When it comes to the wine business, we are all used to hearing tales of woe.
That’s why I was really surprised when yarning with Brown Brothers chief executive Ross Brown at a Brown Brothers dinner this week to find his sales were up. Moreover, he said that the family wine businesses like Yalumba, De Bortoli and Taylors were all holding their own. Why?
Their greatest threats, the giants Constellation and Foster’s, have both stumbled. The old BRL Hardy wine business has never been the same since it went to the American Constellation group and Stephen Millar let go of the reins, while Southcorp has struggled under Foster’s.
Whereas these two groups had been expected to decimate medium-sized family wine makers, the good family operators who know the business backwards have prospered.
The secret to Brown Brothers is that they use their cellar door as a massive market research tool and craft wines to suit what the customer wants.
In the case of Brown Brothers, they also have a discipline to ensure excellence in succession – a member of the family can’t join the business until they have spent four years working for others. It’s not a bad rule for family companies generally.
One of the factors making it tough for Australian wine makers has been the export market, particularly the US. Australian wines are having a hard time in the US because we have been slotted into the low-priced category.
But Ross Brown is upbeat about exports over the next five to 10 years. He has been hosting wine dinners in China for many years and in the last couple of years he has noticed a dramatic change – the up-and-coming generation of Chinese are choosing wine over beer and spirits as their drink of preference. And they like white wine.
Moreover, the Chinese are not that good at making their own wine, so Brown can see an enormous market developing. But it might take five years before what Brown is seeing at Brown Brothers dinners in Shanghai converts to a major market. That’s off the timescale of major listed companies, but it’s very much part of the long-term strategic thinking of family companies.
Third generation wine maker Ross Brown is excited and believes the family’s next generation has a big future.
This article first appeared on Business Spectator.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
