In last week’s column we looked at the increasing phenomenon of Australian wine makers acquiring or developing overseas interests. Spreading risk, increasing total capacity, appealing to a wider audience, hedging against exchange-rate variations, taking advantage of lower production costs and catering for the parochial factor are just some of the driving forces behind the increasing trend to establish strategic interests off shore.

Mildara Blass (owned by Foster’s), as we saw, dipped its toe into the United States market last year via a joint venture with Golden State Vintners (GSV). Wines were made in 1997 by Mildara Blass wine makers, Adam Marks and David O’Leary, at  GSV’s Monterey winery,  using grapes bought from selected vineyards in the region.

A new and yet-to-be-named brand jointly-owned by Mildara Blass and GSV will be released on the U.S. market this year.

In a similar fifty fifty joint venture, Mildara Blass last year made wines in Chile in conjunction with Vina Santa Carolina, one of Italy’s  largest wine companies.

The venture sourced sufficient grapes from Casa Blanca and the Maipo Valley to make about fifty thousand cases of Chardonnay, Cabernet Sauvignon, Merlot and Sauvignon Blanc for release in the United States  under a new brand this year.

When the United States and Chile ventures are on a commercial footing, Mildara Blass intends making small parcels of ‘reserve’ wines from the best grapes from both California and Chile.

So far the makers have been particularly impressed by the quality of Chilean grapes. And in California — knowing what’s been done in Australia with shiraz from old, bush-pruned vines — David O’Leary can hardly wait to get his hands on a special block of old zinfandel vines.

Mildara Blass’s move makes sense for a company with major international ambitions. “It’s not enough to produce wine in one country only”, said Mildara’s Stuart Gregor, adding “and you have to be involved in domestic markets because parochialism is rife”.

And if you’re a Mildara Blass shareholder, it’s probably comforting to see a comparatively low-risk,  ow-capital-investment approach being taken. Where recent expansion in Australia has come largely through large up-front shareholder investment in vineyards and wineries, the overseas joint ventures use existing capital resources.

Hopefully, we’ll see big juicy profits coming back home.

BRL Hardy takes a similar approach to Mildara’s in its two new joint ventures overseas, one in Chile, announced in December last, the other in Italy, announced only last week

The Chilean venture, a fifty-fifty deal with major Central Valley producer Jose Canepa, will see the global launch of a new brand, Mapocho, distributed through BRL’s world-wide chain. The main emphasis will be in the United Kingdom, mainland Europe and the United States.

Mapocho wines are to be made — with some help from the BRL Hardy wine-making crew — at the Jose Canepa winery (one hundred and eighty kilometres south of Santiago) using grapes from Canepa’s recently expanded vineyards.

Hardy’s other new joint venture, in Sicily, will initially focus even more sharply on Europe and particularly the UK market. The press release talks of marketing “at price points lower than those currently occupied by Australian wines”.

What this means is that having successfully established strong brands and lifted wine prices above the low-profit, commodity end of the market, BRL intends to maintain a fighting presence in the budget stakes,  under the new ‘D’istinto’ banner, through low-cost production in Sicily.

The fifty-fifty partner there is Casa Vinicola Calatrasi. Again, BRL Hardy is to provide technical input  all the way from the vineyard to the bottle. In moves paralleling what we have seen in Australia in recent years, wine makers intend setting quality standards for fruit coming into the winery, with an eye on “quality rather than quantity”, to quote BRL Hardy’s Stephen Millar.

Again, the low-capital approach to overseas production may prove fruitful for Australian shareholders, unlike Thomas Hardy and Sons earlier pre-float push into Italy, when it purchased well-known Chianti producer, Casa Vinicola Barone Ricasoli almost a decade ago. The purchase was a disaster and the winery was off loaded some time later.

At about the same time as the Ricasoli purchase, Hardys acquired ‘Domaine de la Baume’ in France’s Languedoc-Roussilon region. Success here seems to have been limited, but when Thomas Hardy and Sons was floated and joined with the old Berri Renmano Cooperative to become BRL Hardy, the French
winery (unlike the Italian one) was taken into the fold.

Domaine de la Baume today is a going concern whose time may be about to come as Australian wine making goes truly global.

This and Southcorp’s French and Californian stories will follow next week.

Copyright © Chris Shanahan 1998 & 2007