The quality and style of several great Australian wine brands owned by Foster’s remain intact despite the wine division’s ten per cent sales decline in the first half 2006–07. But will great brands like Penfolds, Wynns and Wolf Blass flourish long term under the Foster’s banner? Will Foster’s remain in the wine business in the long term?

I wonder if, in relaxed moments on the golf course, Foster’s boss, Trevor O’Hoy laments the brewer’s venture into wine. A ten per cent slide in wine sales in the first half of 2006–07 says clearly that integrating a brewer and a winemaker is hard slog — and the analysts are onto it.

One major stockbroker, Merrill Lynch, cited by Richard Farmer on glug.com.au, writes, ‘We have argued in this note that we are non believers in the Australian multi beverage model, that we are non believers that a large company with a portfolio containing non-performing brands can ever out perform the market, and that we are non believers that a large wine company can grow brands without hurting other brands within its portfolio. We also believe Foster’s integration is too complex – and that snags will be a regular feature. In essence, we believe Foster’s operating under its current structure will continue to disappoint. And it is for this fundamental reason that we maintain our SELL recommendation’.

While Foster’s battles to overcome these management, financial, marketing and trading difficulties, the winemaking end of the business has, to date, kept some of our great brands intact. We can still trust and enjoy them. And that means that they still have the intrinsic quality to drive domestic sales and the export push.

Behind names like Penfolds, Saltram, Metala, Wynns, Mildara, Seppelt and Leo Buring lie specific regions, vineyards and decades of winemaking practice. These are the elements that create distinct wine flavours and, in turn, make the brands what they are.

But what happens when disparate winemaking cultures come together in one winery? When you blend Beringer Blass with Southcorp and all the brands associated with each, as Foster’s have done, do you get homogeneity immediately — or over time?

A tasting of the wines shows that it hasn’t happened yet. And a look at the winemaking structure, with chief winemaker Chris Hatcher, shows how this can be maintained for the present. The real challenge could come later, though, if financial underperformance forces more rationalisation.

Each of the brands has a long-term winemaker in charge, for example Sue Hodder for Wynns Coonawarra; Andrew Hales for Mildara Coonawarra; Caroline Dunn for Wolf Blass – Barossa, Langhorne Creek, McLaren Vale, Adelaide Hills; Nigel Dolan for Saltram Barossa and Metala Langhorne Creek; Peter Gago for Penfolds reds – multi-regional; Ian Shepherd for Penfolds whites – Eden and Clare Valleys, Adelaide Hills, Henty, Tumbarumba; Emma Woods for Seppelt Great Western and surrounds; Wendy Stuckey for Annie’s Lane Clare Valley.

That’s only part of the list. But each winemaker has designated vineyards, or sections of vineyards, both company owned and contract grower. Grading for each wine style begins in the vineyard, continues at the crusher during vintage and afterwards in fermenter, storage tank and barrel.

Continuing assessment of grapes and individual wine batches means that quality grading from A (eg Penfolds Grange, Wolf Blass Black Label) to F (wine cask) can be altered as the season and, later, maturation progresses. Thus wines may be upgraded, downgraded or even re-allocated on the basis of style. Maintaining discrete batches right up until the point of final blending facilitates this.

Hence, when you taste a Wynns Coonawarra next to a Mildara Coonawarra, the styles are notably different. And this comes from different approaches in the vineyards, different vineyards within one region, harvest decisions and winemaking approach. Similarly Nigel Dolan’s reds taste different from those made by Caroline Dunn in the same winery.

Indeed tasting tank samples of 2007 rieslings tasted with Hatcher’s winemakers in the Barossa recently showed very marked variations amongst those destined for the Annie’s Lane, Leo Buring and Wolf Blass brands – and even between different quality levels for each.

From a consumer viewpoint these major Foster’s brands offer great value. And the best are exciting, world-class wines. Hatcher says that the focus both here and overseas will be increasingly on regionality and that this will continue to be driven by the winemakers.

Unfortunately, some of these great brands appear to be in decline commercially, if not in quality. We can only hope that Foster’s marketing and trading arms might fall into step with the winemakers so that these great products continue.

Copyright © Chris Shanahan 2007

The 2007 vintage ends a difficult season for wine makers in which drought, frost and bushfire trimmed the national grape harvest by hundreds of thousands of tonnes. But the small vintage, harsh as it will be financially on many winemakers and grape growers, appears to have brought a profit-sapping surplus to an end.

Visiting Canberra recently, Barossa vigneron Grant Burge called 2007 ‘the vintage from hell’. He said he’d ‘never seen anything like it. Reds are down in volume by seventy per cent and whites by thirty five per cent’.

From Nagambie Lakes in Victoria’s Goulburn Valley, Tahbilk’s Alister Purbrick writes, ‘I wrote to you last October with a good news/bad news letter in regard to the effect of the frost on our and other Victorian vineyards. I predicted a crop loss of 50% – the bad news is that it is more like 70-75%.

‘The good news – the Australian wine industry will be down around one million tonnes (720 million litres) which will not only use up all 2005/2006 bulk wine excesses held in tank (450million litres) but will leave the industry in a grape shortfall situation ongoing, which will hopefully lead to a more stable marketplace, less discounting and some restoration of margin and profitability to winemakers’.

In his newsletter Tappenings, vigneron Brian Croser goes straight to the cause of the harsh seasons, ‘El Nino, the cyclic weather phenomenon of the Pacific Ocean and not global warming, was responsible for the “drought of the century”, a predictable by-product of which was the clear sky, dry soil, radiation frosts that ravaged a good proportion of Australia’s fine wine vineyards. The likelihood that Australia’s 2007 vintage is 1.3 million tonnes, only 65% of the exaggerated average of the past three vintages is good and bad news; bad news for the frosted victims, good news for the balance of supply to match the demand for Australian wine’.

While Croser, like Purbrick, sees an opportunity for the industry to return to financial health, he adds an important caveat for vignerons, “The intrigue of scarcity will again increase the respect for quality among fine wine consumers who will be willing to pay more and this time around the vignerons should respond by reinvesting in quality rather than quantity’.

The Australian Wine and Brandy Corporation’s April estimate of the vintage size (based on a survey of company’s responsible for about 85 per cent of Australia’s grape crush) puts the harvest at 1.34 million tonnes, 560 thousand tonnes less than in 2006 and the lowest since 2000.

The AWBC estimates that the white crush fell by 17 per cent to 702 thousand tonnes and the red crush by 39 per cent to 639 thousand tonnes. Their report also notes 2007 as the lowest yielding vintage – in tonnes of grapes per hectare of vines – since 1976, attributable to drought, frost and bush-fire taint.

And the low yields are likely to continue in 2008 because of ‘poor development of the primordial buds (next year’s fruiting buds that sit behind those that flower and bear fruit this year) …together with expectations of reduced amounts of water available for irrigation in the warm inland districts…’

Press releases from various Australian regions tend put the best spin they can on a tough vintage. But none has the poignancy of this note from De Bortoli about Victoria’s King Valley, ‘Disaster. Frost, drought and no water from the King River to irrigate, decimated the region. The bush fires imparted a smoke taint on the small crops that were salvaged, making the fruit virtually unusable. We look forward to a normal season in 2008’.

And what about quality? Well, as in any vintage, big or small, generalisations are not helpful. In the Yarra, for example, vineyards on the valley floor copped a hammering from spring frosts, while many on elevated sites produced reasonable volumes and good quality.

In the Barossa last week on what was admittedly a very short visit, winemakers tended to favour whites over reds – and I tasted some convincing Eden Valley and Clare rieslings. But the reds are mostly in the ugly malo-lactic fermentation stage, making it hard to gauge quality.

Those who’ve seen it all before reckon there are some great parcels out there, albeit in small volume. For example, former Grange maker, John Duval, says “Although the quantity is down overall, I’m really very pleased with the shiraz, grenache and mataro from this vintage.”

The sudden shift from surplus to shortage, though, has already firmed up bulk wine prices and is quickly slurping up the hangovers from 2005 and 2006. While competitive forces will almost certainly mitigate retail price rises, they’ll begin to hit before too long, starting with white wines.

But when the red increases begin, as they must, the sheer scale of shortage in the 2007 vintage suggests heftier price rises in store than for whites.

Perhaps the first to be hit by the shortage will be the burgeoning clean skin trade. It’s been around for many decades, of course, and rises and falls with supply. But several years of dramatic oversupply have probably given it a false sense of permanence.

The message for drinkers? Don’t panic. Australia’s not running out of wine. But as prices are likely to firm — and stay firm for the next few years — it might pay to grab an extra case of red here and there when the quality/price ratio is right. And if the going gets too tough, imports will fill the gap.

Copyright © Chris Shanahan 2007

Few people drive the cars that win motor races. Yet motor sports contribute considerably to safety and performance developments in motor vehicles – improvements that finally trickle down to the family sedan.

Similarly, relatively few drinkers enjoy the Ferraris of the wine world – the great and enduring names that excite drinkers, inspire winemakers and lead, ultimately, to the production of better everyday drinking as surely as motor racing leads to better family cars.

Happily, the vehicle/vine metaphor doesn’t stretch to money: while the prices of top notch cars are unattainable to most at hundreds of thousands of dollars, the world’s greatest wines remain relatively accessible at hundreds of dollars a bottle.

Serious wine buffs, winemakers and wine judges – not necessarily wealthy people — can and do test-drive the world’s most venerable bottles, often spreading the expense over a group of tasters.

The practice is particularly widespread in Australia’s winemaking community and even more marked amongst Australia’s leading wine show judges.

While this may appear at odds with our parochial wine taste (Australia’s imports represent only a few per cent of total wine consumption), it’s probably one of the key forces driving improvements in wine quality.

It’s all about benchmarking. And to benchmark in a global market, winemakers need the broadest possible frame of reference plus an unbiased appreciation of the best the world can offer.

Take chardonnay for example. If a winemaker seeks to be amongst the best, benchmark tastings must include leading examples from Australia, New Zealand and the United States as well as a bottle or two from one of the great Domaines of Puligny-Montrachet, Chassagne-Montrachet or Corton-Charlemagne in France’s Burgundy region.

This doesn’t imply any fawning reverence for names — just a genuine, open-minded examination of what the world has to offer. Our best winemakers and judges do this and readily acknowledge road-to-Damascus experiences provided by the best wines of, for example, Domaine Leflaive of Puligny-Montrachet or Domaine Bonneau-du-Martray of Corton-Charlemagne.

These are the Ferraris of the chardonnay world, bound to impress anyone with more than a passing interest in wine. And the price? Perhaps $200 to $400 a bottle. That’s not much really, especially if half a dozen people chip in for the pleasure.

The late Len Evans was the greatest proponent of the ‘Ferrari principle’, having propelled two generations of Australian wine judges to an appreciation of the world’s best – as a prerequisite to competent judging. How can you judge, Len insisted, if you didn’t know the outer limits of quality?

Over lunches, dinners, tastings and at gatherings after a day’s judging, Len, as show chairman, insisted on great bottles, served masked and discussed openly. Talented insiders enjoyed an even more intense tutelage under Len, gaining comprehensive exposure to benchmark wines, especially those of France, Germany and Portugal.

Even after his death, Len continues mentoring via the annual ‘Len Evans Tutorial’ – a structured week long, live-in series of tastings and tutorials for promising youngish palates, conducted by Len’s leading acolytes. The course, through exposure to the word’s great wines, seeks to put wine excellence in a global context.

But there’s life beyond Len as well. While he provided inspiration and leadership, dozens of other influential winemakers and show judges explore the world of wine – sometimes on their own tasting benches, but also in the open forum that continues to follow judges around the wine show circuit.

Mixed in with the ‘Ferraris’ tasted after hours by show judges is a generous blend of rare old Australian wines, regional specialties from around the world and an eclectic mix of anything anyone regards as interesting. So a day’s judging of Australian wine invariably ends with more tasting and lively discussion in the evening.

This restless examination of what the world and we are up to, reverberates through Australian wineries inspiring innovation in as many directions as there are styles of wine.

What the ‘Ferrari’ wines do is provide inspiration for those aiming for the top. While the French wonder how they can possibly exceed the quality of 1985 Chateaux Margaux, 1978 Domaine de la Romanee Conti Le Montrachet, 1985 Krug Champagne or 1967 Chateau d’Yquem, our winemakers know that our quality limits have yet to be approached. We know we can do better.

From a consumer viewpoint, wine drinking becomes more interesting as we expand our frame of reference, experimenting with previously unknown flavours from France, Spain, Italy and Portugal. And, even if only occasionally, to share one of the acknowledged benchmark greats, provides enormous drinking satisfaction as well as blowing the possibilities even more wide open.

Copyright © Chris Shanahan 2007