Oakridge Winery, formerly owned by collapsed public listed wine company Evans & Tate and bought by ASIC Chairman Tony D'Aloisio. Age News pic taken by John Woudstra March 29 2011

Oakridge Winery, bought last year by Tony D'Aloisio. Photo: John Woudstra

TONY D'Aloisio's link to the wine industry springs from his childhood in the Yarra Valley and, after decades as a lawyer, corporate regulator and stockmarket boss, he has returned to the industry that first shaped his life.

''My parents migrated to Australia in 1956 when I was seven and we settled there,'' D'Aloisio told BusinessDay.

''Our connection with farmers and agriculture in the valley goes back to the 1960s and 1970s when I worked with my father in a produce agent business.

''And as my career developed … I did maintain an interest in the Yarra Valley through family or business connections, and I was very much influenced by the work that James Halliday did, who was in those days a fellow lawyer, and Dr John Middleton … and really what they were doing to revive the industry in the valley I was very impressed with.''

That connection included eventually buying his own winery, Oakridge Wines, which he and his wife own.

''We think the Valley is a tremendous place and a tourism/wine business there makes a lot of sense to us and we invested in it.''

Taking on the role of president of the Winemakers Federation of Australia from April 1, D'Aloisio finds himself in the midst of a quickly changing industry.

Although the techniques have not changed much, the Australian wine industry faces challenges that include a high dollar, a wine glut, increasingly powerful local retailers that are the gatekeepers to a majority of the country's liquor shops and growing competition from new and cheaper wine regions such as South America.

D'Aloisio, a former chief executive and partner of law firm Mallesons Stephen Jaques, one-time chairman of the Australian Securities and Investments Commission and CEO of the Australian Stock Exchange, believes the sector is suffering from a lack of capital and investment - a long-term problem that could ultimately affect innovation and growth.

''I think looking at in a macro sense … the industry has been in difficulties or challenging times for some years,'' he said.

''There is probably a lack of capital reinvestment in the industry and that's a worry long-term in terms of innovation, new varieties and modernising wineries.

''I haven't got any figures, but I think the lack of capital invested is really a reflection of low profitability. There just hasn't been the money to be able to reinvest.''

Part of the problem stems from the ownership structure of many wineries. Those that are family owned, passed down from generation to generation, can lack the financial muscle to raise funds for reinvestment.

Wineries owned by public companies have access to capital via the stockmarket and external investors, but these investors demand a return on their funds and so profits that should be used for reinvestment in the business are instead diverted into dividends.

In the 1990s and early 2000s there was a rush of wineries that listed on the ASX.

Many collapsed, some were taken over by large multinationals such as Lion Nathan or Foster's and a few survive but are struggling to squeeze out a profit.

''I think on the issue of structure, one needs to be careful, because structure doesn't actually drive value,'' D'Aloisio said.

''I think what you are seeing with a whole lot of enterprises is that the rigour around a publicly listed entity with analysts and shareholders tends to be very much pushing higher returns … and where you have businesses that have high capital investment and they need longer term to provide returns, they actually don't do well on the ASX top 200.

''The family private operation probably takes a longer-term view and the fact that it may not be achieving a 10 or 15 per cent return on capital … is less relevant if the family has got a sturdy business.''

But he said family wineries can have their own challenges. ''The disadvantage is how you deal with it generation to generation. They generally work well in the first, possibly the second generation, [then] it gets harder as the family unit gets larger, so it has its own issues.

''Structure doesn't determine this. [If] you are running a business that gets a good return, margins, there will be instances where listing it is fine and there will be instances where keeping it in the family and passing it on is fine.''