(AFR) - What's the best way to make $1 million in the wine business?

Start with $2 million.

I've heard many versions of that joke over the years. My family has spent the better part of 30 years plugged into the industry in one way or another, so I know well the hangovers caused by indulging in the wine business.

Wine is a tough business all round. It's tough for the retailer with its broad, costly inventory. Sure, margins are higher than for beer and spirits, but that relative benefit is diluted by the glacial speed of wine turnover on retailers' shelves. Winemakers face an even steeper climb to profitability because of high fixed costs, long investment cycles, and risks ranging from frosts to earthquakes to shifting consumer tastes.

At the core of the wine industry's troubled economics is a tannin-like irony: so many people are passionate about wine that they make an uneconomic lifestyle choice to follow their passion into the business. I'm not judging these people, and I feel the same tingling desire a few glasses into every vineyard tour, but the reality is very few wineries make money. The Winemakers' Federation of Australia said in July 2015 that 85 per cent of Australian production was done at a loss.

SHARE PRICE HAS SOARED

Enter Treasury Wine Estates, the maker of Penfolds, Wolf Blass, and other lesser-known labels, which was spun out of Foster's Group in 2011. You wouldn't think any of what I have said would speak well to the business' prospects, but Treasury's share price has vaulted to almost $10 after spending most of the past five years floating between $4 and $6.

Treasury has had a strong tailwind at its back with the weak Australian dollar, which has boosted the appeal of this country's wines to foreign buyers. A growing taste for fine wine in China doesn't hurt either. Chief executive Michael Clarke deserves plenty of credit too for smart cost cutting and a new-found discipline with the company's less-bloated brand portfolio. The company's first half was also fantastic, with strong Asian demand driving 39 per cent sales increases on a constant currency basis.