A profile of Southcorp Wines

SOUTHCORP OWNERSHIP, SIZE AND SALES

Southcorp Wines is a wholly owned subsidiary of Southcorp Holdings, a public company with a market capitalisation of around 2 billion Australian dollars.

Until 1994 Southcorp Holdings was known as South Australian Brewing Holdings. The name change followed the disposal of its brewing interests to Lion Nathon.

According to figures published in The Australian and New Zealand Wine industry Directory 1994, Southcorp crushed for its own use 162,000 tonnes of grapes in 1993. Its biggest rivals, BRL-Hardy Limited and Orlando-Wyndham crushed 115,000 and 110,000 tonnes respectively.

Roughly speaking then, Southcorp produces the equivalent of 3.3 million dozen 750 mL bottles (or 29.7 million litres) more than its nearest rival.

In March, 1993 Chief Executive, Bruce Kemp, estimated Southcorp had 30 per cent of the domestic bottled wine market (including sparkling wine) and 22-23 of the cask wine market.

Of exports he puts his company’s share at 25-26 per cent, after discounting for the unusually large volumes of bulk wine shipped to New Zealand wine makers following a disastrous vintage shortfall there in 1993.

The Australian and New Zealand Wine Industry Directory 1994 claims our biggest export earners in 1992-3 were Orlando-Wyndham ($78 million), Southcorp Wines ($68 million), BRL Hardy Ltd ($40 million) and Mildara Blass Ltd ($21 million). With current rates of growth, both Southcorp and Orlando-Wyndham seem poised to sail past $100 million a year in export sales this year.

Bruce Kemp puts Southcorp’s current sales break up as 28 per cent export and 72 per cent domestic. He predicts a fifty-fifty split by the turn of the century.

For the six months to December 1993, the wine division’s domestic sales were up 8.7 per cent and exports 34 per cent. Profit before interest and tax was $34.7 million, up 50 per cent.

The group owns, Tollana, Tulloch, Hungerford Hill, Lindemans, Rouge Homme, Matthew Lang, Leo Buring, Penfolds, Seppelts, Woodleys, Wynns, Seaview, Killawarra, Kaiser Stuhl, Stock Gala Spumante, and J.B. Reynolds Cooler.

As well, it manufacures and distributes under licence market-leading cooler, West Coast and Stock Brandy.

HOW SOUTHCORP WINES EVOLVED

Southcorp Wines is the new masthead for Australia’s biggest wine producer. From shortly after its formation in 1990 until 1994 it was known as the Penfold Wine Group.

The group, with its dazzling array of brands and (even by global standards) spectacular collection of vineyards, was formed when South Australian Brewing Holdings (SABH) bought Penfolds Wines from the troubled Adsteam Group.

SABH already owned Seppelts Wines (inlcuding Woodleys and Hungerford Hill) and had moved one of its young brewery executives, Warrick Duthy, to the helm.

However, Seppelts was dwarfed by Penfolds which, over the previous decade, had added numerous wineries, vineyards, and brands to its portfolio. Kaiser Stuhl, Stock, Wynns, Seaview, Killawarra, Tulloch and Tollana were acquired in the early and mid eighties. With them came vineyards in the Hunter and Eden Valleys, McLaren Vale and, probably most importantly of all, included Wynns priceless holdings on the central terra rossa strip of Coonawarra.

The biggest and grandest haul, though was its purchase from Phillip Morris, early in 1990, of Lindemans Wines including the Leo Buring, Rouge Homme, and Matthew Lang brands.

The acquisition included the historic Ben Ean Winery in the Hunter Valley, Chateau Leonay in the Barossa, and the massive winery, bulk-storage, vintage-cellar and packaging facility at Karadoc on the Murray River near Mildura.

With the new brands and wineries came some of the best vineyards in the lower Hunter in the vicinity of Pokolbin and Broke, a huge acreage at Padthaway and, an hour’s drive further south, yet more of the great Coonawarra terra rossa vineyards. These included the plum sites-become-brands, St George and Limestone Ridge.

At the time of the SABH acquisition, Penfolds still had not fully digested Lindemans. How, the trade wondered at the time, would Ross Wilson, head of SABH, blend the Penfold-Lindeman juggernaut with the smaller Seppelts and come out with a profitable business?

Somehow he had to make three distinct wine-making and corporate cultures fit with those of the parent company. To compound the difficulty, the domestic wine market was in the doldrums and the export market, while gathering momentum, was not the booming phenomenon we see in 1994.

Early in the piece, the dominant culture — Penfolds — appeared to gain ascendancy. But some key players from all cultures fell victim as the new corporate cuvee took shape.

From the SABH/Seppelt side, Warrick Duthy moved on, leaving former Penfolds Chief Executive, Ian Mackley in charge with his old sales and marketing force largely intact. Duthy was joined by old SABH insider, Pryme Footner. At around the same time, Penfolds’ Jim Williams, heir apparent to Mackley, also moved on.

By then Lindemas had already lost Philip Laffer, one-time understudy to former Managing Director, Ray Kidd. Laffer was a technical wizz with a hand in the evolution both of many Lindeman classic wines and the brilliant technology behind the Karadoc facility.

Considering the scale of the merger, there was remarkably little blood letting. As well, the core of each company’s wine-making culture remained intact, giving future marketers the necessary gold dust — diversity and individuality — to develop brands.

And while Ian Mackley’s standing was good on all sides, his retirement fell due shortly after the SABH take over.

With Mackley’s retirement, Wilson appointed Bruce Kemp, from SABH’s hot-water division to head the wine group. So Australia’s largest wine company, with a largely Penfold sales and marketing culture and a mix of wine-making philosophies, found itself with a sharp, business-proven pair of fresh eyes at the top.

VINEYARDS

More than those of any other of the four big Australian producers, Southcorp’s wines draw their strength and character from the company’s own vast and impeccable vineyard holdings in New South Wales, Victoria, and South Australia.

Southcorp’s unique ‘end-use evaluation scheme’ links wine maker and viticulturist by tracing, as the name suggests, the end use of each batch of grapes to enter one of the group’s wineries.

As data builds over time, a clear picture of the nature of wine produced from each vineyard plot emerges. Ultimately this lifts wine quality as vineyard management focuses more precisely on what each plot is best capable of producing.

The end-use scheme began with Penfolds and is now applied across the entire group holdings as well to fruit bought from outside growers.

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