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

Australia’s wine exports may eventually be just the tip of the iceberg of success as our amazingly successful, vigorous wine makers go global. As well as wine, we now export technology, equipment and even viticultural skills to the rest of the world. And the next, perhaps biggest, part of the industry’s globalisation, may be in wine-making and marketing enterprises acquired or built from the ground up in other countries.

Watching our wine-export chart climb from 21.3 million litres worth $44.6m to 154.4 million litres worth $603.3m between 1986/7 and 1996/97, it’s easy to get caught up in the ‘gee whiz’ factor while losing sight of how small a player we are.

According to the industry’s ‘Strategy 2025’ published in 1996, Australia accounted then for just 2.4 per cent by volume, and 3.5 per cent by value, of world wine trade — suggesting plenty of room for growth.

But the industry’s ambitious vision of doubling grape output to grab 6.5 per cent of global trade by 2025, encouraging as it is for independent grape growers and smaller wine producers, presents a challenge to larger players with major global ambitions.

Spreading the risk, increasing total capacity, appealing to a wider audience, hedging against exchange-rate variations and catering for the parochial factor are all driving forces behind an increasing trend to establish strategic interests off shore.

There’s nothing new in the concept. France’s Moet and Chandon, part of the giant LVMH  group, for instance, long ago recognised that you cannot be all things to all people. It successfully established sparkling wine production facilities in California and Australia’s Yarra Valley.

LVMH recognised both the finite production capacity of France’s Champagne region and the limited market penetrating capacity of any one brand. Hence, today, Moet remains leading French brand in Australia while Domaine Champagne, from the Yarra Valley, sits amongst the most successful super-premium Australian brands, selling for about half the price of the French original.

An Australian expansion by Remy — owners of Remy Martin Cognac as well the Champagne houses, Krug, Charles Heidsieck and Piper Heidsieck — appears to have failed in its initial effort to create an Australia sparkling wine brand from vineyards in the Pyrenees region, Victoria.

But a complete revamping of the vineyard and a subsequent huge lift in quality may well make a success of Remy’s  ‘Blue Pyrenees Estate’ range of table and sparkling wines.

The biggest  French presence here, and perhaps the least obvious, is that of Pernod Ricard, through its ownership of Orlando-Wyndham, one of our largest producers, exporters and owner of the huge, globally successful Jacobs Creek brand.

The French toe hold in Australia was as logical a step as the overseas interests now being developed by our own very large, publicly owned global players: BRL Hardy, Mildara Blass and Southcorp Wines.

Until its acquisition by Fosters Brewing in 1996, Mildara Blass appeared to be focused more on the domestic market than on exports. Under the leadership of Ray King, with strong brands like Yellowglen, Jamiesons Run and Wolf Blass, Mildara Blass consistently set the industry pace for shareholder returns.

King’s cautious approach to exports perhaps reflected a respect for profits not market share. Interviewed for this column some years back, he said that exports would be undertaken only if they yielded as good a return on investment as domestic sales.

King is still at the helm. But under Foster’s ownership we can already sniff a more global focus. Since the Fosters acquisition, Mildara Blass has bought Rothbury Estate, with its valuable vineyards at Cowra, Cellarmaster Wines — a global leader in wine direct marketing — and recently announced plans for new wine brands to be produced in California and Chile.

For the Californian venture, former St Hubert’s (Yarra Valley) wine maker, Adam Marks has been transferred to the Golden State Vintners winery at Monterey. Here — with occasional help from David O’Leary (Mildara’s Clare Valley wine maker and before that red-wine maker at BRL Hardy) — Marks is to make wine for a new label, to be released, initially, only in the American market.

California’s bumper 1997 crop allowed gave the venture a great start and it seems there will be sixty to seventy thousand cases available for the launch later this years. The brand name has not been decide yet, but initial production was predominantly chardonnay and cabernet with a slightly smaller quantity of merlot and a little zinfandel, a red variety widely planted in California but little known here.

There are also plans for an ‘old vines’ zinfandel’ and a reserve cabernet. The story will continue next week.

Copyright © Chris  Shanahan 1998 & 2007

Australia’s current vineyard explosion, should it continue as envisaged through to 2025, could add more vines to the continent than were planted in the first two hundred years of white settlement.

The pace of change is too rapid for anyone to accurately monitor in any single region, let alone across the whole continent. A sustained expansion may create a southern Australia somewhat like Italy where vines are planted in dribs and drabs all over — literally a new ‘Enotria’, or land of vines as the Greeks called Etruscan Italy — forging a wine map almost unrecognisable to drinkers of the mid nineties.

In Victoria’s King Valley, the remarkable growth sees not just new vineyards, but new wineries springing up overnight.

During a visit last October, Miranda Wines’ presence was a recently-acquired cow paddock on the Wangaratta-Oxley road, and a press release announcing plans for 60 hectares of vines and a 2000 tonne (150,000 dozen bottles) capacity winery.

Last week, after a pleasant drive across the alps to northern Victoria, I was astonished to see the winery approaching completion in time for the 1998 vintage. There was no sign of grape vines, but word is that about 60 hectares are to be planted on the site this winter.

A few kilometres south, near the village of Moyhu, another large paddock was being prepared for planting by the De Bortoli family, Miranda’s wine-making neighbours from Griffith, NSW; and in the neighbouring Ovens Valley to the north, a consortium of King Valley grape growers and Murray-River-based Kingston Estate Wines, has another large winery under construction with a proposed 1998 crush of 2,500 tonnes (175,000 dozen bottles).

Further south up the valley, on a line of low hills to the west of the King River, Brown Bros are establishing a major new vineyard, ‘Banksdale’ in the Myrrhee sub-district. It sits on thin, red volcanic soil — the weathered remains of a lava flow from Tolmie during the tertiary era.

At 410-486 metres, Banksdale provides a notably cooler grape growing environment than at Brown Bros old Milawa vineyards, on the deep, alluvial Oxley Plains at around 170 metres.

Seventy hectares of vines are already in the ground at Banksdale with another 25 to be planted this winter, giving this single vineyard a potential output of around 70,000 dozen bottles a year — more than the output of the entire Canberra region.

While Banksdale may be bigger than the average King Valley planting, its broad acres are typical for the region.

Where Canberra in its pioneering phase was characterised by tiny winery-vineyard developments, the King Valley seems to have been driven by one large winery — Brown Bros — fed by comparatively large-scale independent grape growers with no original interest in wine making.

Thus, according to the King Valley Grapegrowers Association, there are now about fifty families in the region “dependent on grapes as their primary source of income”.

And the focus on planting has moved away from the warm northern end of the valley to the cool southern end, thanks to he pioneering work of independent grape growers and, later, the establishment of Brown Bros ‘Whitlands’ vineyard at 800 metres above sea level.

Independent growing in the valley was pioneered by Guy Darling and John Leviny. Both established vines in the higher, cooler northern end of the valley in 1970 (between Moyhu and Whitfield).

(Guy Darling’s ‘Koombahla’ vineyard at Whitfield lent its name to a Brown Bros wine for many years but is now used only on Guy’s own wines.)

Brown Bros absorbed most of the region’s grapes in the early days and remains the major player. But there are a number of small wineries in the area (John Gehrig, Avalon, La Cantina and more); Miranda, De Bortoli and Kingston Estate are setting up shop; virtually all of Australia’s major wine makers source wine from the valley; and, increasingly, grape growers are converting part of their crops to wine through contract wine makers — setting the scene for an explosion of King Valley labels.

The Valley — the northern end of it at least — is beautifully situated for tourism, being close to the Hume Highway, the Victorian alps and historic tourist towns like Beechworth. Brown Bros cellar door sales are
reputedly amongst the highest in Australia thanks to a 365 day a year stream of tourists — including a strong ski contingent during winter.

The sites of the new Miranda and Kingston Estate Wineries suggests an eye to passing trade and a big new impetus to regional tourism.

More on the King Valley next week.

Copyright Chris Shanahan 1998 & 2007

Grenache, one of the world’s most widely planted red grape varieties, produces delicious but mainly frivolous and fruity wines from Spain, to Sardinia to Southern France to California to Australia.

It can and does make reds of substance, sometimes in its own right but especially in tandem with shiraz, mourvedre or, in Spain, with tempranillo.

In 1996 — at 33,950 tonnes — grenache weighed in as Australia’s third most voluminous red variety, behind shiraz (92,500 tonnes) and cabernet sauvignon (72,330 tonnes).

24,000  of Australia’s 33,950 tonnes came from South Australia. Of that the hot, irrigated vineyards of the Murray contributed 13,500 tonnes, the Barossa Valley 6,000 tonnes and McLaren Vale 3,500 tonnes.

Large areas of old vines in these warm areas survived the swing from fortified wine to table wine and now enjoy a renewed interest as wine makers and drinkers accept grenache as a delightful wine for the warm Australian climate.

Even if most grenache continues to disappear into anonymous, cheap blends, the name appears on an increasing range of wines, many of which are a big step up from vin ordinaire and provide outstanding value and drinking pleasure in our warm climate.

At a random tasting this week of about one hundred cheap and middle-priced Australian reds, a group of grenache and grenache blends stood out as the real value.

Too many of the traditional reds (mainly shiraz, cabernet and cabernet shiraz blends) relied on oak and alcohol for flavour. Some held a fleeting appeal, but after sip or two, the astringent, mean nature showed. It seems grape flavours in red wine now come at a premium.

In contrast the grenache blends, in general, delivered attractive fruit flavours in styles ranging from the light and simple to the firm and solid. A sample of seventeen wines yielded good drinking in the $8-$18 price range.

At $8 (specialling as low as $6.99) Orlando Jacobs Creek Grenache Shiraz 1997 provides a tasty ‘luncheon’ version of the grape. It has the variety’s sweet, floral aroma and a silky, juicy, gentle, refreshing, dry palate. Probably best served lightly chilled and treated like a full-bodied white. Drink now. Do not cellar.

Rosemount Grenache Shiraz 1997 (about $9) continues in the fruity, scrumptious style but offers more depth of flavour than the Jacobs Creek. Fine, silky tannins give it a more ‘purchase’ on the palate. Again, this is one for current drinking and a slight chill probably enhances the delicious ‘musk’ and ‘cherry’ fruit flavours.

Sticking to the ‘fruit-not-oak’ styles, St Hallett Barossa Gamekeepers 1997 ($11), combines grenache, mourvedre and touriga (a Portuguese variety) in a wine of heady perfume and sumptuous, fleshy fruitiness. Once, again serve lightly chilled and polish it all off in time to buy the next vintage. My favourite of this genre.

Another Barossa wine, Peter Lehmann Grenache 1997, holds tremendous appeal, too. It weighs in at a whopping 14.5 per cent alcohol, but the sensuous, spicy-plummy, pure fruit flavours almost hide the alcohol which fights through to give a pleasantly astringent finish. Drink up.

Moving to weightier styles, where oak as well as fruit plays a role, Gramps Barossa Grenache 1995 ($11) delivers rich, round, mouthfilling fruit flavours mingled pleasantly with solid ‘vanilla bean’ oak flavours. This wine is substantially more tannic and grippy than the fruity styles and at about three years of age is probably at its peak.

Yalumba Bush Vine Barossa Valley Grenache 1996 ($16) offers spicy, plummy, mouthfilling fruit flavours cut through with oak flavours and fine, drying tannins. Oak gives the wine a good mouthfeel and finish but fruit remains the main feature.

Richard Hamilton Reserve Grenache Shiraz 1995 takes body and richness to another level, aided by the shiraz component. Its colour, richness, and firm, gripping nature make for good drinking now with red meats, but this may be one to cellar for another two or three years.

Of the solid, oak-matured styles, my highest rating wine was Tatachilla Keystone McLaren Vale Grenache Shiraz 1996 ($13). Everything — from the dense, crimson-tinted colour — to the deep, sweet scent, to the opulent, supple, oakey palate — made it a standout, one to swallow happily over the next two or three years.

From the simple, fruity Jacobs Creek to the substantial, oak-matured Tatachilla these reds are linked by the common thread of delicious grenache fruit flavour. They are wines to quaff happily now or in the near future without too much knitting of the brow or deep thought.

Chateau Shanahan looks forward to putting all these (and more) to the bottle test over the remaining warm months.

Copyright Chris Shanahan 1998 & 2007

It’s been a big year for the Australian wine industry. The second biggest vintage ever fell short of demand, especially in premium red wine. Exports reached an all time high. Domestic consumption, especially of bottled red and white grew strongly. And, in face, of shortage, prices continued to climb.

Premium riesling, so long the bargain of Australian whites, finally caught on, resulting in rationing and higher prices. On the commercial front our larger wine makers moved into off-shore ventures to fully exploit growing global demand. Australian wine-making interests now span the world.

Share prices of listed wine companies reached new heights. New floats (mostly recently Cranswick Estates and Alambie) attracted strong interest. And acquisitions continued, including Southcorp’s purchase of Devil’s Lair in the West and Mildara Blass’s $160 million move into direct marketing
through its purchase of Cellarmaster Wines.

On the retail front, growth of the majors continued with the Coles Myer owned Liquorland’s group move into the Queensland market through the purchase of hotels and attached liquor barns.

And Woolworths-owned Macs liquor launched its Australia-wide ‘Abervale Wine Club’ apparently to counter arch-rival Liquorland’s Vintage Cellars and Fly Buys Wine Clubs, The Australian Wine Society and the numerous wine clubs run by Cellarmaster Wines. All of which is good news for drinkers. There’s
nothing like hot competition to raise service levels and keep a lid on prices.

In Canberra, 1997 brought a legally defensible regional wine boundary after years of debate and negotiation. The boundary starts and finishes at Burrinjuck dam wall after wandering north then east along the Yass and Gunning Shire boundaries to the 149 degree two minute meridian, south to 35 degrees 35 minutes, west to the 149 degree meridian, then north back to the dam wall.

The Canberra wine region, as gazetted, becomes law in mid January 1998, provided no one lodges objections to the proposed boundaries.

Canberra’s other big wine news in 1997 was BRL Hardy’s decision to establish a winery, cellar door facility, regional promotion centre and to foster the planting of 250 hectares of vines within the regional
boundaries.

A government land grant on the corner of Flemington Road and the Federal Highway at Watson has clinched the location of the winery. And when the regional boundary is bedded down, vineyard planning may proceed with more certainty.

1997 will go down as the year the big decisions were made. The future should see Canberra’s wine output increase tenfold by the turn of the millennium, with the possibility of Canberra’s becoming a major
wine-processing centre for grapes planted along the western side of the Great Dividing Range.

Through all this rapid change and price escalation, Australian wineries continued to make ever-better wine. I offer here the Chateau Shanahan annual wine awards for 1997:

Best current-release red: Penfolds Cabernet Sauvignon Bin 707 1994. A fabulous, world-class red still selling for about one third the price of Grange.

Best mature red: Wynns Coonawarra Estate Cabernet Sauvignon 1991. Bottles from Chateau Shanahan and the Anders Josephson Collection confirmed good old black label Wynns one of the great wine bargains of the world.

Best white wine of the year: Penfolds Reserve Bin 95B Chardonnay 1995 . Due for release this year this wonderful Adelaide Hills-McLaren Vale white won three trophies at the Sydney Show and was described later by Chairman of Judges, Len Evans, as ‘a revelation’. (This wine, an Adelaide Hills/McLaren Vale blend, became the first Penfolds Yattarna. Penfolds released its cellar mate, a straight Adelaide Hills blend, and a better wine, in my opinion, as Bin 95A Reserve Chardonnay).

Best mature white : Leo Buring Bin DW B13 Watervale Riesling 1972. Wine maker John Vickery offered this wine in a tasting of distinguished Australian rieslings spanning thirty years.  You can’t buy it now, but the message is that top rieslings are amongst the best whites we make.

Copyright Chris Shanahan 1998 & 2007