23/05/2013 - 14:28

No substitute for effective management

23/05/2013 - 14:28

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No substitute for effective management

What lessons can we learn from wine sector that we can apply to industry development in this state?

The wine sector has intrigued me as a business journalist for the past two decades.

I started covering it in the mid-1990s, drawn in by the collision between the existing family-owned wineries and a new breed of corporate player.

Apart from the Swan Valley, dominated by Houghton, winemaking in Western Australia was (and is) a relatively new industry. It took the observations of agronomist John Gladstones in the early 1960s regarding the suitability of Margaret River for viticulture to prompt a few spirited adventurers to establish vineyards in the area later in that decade and the early 1970s.

By the 1990s these had arrived as significant, if boutique, players on the national and, to a certain extent, international stage.

Cullen, Moss Wood, Vasse Felix and Leeuwin Estate were well known for their achievements.

Further east, Howard Park was emerging as key player in the even more recently planted Great Southern, where Moss Wood co-founder Bill Pannell had also established Picardy.

Margaret River had put WA on the wine map, and it didn’t take long for the corporate world to take notice.

Houghton was already part of the BRL Hardy empire but the obvious step into the region by other national players was somewhat pre-empted by some smart new operators and the unexpected emergence of tax-driven schemes that were following in the footsteps of the blue gum investment sector.

From a reporting perspective, these were exiting times.

Devil’s Lair, Stella Bella, Amberley Estate, Voyager and Goundrey were new names that upset the status quo.

However it was the tax-investment driven growth of Palandri, Xanadu and Watershed (to name a few) that significantly changed the region’s wine industry by ramping up production – something many existing family operators felt threatened the Margaret River name.

That growth reflected global wine demand, of which Australian producers had been among the earliest beneficiaries.

It was not just existing private wineries, big corporate beverage companies, and tax-driven managed investment schemes that were spending on vineyards, production and brand development, however; many individuals and couples saw the industry’s romance and lifestyle as a sure bet for their financial futures and headed to Margaret River to grow grapes and make wine.

That was part of the bubble that burst in the middle of the past decade, creating victims from the largest of the global beverage houses to the smallest cottage operations.

Today we see the survivors, and we ought to acknowledge just how good these players are for toughing it out as high-cost producers in a competitive global industry.

While some owners do have deep pockets for what might be classed a ‘hobby’ rather than a serious business, the best of the established players are internationally successful, beyond the judging of their wines.

It is a lesson for us all. WA businesses in the right sector can compete and succeed in the manufacturing and marketing of branded products. Some of these wineries are recognised globally for what they do.

Margaret River’s terroir, as its soils are referred to in wine circles, might give it a natural edge but there are plenty of competing regions close to and inside the world’s major markets.

I find it intriguing that Peter Fogarty chose wine to follow on from his previous career as the head of volatile technology group ERG.

ERG was a lost opportunity for WA. It was briefly a significant global player in the emerging field of public transport ticketing and cashless payment systems.

As a believer in free markets it pains me to acknowledge that in almost any other country ERG would have had state-backing and preference for its products and, as a result, would most likely have succeeded.

While the company’s failure might vindicate that lack of initial state support, it may also have been part of the reason.

The wine industry is different, as I am sure Mr Fogarty has discovered. It is not exactly unique but it does have advantages in certain soils and climates – things that can’t be relocated.

But it still requires many skills in production, marketing and logistics that mean businesses in the industry need to be managed extremely well to survive in the face of global competition.

     

     

 

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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