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Local Expertise Replanting Marlborough vineyards PAUL O’DONNELL
MANY VINEYARDS are now approaching the age where trunk disease is becoming an issue, necessitating vine replacement. There are several approaches to this challenge, these need to be considered carefully in order to effectively manage associated costs and reduction in production/ income. Option one is to ‘rip the band-aid off’ and do a total replant. Trellis and irrigation may also be at the point of needing replacement as well, so the project could be even bigger. The benefits of this approach are lower overall cost due to economies of scale, and also locking in current prices in an inflationary market. The replanted vines are then all at the same age and stage, making future maintenance and planning simpler. However, this approach creates a period of two to three years without income, on the back of significant capital expenditure. Banks may be hesitant, somewhat understandably, to fund this approach. Supply issues must also be considered – will the quantity of plants, posts etc be available? Option two is to take a progressive approach to replacement, replanting smaller sections of the vineyard over several years. Capital expenditure is then spread over time, and income, while reduced, remains steady. It is likely that the bank will look more favourably on funding this option. Availability of supply shouldn’t be as much of an issue as with full replacement. But the result is a vineyard with varying ages, and potential for variability across the
different plantings. Future management is more complex. Also, this may not be a viable option if infrastructure needs to be replaced as well. If the trunk disease is not widespread, then diseased vines could be identified individually and replace or retrunked. Benefit here is that all costs can be claimed as R&M, reducing tax incidence, and disruption to income is minimised. However, this option could be seen as ‘papering over the cracks’ and simply delaying the inevitable. Alternatively, if you don’t have the appetite for the disruption of a replant, this could be a good time to list the vineyard for sale – valuations and sale prices often don’t factor in the state of the plants, posts, irrigation etc. It’s also important to consult with your winery about timing, especially if the grapes are under contract. Reach out to suppliers to get a feel for availability of both product and labour. As always, best practice is to consult with your accountant (and bank) early in the process, using modelling and forecasting to work through the various scenarios, and find the right solution for you and your vineyard. Paul O’Donnell is managing director of BDO Marlborough. If you have a question for BDO Marlborough that could be answered in this column, please email sophie@ sophiepreece.co.nz. The comments here are general in nature. You should obtain your own specific tax advice.
Industry expertise, locally. Backed by BDO, globally.
20 / Winepress June 2022
