Chris Shanahan: Who owns what in the Australian wine industry

Four companies – The Penfold Wine Group, BRL-Hardy, Orlando-Wyndham, and Mildara-Blass…by my estimate make seventy six per cent of Australia’s wine. Add to that the production of another three…McWilliams, Yalumba, and DeBortoli…and you’ve accounted for something like 91 per cent of our output. The remaining 9 per cent of the market is shared by about 600 producers.

The major conglomerations are quite recent occurrences: late in 1990, South Australian Brewing Holdings (SABH) acquired Penfolds when John Spalvin’s Adsteam group struck trouble. Penfolds had only recently added the Lindemans, Rouge Homme, Leo Buring, Matthew Lang group to its Penfold, Kaiser Stuhl, Tollana, Tulloch, Wynns, and Seaview brands.

After acquiring Penfolds, SABH merged it with Seppelt (including Hungerford Hill and Woodleys) under the new banner, The Penfolds Wine Group. With, by my estimate, 32 per cent by volume of the Australian wine market, Penfolds is the country’s largest maker.

In June this year Thomas Hardy and Sons Pty Ltd merged with Berri Renmano Ltd (itself an earlier marriage of two Murray River co-operatives). Under its new name, BRL Hardy Ltd, the group accounts for about 20 per cent of the Australian wine market. The portfolio includes brands earlier acquired by Hardys: Chateau Reynella and Stanley Leasingham.

BRL Hardy hopes to raise $70 million when it lists on the Australian Stock Exchange later this month.

BRL-Hardy’s 20 per cent is just a tad ahead of the 18 per cent market share enjoyed by the Orlando Wyndham Group. Orlando was acquired by the British group, Reckitt and Coleman in 1970, and passed briefly into local ownership under a management buyout in the late eighties. Shortly afterwards, the management team relinquished control to the French Group, Pernod Ricard. The French joined Orlando to Wyndham Estate and its brands, Montrose, Craigmoor, and Richmond Grove in February 1991.

Next of the big four is Mildara Blass Ltd formed in mid 1991 by the merger of Mildara Wines with Wolf Blass. By volume, its market share is just 6 per cent. But as it is not involved in the cask market (sticking entirely with bottled product) its share by value is in the order of 12 per cent. Mildara’s most successful brands are Yellowglen champagne and Jamieson’s Run.

Three family companies…McWilliams, Yalumba, and DeBortoli, rank next in size. It’s anyone’s guess as to their market shares, but combined they produce around 15 per cent of Australia’s wine. My best guess puts McWilliams at 5.5 per cent, Yalumba at 4.5, and DeBortolis at 5.

Where did DeBortolis come from? This little Griffith-based family company, barely known a few years ago as a bulk producer, made its mark amongst connoisseurs and judges with its brilliant late-picked dessert semillons. As well as making wine in Griffith, the family is now the biggest processor of grapes in the Yarra Valley and handles sizable tonnages from Victoria’s Strathbogies region as well. Dean DeBortoli and his winemaking son, Darren, are proving themselves vigorous and imaginative operators.

Let’s hope they’re efficient as well! Because even with an apparent renewed growth in domestic wine consumption, a recession-induced margin squeeze is forcing makers to look at ways of reducing costs. This has been one of the great precipitators of amalgamations as one of the best cost savers for big operators has been shutting down wineries and consolidating production in fewer centres.

This time last year big producers were about ready to shoot themselves. Ray King, head of Mildara Blass, tells me that March, April, and May 1991 were disastrous for sales of bottled wine across the industry. Now he sees a ray of hope. Sales began to show growth late last year and seem to be continuing. And the feeling seems to be that the big winners amongst producers are BRL-Hardys, Orlando-Wyndham, and Mildara-Blass.

But the biggest winners of all are we wine drinkers. It seems to me wine sales are moving up in response to price wars sparked by the recession and last year’s short, sharp slump in sales of bottled wine.

With better-quality-than-ever-before grapes going into our wineries (some 600,000 tonnes this year) and immense pressure on producers to keep prices down, it seems we’ll be drinking well for some time. Red drinkers beware though. The Penfolds Wine Group tips a shortage of good red material. And they should know.