Friday, March 29, 2024

The wine dynasties

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The history of the Australian wine industry has always been one of families. Brands such as Penfolds, Lindemans,  Hardys, Houghtons, Brown Brothers, McWilliams are family names with 19th century origins. Other families from that era trade as brand names: Purbrick’s Chateau Tahbilk, Smith’s Yalumba,  Gramp’s Orlando and Jacobs Creek are well known.

In the 20th century emerged such well known family winemakers as Taylors, de Bortoli, Jim Barry, Tyrrells, Cullen, Oatley, and not forgetting Casella of Yellowtail fame.

Over the years there have been many changes of ownership and corporate structure in the industry.

The publicly listed Treasury Wine Estates was spun off from Fosters Brewing, it was formerly known as Southcorp, merged with Oatley’s Rosemount. It owns many brands including Penfolds, Lindemans, Rosemount and  Wynns Coonawarra Estate.

South Australian Hardy Wine Company acquired Western Australian Houghtons and a number of other family wineries, becoming known as Accolade Wines, then being acquired by private owners.

Public companies issue results every six months, and if possible pay dividends to shareholders every six months. Investors often rely on these dividends for their livelihood.

The wine industry is at the mercy of the weather, the market, and many other knowns and unknowns. Take for example the recent imposition of duties by Communist China, which abruptly halted exports to that huge market. Producers heavily reliant on that market – that is with most of their eggs in one basket – are taking a big hit. The shares in Treasury dived, but are now recovering. That company has the breadth of market and size to absorb such bumps.

But family companies are privately owned, and don’t have to report to the ASX every six months, and don’t always have the need to provide a steady dividend stream. I’ll discuss the “always” in the prior sentence further down. If a family winery has a bad year, they just ride it out like farmers do. Put off buying new equipment for vineyard or winery, use the overdraft, or bring forward a new release. There are many ways to smooth out the bumps. These families consider themselves to be farmers who value add their farm produce.

For my own wine business the story is different. The business consists of two families. Neither family has any child who wishes to continue in the business. As we approach retirement we are selling off the vineyards, and selling the wine business separately. The brands we built and maintained will survive. There is no remorse. 

Now to the “always” above: older family wine companies like those started in the 19th century, have had a number of generations. In these families, like farming families, the members of successive generations are spread far and wide, each member having some shareholding in the business. These members want their income from the business. There arise divisions, jealousies and rifts. Some families deal with this efficiently and quietly, often buying out dissenters. Others do not handle these problems so well. Such divisions have resulted in the sale of family wine businesses, splits in families and public disagreements.

One family which has handled this very well is Coopers Brewery. Their diverse family members have shares in the private company. Once each year the company offers to buy back a specified number of shares, and family members can opt to sell their shares. This keeps the members happy, and the shareholding tight. It enabled Coopers to successfully resist a determined takeover bid by Lion Nathan a few years back. And I love their beers!  

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