similarly ballooning in the Yarra

Valley has become a popular part of the wine experience.

Assessment of the contribution to a project of existing

and potential alliances can be a decisive factor indetermining long term viability.

4.2.8 Promotional Support

Assessment of a new venture should take account

of the continuing requirements for promotion in the

marketplace. Advertising, public relations and loyalty

programs are likely to underpin a viable enterprise.

Tourism Victoria and regional tourism authorities provide

crucial promotional support to wine tourism initiatives.

Tourism Vic torias publication, Wine Regions of Victoria,has a distribution of 125,000 throughout Victoria and its

regional jigsaw brochures are perhaps the single mostsignificant influence on self drive tourists.


16/43

15

There are also other free opportunities for news,

radio/television and internet coverage. Television, in

particular, can be powerful in raising awareness of a

wine and its brand. Travel programs, Postcards, Discoverand Australian culture programs are constantly seekingnew angles on the Victorian scene.

Again, co-branding with other businesses may enhance

awareness and image. This may be as s imple as

providing wines to the local art gallery or as complex

as formal deals with major corporations as par t of joint

promotional exercises. Sponsorship is a form of co-

branding. The trade off is between the winerys cash

and/or k ind in return for association with the brand

of the local group, charity, cultural centre or product.

Nonetheless provision for paid advertising, sponsorships

or public relations activity is prudent.

4.2.9 Product Mix

The opportunities for investment are limited only by

imagination and potential market demand. Broadly,

customers display consistent needs which commercial

on-site ventures can tap into.

The table right (Table 1) summarizes some relationships

between the needs of customers, potential wine associated

activity which may satisfy those needs, and some possible

markets for the new enterprise.

Holiday buying behaviour can be signif icantly different

from day to day shopping. Wine sales and specialty

consumption are typically more attrac tive in a holiday

situation and the opportunity is to cater to such

specialties. Again, wine education represents an activity

which may best be pursued on site. It is also clear that

accommodation associated with wineries has added a

positive dimension to an overnight s tay. Meeting the needfor corporate conferencing is especially appropriate in a

winery as is demand for food and celebration.

Table 1. Customer Needs

Customer Need Business Activity Associate markets(Morgan)*

Buying Cellar Door Merchandise

Gourmet produceGallery

All day trip and overnight(Visible Achievement/Look atMe/Socially Aware/ Young Optimist/Traditional Family)

Learning TastingWine educa tionWiner y toursMuseum

Education, interest group(Socially Aware, Traditional Family)

Accommodation B&BHotel / Motel

Weddings, romance,festivals, gay/lesbian,adventure, sports(Visible Achievement/SociallyAware/ Young Optimist/Look atMe/Traditional Family)

Business Conference facility Seminar, convention, retreat

Eating CafeRestaurantEpicurean CentreBBQ / Picnic

Day trip, romance, festivals,events, gay/lesbian,adventure, sports (VisibleAchievement/Socially Aware/YoungOptimist/Look at Me/TraditionalFamily)

Weddings, f unctions Reception facili ties Weddings, ce lebra tion(Visible Achievement/YoungOptimist/Look at me/Socially Aware)

* Morgan Value Segments Roy Morgan Research


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5. FINANCING WINE TOURISM

(Important Note : It is not the purpose of these guidelines to broach all the issues associated with possible finance and financial structures for under takinga new project; nor to recommend any. However some exploration of structural options may provide prompts to further discussion with qualified accountantsor financial advisors)

5.1 Who isinvesting inWine Tourism?

The great lesson of the

past ten years is that

investment in wine and

wine tourism can come

from many quarters- dedicated wine

growers, professionals,

the hospitalit y industry,

superannuants,

international corporations, farmers and others.

However, it is important to differentiate between

the two types of investor involved in wine tourism:

the winegrower or winery expanding its offer to

the public for revenue or brand development ; and

the external investor using visitation to a wine region

as a springboard to infrastructure development in

hotels, accommodation, restaurants, gourmet food,merchandise and so on.

5.2 Why invest in Wine Tourism?

Wine producers viewpoint

Growers may have a number of major financial

motivations for entering into a wine tourism venture:

to directly increase yield, and net return through

additional income streams;

to enhance a brand in order to maintain or increase

market share;

to improve the value of the capital asset of the land

and its improvements; and

lifestyle.

Perhaps most significantly, wine tourism projects can

offer some growers a way to balance cash flow over the

long term development of a wine business. The early

set up years of a wine business are characterised by low

revenue. As vines mature, the label is established in the

marketplace and economies of production are realised,

break even is achieved and eventually ongoing profit

achieved. A tourism product can, however, be achieved

more quickly and may deliver positive cash flow sooner.

The model below (Graph 1) reflec ts a hypothetical case

of cash flow from wine (in blue) and tourism (in red).

It can be seen that the net cash flow position (in green)

can be improved, especially in the sensitive early years

through introduction of a tourism product . By the time

reinvestment in tourist product is required (shown below

at Year 8), vineyard income is nearly established and the

overall net cash flow position is manageable by Year 15

the overall benef its of cash flow from both sources are

clearly apparent.

Graph 1. Cash flow

SprayFarm

-600

-500

-400

-300

-200

0

100

200

300

400

-100

Year

1 2 3 4 5

6 7 8 910

11

12

13

14

15

16

17

18

19

20

$

Wine

Tourism

Net Cash Flow


18/43

17

The simplified models (based on nominal value per

case) below demonstrate the advantage to the wine

producer in undertaking direct sales . In Model A the

producer achieves profit solely in the margin betweenproduction costs and wholesale less distributors charges.

Model B shows that while there may be costs of direct

sales - administration, time, travel, representation, etc

- equivalent (or near) the distributors charges, the whole

retail component is retained by the producer, in this case

doubling gross margin.

Model A: 100% Distributor

$/ Case

Production cost 40

Distributor (say 20% Wholesale) 20

Producer Gross Margin 40

Retailer 40

TOTAL (RRP) 140

Production cost

Distributor

Producer Gross Margin

Retailer

Graph 2. Without cellar door

Model B: 100% Own Sales

Production cost 40

Cost of sales 20

Producer Gross Margin 80

TOTAL (RRP) 140

Production cost

Cost of Sales

Producer Gross Margin

Graph 3. With cellar door

In practice cellar door sales are limited by the demand

at cellar door. If the total production cannot be solddirectly, other distribution must be arranged. Again selling

purely through cellar door may limit the establishment

of the brand in the wider marketplace and be seen as

undesirable from that point of view. Nonetheless the

desirability of encouraging visitation to the winery to

capture the winery experience and cellar door (withassociated restaurant) sales is clear.

The Wine Equalisation Tax (WET) rebates available

from the Commonwealth and Victorian governments to

small growers for cellar door sales (up to $300,000) have

also provided a strong inducement to most producers

to establish cellar door facili ties and direct mail-order

services. Under changes announced in the 2004 Budget

producers will now receive a maximum rebate of

$290,000 per year on allsales up to $1m. - effectively

neutralising the cost of the WET for 90% of wineries. The

net effect is to put distr ibutor sales in the same (rebated)

situation as cellar door so this may actually remove some

of the incentive to open a direct outlet.

Small growers certainly benefit from direct sales in other

ways as well - principally in saving distribu tors margins

and competition for shelf space and smoothing year

round cash f low. But even the basic cellar door operation

must be considered a small business with all the

requirements for staffing, promotion, branding, facilities,

ongoing costs and so on.

There are no rules for sequencing investment. Brown

Brothers have shown the prudence of moving forward

from a stable financial and marketplace platform. On the

other hand, Spray Farm has successfully demonstrated

that intensive investment in events , food and functionscan help quickly elevate a brand above the also-rans.

Often, to suppor t a cellar door operation, a grower will

invest in ancillary facilities from BBQs to restaurants,

B&Bs or other attractions. The option seems reasonably

simple. Vines take years to produce income whereas a

restaurant can be productive immediately. The challenge

is to make visitors come ... and buy !

In addition to capital commitment to growing grapes and

making wine, the grower is then faced with new financing

needs for buildings and fit-out . The danger lies in over-

extending reserves while there remain demands on the

winemaking business to cover establishment, expansion,stock holding costs or in riding out over-supply s ituations.

Unsustainable costs in a new venture can actually

endanger the core business. Frequently the answer can lie

in a smaller investment in cooperative regional marketing

or in drawing external investors into the business or

in encouraging synergistic development by others.

Sometimes the new business may prove to be a superior

investment to the wine business. Genera lly, however, the

rule is that as business grows more ex ternal funding will

need to be injected.

Throughout, the grower-investor must carefully gauge

the level of investment which is sustainable and the

implications of borrowing or capital raising on wine-tradedevelopment and control of the business.


19/43


Outside investors point of view

External investors usually seek to associate with

the wine tour ism industry :

to make profit and a satisfactory internal rate of return

to invest in the long term growth of the wine industry

to invest in the long term growth of the

tourism industry

to invest in the long term capital growth

because of lifestyle considerations

Benefits of cooperation

Cooperation of winemakers and other investors can

contribute to:

risk reduction

sharing of expertise

increased borrowing power

expanded brand profile

synergies of development and marketing

The principal benefit is, however, a question of scale.

Although there are oppor tunities to invest in wine

tourism at all dif ferent levels, increasingly, the scale of

investment in facilities is growing larger as tourist s expect

more (and get more from the competition). There is no

doubt that the more vigorous the wine tourism industrybecomes the more cost effective larger scale investments

in infrastructure become.

5.3 Business Planning andObtaining Finance

Proper business planning is the key to prudent

investment. A good business plan will test the concept

of the project; it will provide a required basis for

consideration of others - banks, financiers, etc; and, i t will

provide targets against which the new venture can test

itself in operation. The plan should clearly identify:

Purpose- Why the enterprise is being undertaken.

Objectives- What is hoped to be achieved by theventure.

Concept planning- explaining the concept.

Vertical or horizontal integration- Relationship withother activities.

Identification of business- What industry is the newventure in? What are the trends and opportunities of

that indus try ?

Market positioning- Where the new venture sits inrelation to competition, market type and market

demand.

Piggy-back development- Relationship to events,attractions, etc.

Alliances- formal and informal. Financing- capital structure and cost.

Profitability- satisfactory Internal Rates of Return;reliable revenue, expenditure and cashflow

performance.

Market ing plans- links to operators, brochures, tradeshow attendance, advertising, sponsorships, loyalty

programs.

Organisation- Corporate structure, managementstructure, staff.

Operations- hours of operation, cyclical maintenancecosting, risk management, insurances.

Government support- Access to grantprograms, subsidies.

Statutory- Requirements for: planning approvals,Worksafe, licensing , environment protection, shop

trading, etc.

5.4 Issues for obtaining Finance

Put simply, there are two types of f inance:

Loan Funding- Usually borrowed on the basis ofrepayment of a loan plus interest based on security

of the proponent. This type of arr angement is most

appropriate for small scale ventures with a value

of under $2m.

Venture Capital- Equity participation fromsuperannuation funds, managed investment funds,

specialists in rural business, merchant bankers, etc.

For premium deals arrangements involving debt and

equity involvement may be established. Usually this

will involve projects of at least $2m.

Banks and f inance institutions gauge the risk of their

involvement in particular investment in the context of

the expec ted per formance of the industry in which i t sits .

For example, an investment in a winery restaurant couldbe considered as a part of the restaurant industry and/or

as a par t of the wine industry. Current bank guidelines

rate large scale wine enterpr ises more highly than smaller

ones. This will effect the ease wi th which funding may

be available. Similarly, the restaurant industry is seen as

having its own risks. Generally the greater the lenders, or

investors, perception of risk, the costlier and less f lexible

arrangements are likely to be.


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19

To improve attrac tiveness to financial institutions,

investors must be rigorous in addressing clearly and

reliably:

Business Skills- the track record of a proponent in thechosen business or in earning other income.

Actual Capital Costs- Independent quantity surveyor orarchitect assessments of costs.

Business Plan- finance ratios, revenue estimates, costestimates, etc.

Pricing- Premium Wine Experience or lower valueprice bracket. Some regions brands can sustain

$30.00 / bottle, some cannot. Similarly some tourism

products can attract a premium others may have

to find another position due to issues of margin and

customer profile.

Brand- Is existing brand awareness suff icient to drawcustomers? Does cellar door etc build brand or is it

better to build other experiences as an anchor to the

business?

Benchmark- Estimated performance against industrybenchmarks.

Risk- Risk can be in the form of: competive pressure inmargins; demand trends ; and liability to litigation.

Impact on rest of business- does the new enterprise fitwith the existing business.

Capacity to meet demand of the tourism industr y- leadtimes, volumes and commissions.

Regions tourism performance and catchment- egdistance from Melbourne, existing established regional

tourism industry.

Scale- Size of enterprise, capital requirements,turnover etc.

Security- Is debt secure?

Presentation- Is the proposal presented in aprofessional manner, inspiring confidence?

5.5 Structural Options

Wine tour ism projects are often characterised by

a development of interests between a grower or

winemaker and new expertise (in say restaurants,

accommodation or some other venture). Where two

or more par ties are sharing funding of a project close

attention needs to be paid to the type of corporate and

financial structure chosen to reflect interests and control

future plans. Too often winemakers have seen a need to

attrac t capital to cover stock holding or expansion then

found that their new partner has gained unanticipated

rights to the firms management and assets.

Most structures should therefore be entered into on

the basis of a clearly unders tood vision of personal and

enterprise goals reaching well into the future.

Financial structure (or corporate structure) may be

considered in the context of:

financing

income sharing

taxation planning

indemnification and limitation of liability

family inheritance planning

Sole proprietorship, where a business is operated in

the name of an individual is perhaps the simplest form

of structure. Revenue and outgoings provide the basisfor the individuals net income and, accordingly, tax

responsibilities. The proprietor also retains responsibility

for legal obligations, including debts. This structure costs

little to set up and can quickly reflect the f inancial success

of a business, par ticularly when it operates in only one

enterprise. The structure can present limitations in

respect to capital raising as the assets of the business are

essentially limited to those of the propr ietor. The great

advantage of this structure is that it does ensure close

personal control of a business.

A partnershipcan increase access to borrowings and

can bring together complementary sk ills. A husband and

wife can also value their respective input into a businessfor taxation purposes. A par tnership does, however,

open up possibilities for internal dispute regarding overall

direction. In the situation where a grower seeks the

partnership of a tourism specialist, say a restaurateur,

it is important that corporate vision and goals are

clearly agreed and that dispute settlement procedures

are envisaged. Additionally, a partnership usually has

unlimited legal liability.

Proprietary companiesprovide a separation of legal

entity from the individuals involved in them. In this way

financial participation in the company can be at legal

arms length through shareholding and consequent

dividends and legal liabilit y lie with the company - not the

individual. Establishment of a company structure does

involve some costs and annual reporting to the Australian

Securities and Investment Commission. It also entails high

standards of record keeping and public scrutiny. Directors

of a public company are also required to comply with

clear standards of decision making and retain financial

responsibilities in certain situations. The proprietary

company does offer a means whereby a diversity of

owners can be accommodated through shareholding

and election of Directors. The company structure does

not necessarily preclude shareholder friction as holdings

fluctuate but it can provide impartiality of management

and perhaps a more stable base for accessing finance.


21/43


Managed Investment Funds( MIF) represent

another vehicle of use in raising finance. In a managed

investment scheme your funds (and other par ticipants)

are, in effect, combined to provide a capital base for acommon enterprise. Such schemes have been utilised

to invest in a variety of enterprises including : property,

small businesses, shares, cash management and

agricultural projects.

Established as a proprietary company (with the

consequent advantages and disadvantages) a MIF can

be designed to accept shareholder funds from, say two,

participants in a project on the basis of a transfer of

shareholding. A MIF can also ac t as a contributor to

another entity which can include proponents of

a particular scheme.

In some cases where a portfolio of assets is to be held, anequity structure of stapled securities can be considered

instead of simple shareholding. Stapled securities usually

comprise two or more separate entities (for example a

loan note, or trust unit, and a share) that must be traded

as one stapled securi ty. This arrangement can allow for

some flexibility in distributing income and equity

between participants.

Strict controls apply to the establishment of these

types of investment vehicle and es tablishing a Managed

Investment Scheme, or par ticipating in an existing one,

is a complex business which should only be undertaken

after getting high quality financial advice.

Recently, Pooled Development Fundshave emerged totake f inancial positions in winemak ing and associated

enterprises. The First Wine Fundand theAuthor ised

Investment Fundare examples. Typically, these companiesuse shareholder funds to invest in existing wine

businesses or to undertake new ventures. Stock market

listing entails considerable expense in meeting statutory

requirements for shareholding, capital and prospectus

issue but provides a certain ongoing strength in raising

finance. Usually this type of investment company provides

impartial administr ation of the business, however, at this

scale it can be difficult for smaller participants to retain

control over strategic decisions.

Two other more specialised structures have recently

been utilised.

To facilitate construction of its 32-apar tmentdevelopment at Yarra Glen , Balgownie Vineyard Resort

has offered the 1 and 2 bedroom units for 199 year lease

(off the plan) on the basis that the lessee could make the

unit available to the resort to enable it to offer rooms

in conjunction with its proposed conference centre and

general tourism. This lease option enabled the company

to conform to planning subdivision requirements whilst

at the same time providing financial par ticipation by

others in the project.

At Tarrawarra, Eva and Marc Besen have established the

TarraWarra Museum of Art Ltd as ... the f irst privately

funded, significant public visual arts museum to be set

up under the Australian Governments philanthropicmeasures announced in March 1999. (TarraWarra

Museum of Art brochure)

Badger Brook Winery


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The development of any

food and wine tourism

investment requires

careful and considered

planning and design

in the early stages

of the development

process. For any foodand wine tourism

project to succeed it

will need approval from

relevant Government

departments including Local Government.

The development of a winery with restaurant and

associated accommodation for example, would, in the

firs t instance, require planning approval from the relevant

Local Government Authority. The following will provide

information on the Planning Framework which controls

development in Victoria, the general planning process

to gain approval and some design considerations when

considering the development of a food and winetourism investment.

Further information on the Victorian Planning Framework

can be found at www.dse.vic.gov.au

6.1. The Planning Framework

Victorias Planning Schemes are governed by the VictorianPlanning and Environment Act 1987, which provides astatutory base for land-use and development planning.

The Act specifies the planning process and the par ticular

procedures Local Government must take in the

assessment of a planning application. Underpinning the

Act are specific Local Government Planning Schemes

which specify land use and development controls and

policies.

The Planning Scheme

The Planning Scheme effectively determines what types

of development and land use can be undertaken on land

and any new development must comply with the specific

requirements.

They contain:

A State Planning Policy Framework (SPPF) which

describes strategic issues of state importance.

A Local Planning Policy Framework (LPPF) which

contains a Municipal Strategic Statement (MSS),

and Local Planning Policies. The framework identifies

specific long term directions about land use and

development in the specific Local Government

area and presents a vision for the community

and other stakeholders.

Zones which specifically identify what types of land useactivities, development and subdivision could possibly

be undertaken.

Overlays, as well as zones, which can apply additional

controls on the development of a si te. eg. Building

height, heritage and vegetation protection.

Particular Provisions which identify specific

requirements for land use, development and

subdivision.

General Provisions and Land Use Definitions.

Therefore, before considering a particular use and

development of land specific consideration should be

given to the Zone and any Overlay control which may

be applicable to the site.

Zones

The Planning Scheme zones are lis ted in the planning

scheme and identified on the Planning Scheme

maps. Each particular zone has a purpose and set of

requirements. This information will indicate if a planning

permit is required and the mat ters Council must consider

before deciding to grant a permit. This zone also contains

information relating to land uses, subdivision of land,

construction of new buildings and other changes to

the land. A zone sets out the land use controls in threesections as follows:

Section 1 Uses - Uses which do not require a permit

Section 2 Uses - Uses which require a permit

Section 3 Uses - Uses which are prohibited

Thus, for example, a permit for a B&B accommodating

no more than 6 people does not require a permit in a

Rural Living Zone (RLZ) but a Restaurant does; and

a Nightclub is prohibited.

6. PLANNING AND DESIGN

ParingaEstate


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Overlays

Not all land has an overlay but some sites may be

affected by more than one overlay. An overlay may relate

specifically to significant landscapes, heritage, building

height limits, vegetation, etc. which attract permit controls

over and above other scheme controls.

Where land is used for multiple purposes, which are

not identified as ancillary, each use must comply with

scheme requirements.

Councils are continually adding to and amending their

schemes and therefore careful consideration should

be given to the current planning controls relevant to

the land.

6.2 The Planning Process

In most cases, a food and wine tourism proposal will

require a planning permit, however, this should be

confirmed by meeting with the Local Government

Authority to discuss the idea. If a planning permit is

required a general outline of the process is:

1. Pre-application Preparation

Review the planning scheme.

Discuss the proposal with Council.

Talk to neighbours.

Consider getting professional advice.

2. Prepare and Submit the Application

Complete application form.

Pay required fee.

Lodge required plans and drawings.

3. Council checks the Application

Is all information provided?

Council may request further information.

4. Application is Advertised, if Required

Advertised for at least 14 days.

Usually by letter to neighbours and a sign on site.

People affected may object.

5. Council Assesses the Application

Considers objections.

Holds mediation meeting, if needed.

Considers any Referral comments.

Assesses planning scheme provisions.

Negotiates with applicant.

Prepares report .

6. Council Decides Application

Approval (Usually with conditions), or;

Refusal.

7. Review by Victorian Civil and Administrative

Tribunal (VCAT), if applied for

By permit applicant against conditions or refusal.

By an objector against an approval.

The time taken for the consideration of an application

will vary considerably for each Local Government area

and will be determined by the work load of the Council

staff, the number of objections (if any) to the proposal

and the various issues involved in the assessment of the

application. Investors should discuss the timing of the

application with the relevant Local Government off icer

to gain an understanding of the length of the application

process. A refusal at Council level may not mean the

end of a permit application. Appeal against a Council

determination may be pursued through the Victorian

Civil and Administrative Tribunal.

6.3 Other Approvals

In addition to the State planning legislation, there are

a number of other permit authori ties which must be

approached for certain aspects of some developments.

These include:

Vic Roads - Traff ic management, highway access andhighway signage.

Heritage Victoria - Listed historic buildings and

places, aboriginal, and shipwreck sites of state-wide

importance.

Consumer Affairs - Liquor licensing - Vignerons Licence

(Cellar Door or licenced restaurant)

Environment Protection Authority - Pollution and noise

emissions.

Local Government Health Requirements - food

preparation areas require health approval.

Local Water Authority - Sewerage and water supply.

Investors should consult each of the relevant authorities

to determine their specif ic requirements and any

application procedures. Local Governments planning

office will generally guide you on the authorities that

you may need to consult with.

6.4 Planning and Design Issues

There are a number of issues which should be addressed

in consultation with the relevant Local Government

Authority. Some may be of a minor or technical nature

others may be central to success. A strong Council

commitment to food and wine tourism can be the keyvariable in making or breaking a project and the lesson,

therefore, is ta lk early, talkoftento Councillors and staff.


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Money spent on good design is a wise investment and

will help maximise functionality and customer experience.

It may be prudent to engage an exper ienced designer

or architect that can lead you through the design phase.Design of a new facility requires not only forward

planning of physical elements but a strong unders tanding

of a winerys brand character. A new building or

extension can reinforce an existing character or

can signal a new direction for the winery. It must be

considered as a major public statement of the aspirations

of the winery; the sense of arrival and amenity of the

facilities is critical to the visitors impression of the

product and services. Some of the most successful

food and wine tourism investments feature well planned

and designed facilities that fit well within the landscape,

are contemporary and reference their locality.

The following will provide insights into some of theplanning and design issues that should be considered

in the scoping and design phase of a food and wine

tourism product.

Access and Car Parking

In most cases food and wine tourism development is

linked strongly with road touring and therefore the

provision of quality vehicular access and car parking is

central to a quality experience.

Vehicular access should be provided to allow safe and

efficient movement of vehicles considering adequate site

distances for vehicles exiting and entering the site. In manycases, consultation with Vic Roads would be required for

new access points, where it abuts a main road. Vehicle

slip lanes may be required to allow adequate distance

for vehicles to enter or exit a main or local road.

Adequate car parking should be provided to

accommodate the likely number of vehicles that may

be associated with the proposal. The Planning Scheme

stipulates the minimum required number and dimensions

of car parks. For example, a restaurant is required to

provide 0.6 car spaces to each seat available to the

public. In a number of cases consideration may be given

to providing additional car park ing to accommodate any

overflow which may result. Provision should also be madeto accommodate buses as , in a number of cases, bus

groups may be associated with wine tourism activities .

Wet weather access to the facilit ies from car parks should

also be considered. It is also cri tical to plan car parking to

minimise the likelihood of visitors bringing vine disease

into the vineyard.

Building Design

Any buildings proposed should be designed to

consider the brand image of the wine product

and the surrounding landscape.

In par ticular, consideration should be given to the

setbacks, height and or ientation of the building so that

it provides for desirable view lines both to and from the

building. For example, it would not be desirable for a

building to look out onto a car park , toilet facilities or

service areas ; the more appropriate response would be

to capitalise on view lines across natural land featuressuch as vines, a valley or water body. Quality view

lines to the building could be encouraged with a building

height, massing and an external f inish that complements

the surrounding bui lt form, landscape and

topographic features.

Building Layout

A functional, well designed building will assist with the

management and comfort of visitors to the venue. Some

considerations include the provision of disability access,

wet weather protection, provision for deliveries and

service areas, provision for solar orientation and access

to natural sunlight and food preparation areas thatcomply with relevant health standards.

The building layout should also include provision for

possible future expansion should this be necessary.

Landscaping

Quality landscaping is one way of significantly adding

to the food and wine tourism experience. Consideration

should be given to retaining as much significant vegetation

that is on the s ite and also to planting appropr iate new

landscaping. Landscaping can def ine and accentuate

a pleasant entry way and can also screen any visually

undesirable structures or vistas, such as service areasor staff facilities. Careful selection of plant species is

important as each species type would have different

mature heights and screening abilities.

Consideration should be given to drought tolerant

plants particularly those that are indigenous to the l

wine investment guidelines 04

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