The art of criticism

australian

The art of criticism Jeni Port Columnist

Inside in this issue

• A ppointments and Accolades

82 • S uccession is a journey not an event

83

• T he Wine Exporter Snapshot

86 • C alendar

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March 2011 – Issue 566 – www.winebiz.com.au

The biennial International Pinot Noir Celebration, on the Mornington Peninsula, highlights not only the difference in taste in the Pinots of the New and Old Worlds but another, possibly more startling difference. To describe it, first let’s set the scene. It is January 29 - Day 2 - at the Cape Schanck Resort. One day down and the mood is loose and talkative as everyone gets more acquainted with the international speakers headed by Allen ‘The Burghound’ Meadows, an erudite American who has devoted the past 10 years to writing and tasting the wines of Burgundy and making his Burghound website the go-to place for Pinot nuts. The third tasting in and things get heated with the aged Pinot Noir bracket, in particular the appearance of the 2004 Faiveley Latricieres Chambertin Grand Cru. Allen Meadows opens the floor for discussion. Tasmanian winemaker Julian Alcorso fires the opening salvo. The Faiveley wine screams Brettanomyces and is undrinkable he says. How could a winemaker release such a wine, especially a wine selling for $250 a bottle? Others join in. The Faiveley wine is weedy and thin and faulty, hardly worthy of a Grand Cru. And so it went on with the last word from wine writer Tim White: “You were talking about food and wine matchings earlier. This wine would go well with a horse and faeces pie!” With that, the 200-strong audience erupted. Everyone enjoyed a good laugh, everyone that is except the international winemakers present. Allen Meadows managed a strained smile. Is this how Australian wine people talk about wine? The forthright dissection of wines, anyone’s wines, is part of the Australian winescape but clearly it comes as a surprise to visitors from overseas. Our winemakers are generally uninhibited about discussing their own wines and this extends to the wines of others. However, at the celebration it appeared

I think at an event called a celebration there is room to be merciful. Michael Glover, Bannockburn winemaker to offend some of the international speakers, with Etienne de Montille, from Domaine de Montille, in the Cote de Beaune, taking particular umbridge. As the next tasting bracket devoted to his wines kicked off (a fantastic selection of Pinot going back to 1998) he felt compelled to speak his mind. “Wine is emotion,” he said. “Wine is made by humans and humans make mistakes. I want to be free to get it wrong. I ask you for tolerance.” He was clearly upset at the words used against the Faiveley Pinot Noir, saying there was no point in “lashing out” at the wine, even if it was a bad wine. “You can find many bad wines. There is a lot made all over the world, including in Burgundy,” he said. “Every taste has a right to exist as long as it is made in an honest manner. I am sorry to be very emotional.” Emotions definitely ran high. This is not the first time an international winemaker has been confronted by the frankness of his Australian counterparts. It happens regularly in the wine show system, sometimes ending in argument. It cuts to the essential difference between them and us when it comes to the art of criticism: the technical versus the emotional. Some Australian winemakers believe it is something inherent in their education at wine schools. “Australian winemakers are trained to look for faults in their assessment of wine, and we are sometimes much more comfortable talking about shortcomings rather than merits,” Geraldine McFaul said, winemaker at Willow Creek Vineyard on the 

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australian wine business Mornington Peninsula. A fine maker of Pinot, she says she found Etienne de Montille’s comments “quite inspiring.” Michael Glover, winemaker at Bannockburn in Geelong considers Etienne’s response to be “mighty.” “I think at an event called a celebration there is room to be merciful.” Glover admits that over the years he has been led to question his core values and beliefs when it comes to wine. “I remember when I left uni I thought of myself as a bit of a hot shot. I could pick up sulphides and VA from a hundred paces and VA from a hundred paces. That’s not mature. That’s not a complete wine individual.” The question of when a winemaker or wine writer or even consumer oversteps the mark is an interesting one. George Mihaly at Paradigm Hill on the Peninsula who spoke at the IPNC doesn’t mind criticism with bite but believes there is no room for rudeness. “It is an Australian characteristic to be

irreverent and make light humour of things, which is fine, but!” The final word comes from the chairman of the Mornington Peninsula International Pinot Noir Celebration, David Lloyd. He admits discussion on the Faiveley wine got out of hand and did feel for his friend and colleague Etienne de Montille. “Etienne has a slightly wicked side to his humour and although he appeared distressed it was partially due to a wine from a colleague (Faiveley) looked so atypical,” Lloyd said. Lloyd experienced his own uncomfortable moment during the celebration when a pre-tasting of wines from Domaine Serafin revealed that with one of the wines to be shown, four bottles out of 19 were corked. The maker, Christian Serafin, 71, was “shattered” by the discovery especially so because he considered the wines to be in good condition. Lloyd recalls Serafin went pale with shock when he realised the organising committee had made the call not to use

the wines. The perception of corked wines, as with Brettanomyces, is one that often reveals the differences between the New World and the Old. Wine lovers who have attended International Pinot Noir Celebrations around the world often praise the Mornington Peninsula event for the level of knowledgeable debate and the frankness of it. Winemakers should feel free to discuss the wines in a direct and unrestricted way. No-one wants a love fest. However, maybe the last word on the subject should come from Michael Glover who pleads for a little more give . . . and take. “You have to give a wine as much opportunity to talk to you as you can.” It’s a nice philosophy. Jeni Port is a Melbourne-based wine writer, author and wine judge. She is the longest serving wine writer on The Age newspaper and the author of several books including Choosing Australian Wines and Crushed By Women: Women and Wine.

appointments & accolades For all your winemaking information visit www.winebiz.com.au to view and purchase our range of wine related journals and books.

Changing of the guard at Brown Brothers Ross Brown has stepped down from his role as Brown Brothers Milawa Vineyard chief executive officer and handed the reins to Roland Wahlquist, BB’s general manager for the past decade. In making the announcement, Brown said 10 years was always the timeframe he had given himself in the role and the decision ensured timely succession planning. “Roland has all the experience, knowledge and energy for the role and I’m absolutely delighted he has accepted the challenge and the increased responsibilities,” Brown said. Roland Wahlquist started at Brown Brothers 21 years ago as head of winemaking, later moving to operations management and the role of general manager in 2001. Brown denied his decision is a step towards retirement, saying the new role will increase his time and efforts representing the family business globally and contribution to industry bodies.

New senior winemaker appointed Howard Park Wines has appointed Janice McDonald as its new senior winemaker for labels Howard Park and MadFish Wines. McDonald’s career spans more than 25 years in brewing and winemaking, and she began her new role at the Margaret River and Denmark Wineries last month. McDonald was named ‘winemaker of the year' in the Big Red Wine Book 2010-2011 and said she was excited and honoured to be joining the team at Howard Park Wines.

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www.winebiz.com.au – March 2011 – Issue 566

australian wine business

Succession is a journey, not an event! Chris Graves

Perhaps you have heard your business advisor talking about the importance of having a succession plan in place but have little understanding of what it is, why it’s important, and what’s involved. If this is you, then read on. This two-part article has been specifically written for those who want a better understanding of what a succession plan is, why a succession plan is critical for all privately-owned businesses [particularly family-owned enterprises], and the steps involved in developing an effective succession plan. In this article I specifically focus on succession issues relating to family-owned businesses which dominate the grapegrowing and wine production sectors not only in Australia, but around the world.

What is a succession plan? In essence, a succession plan is a strategy to address all of the issues surrounding the transfer of ownership and management of the business. These include not only guidelines for appointing the successor(s) but also addressing related issues such as shareholder agreements, taxation implications, business (legal) structures, method for valuing the business and estate planning to name a few. At some point in time, every family business will go through a transfer of ownership, that is, when the existing owners relinquish some or all of their ownership and management of the business. This could be in the form of transferring some or all of the ownership and control to the next generation of family members or a complete exit through a trade

sale to another business. Understandably, most owners desire to exit at a time of their own choosing, to be the masters of their own destiny. However, the succession event is often brought about by unforeseen circumstances such as the ill-health or death of the family CEO, family conflict (divorce, sibling rivalry) or personal financial circumstances. Most family businesses do not survive beyond the first generation of owners because of a failure to plan for succession. As the saying goes in Australia...’from shirtsleeves to shirtsleeves in three generations’. Similar sayings exist around the world such as one commonly used in Italy... ‘from barn stalls to the stars and back to barn stalls’. The 2010 MGI Australian Family and Private Business Survey 2010 highlighted that the average age of the family business owner was 55 years. This suggests that many family businesses will be facing succession within the next decade, whether planned (retirement) or unplanned (e.g. ill-health). Despite this the survey results reported that only 20 percent of family business owners took the challenging task of succession planning seriously and put considerable effort into it. Not surprisingly, two-thirds of family business owners stated they were not exit or succession ready. There are four common reasons why family businesses do not prepare a succession plan. First, many owners have a poor understanding of what a succession plan is and why it is worthwhile investing the time in developing one. Second, even if owners understand the nature

...the average age of the family business owner was 55 years. This suggests many family businesses will be facing succession within the next decade, whether planned (retirement) or unplanned (e.g. ill-health). and importance of succession planning, they don’t know where to begin or how to work through some of the difficult issues that need to be addressed (e.g. potential conflict between siblings when one is chosen as the successor). Third, they may view succession as a once-ina-lifetime event rather than a process (or journey) that needs to be entered into and planned for. Finally, by its very nature, succession planning involves planning for ‘retirement’ and ‘letting go’ sometime in the future, something that can be difficult to contemplate or face, not to mention actively plan for. Discussions about management and ownership transition can often be difficult to initiate with family. The next section outlines why spending time on developing a succession plan should be viewed as an investment rather than as just another pointless administrative exercise.

Benefits of succession planning It comes as no surprise that one of the important lessons learnt from studying successful, long-lasting family businesses is the need to take succession planning

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March 2011 – Issue 566 – www.winebiz.com.au

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australian wine business seriously and invest considerable time in developing such a plan. Why? Below are some of the key benefits attributed to succession planning: Perpetuating the family vision: Through succession planning, the exiting family owners have an opportunity to discuss what goals and vision they have for the business and the family. This includes not only business aspirations such as growth, financial return and investing in new ventures but also aspirations regarding family wealth and continuity of family ownership and control. A shared vision can be a powerful tool for uniting and focussing the energies of family members towards achieving a common purpose; Preserving the knowledge and economic value of the business: The future economic value of the business is dependent on retaining the knowledge and experience of the current owners within the business. Succession planning provides an opportunity to develop strategies to ensure this knowledge and experience can be passed onto the future leaders of the business as well as attracting the most appropriate successor (whether they be family members or outside managers). Orderly transition: A succession plan provides an opportunity to establish and communicate the guidelines and process for the retirement of the existing family CEO and appointing a new CEO. This is important for not only ensuring the family CEO does not become entrenched in the position, it is also important for minimising risks associated with a forced transition (such as the death of the family CEO). It

can minimise family conflict and rivalry which can occur when succession is not handled appropriately. Communicating the guidelines and process is also important for reassuring stakeholders such as employees, suppliers and customers that the future of the business is in good hands and well planned for. Development of the next generation: Succession planning is a great way to communicate the opportunities for and expectations associated with working in the family business. Succession planning takes into consideration of the needs of both the family and the business. If family members aspire to work in the family business, they will have a clear understanding of what qualities they must develop in order to be considered for such a role. This may include relevant outside work experience, education and a structured mentoring program. Minimising associated transaction costs: As part of the succession planning process, expert advice from qualified accountants and lawyers can assist in minimising taxation implications and establishing the most efficient and appropriate business (legal) structure to meet the future needs of the family and the business.

It’s a long-term planning process Because there are a number of issues that need to be worked through as part of developing an effective succession plan, succession planning should be viewed as a process rather than an event. Some argue that developing the next generation for taking over the business may take 5-10

years. As a consequence, it is no wonder that family businesses without a succession plan end up being sold on the market when a succession event is forced on them (e.g. through the death of the family CEO). A good succession plan should result in the actual succession event being a ‘nonevent’, that is, the transfer of ownership and/or management to the next generation (or individuals outside the family) should be a smooth and anticipated transition. It’s never too early to start planning for succession regardless of the intended succession pathway (next generation, outside management or eventual sale of the business). Read more: Next month we publish part two of this article, which will outline the steps involved in developing a succession plan. Dr Graves is a senior lecturer in the University of Adelaide Business School and teaches accounting and family business management to managers undertaking the school’s MBA programs in Adelaide and Singapore. He is the co-director and founder of the school’s Family Business Education and Research Group [FBERG] which promotes research, education and industry engagement in the field of family-owned enterprises. In 2010 he was appointed to the board of ‘International Family Enterprise Research Academy’ [IFERA], which is the driving force of an international network advancing family business research, theory and practice. http://www.business.adelaide.edu.au/ research/fberg/

appointments & accolades Jackson Family Wines promotes ex-pat Aussie Hugh Reimers Ex-pat Hugh Reimers – former Roseworthy graduate and Yalumba winemaker – has been appointed as chief operating officer of US-based wine company Jackson Family Wines. Prior to joining Jackson Family Wines, Reimers was chief winemaker at Constellation Wines, responsible for overseeing wine quality, and delivering financial expectations across the Constellation Brands portfolio in the United States. The California-based Jackson Family Wines were ranked as the 9th largest wine company in the US in 2010, according to Wine Business Monthly and have more than 36 wine brands under its control.

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Rural Women’s Award announced Margaret River winemaker Cathy Howard has been named runner-up in the 2011 RIRDC Rural Women’s Awards for her commitment to supporting and mentoring women in the wine industry. Ms Howard is well-known for her contribution to the wine industry formerly in the Barossa Valley and now in the Margaret River. She is a former writer for the Grapegrower & Winemaker, and is current manager of the contract crushing facility Boars Rock as well as winemaker with husband Neil for their own label Whicher Ridge. The Western Australian awards ceremony was held on 16 February, with the national winner to be announced in May.


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the wine exporter

Australian Wine Export Market Snapshot Highlights – year ended January 2011 Key Statistics Total

2010

Volume ML

780

2%

Value $AM (fob)

2071

-8%

Destinations (by value growth)

$Am

Growth ($Am)

China, Pr

164

29

Canada

211

9

New Zealand

73

7

Malaysia

24

3

Taiwan Province

10

3

Container type (by volume)

Share

Change

% point change

Glass bottle

53%

Bulk

46%

6.8

1%

-0.2

Soft-pack Alternative packaging1 Still wine by colour (by volume)

0% Share

-6.7

0.1 % point change

Red

60%

-1.6

White

40%

1.6

Share

% point change

Winestyle (by volume) Red still wine

60%

1.5

White still wine

37%

-1.3

Sparkling

2%

-0.2

Fortified

0.1%

0.0

Other

0.1%

0.0

Share

% point change

Price points (by volume) $A2.49/L and under 2

51%

2.9

$A2.50/L to A$4.99/L

39%

-1.1

$A5.00/L to A$7.49/L

6%

-1.7

$A7.50/L to A$9.99/L

2%

0.1

$A10.00/L and over

2%

-0.1

Top 5 varietal label claims on bottles (by volume)

ML

Share

Shiraz and Shiraz blends

142

36%

Chardonnay and Chardonnay blends

88

22%

Cabernet Sauvignon and Cabernet Sauvignon blends

69

18% 8%

Merlot and Merlot blends

33

Pinot Gris and Pinot Gris blends

12

3%

Top 5 regional label claims on bottles (by volume)

ML

Share

South Eastern Australia

272

73%

South Australia

49

13%

Barossa

7

1.8%

McLaren Vale

6

1.7%

Victoria

5

1.2%

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Notes & definitions Prepared: 5th February 2011, updated monthly 1 Alternative packaging includes flagon, tetra, PET and other packaging types 2 The growth in this segment is due to growth bulk shipments as more Australian wine is being packaged overseas for a combination of reasons, including economic, enevironmental and scale rationale together with meeting the requirements of some customers. The change in share represents percentage point change in share between the current twelve month period compared to the preceding 12 month period. Based on data compiled from the Wine Australia Wine Export Approval System. Average Value ($AUD) calculated on FOB value. Free on Board (FOB) value includes production and other costs up until placement on international carrier but excludes international insurance and transport costs. Data is based on wine shipped from Australia to the country of destination - in some instances, wine is then transshipped to other countries for consumption. Disclaimer: While Wine Australia makes every effort to ensure the accuracy and currency of information within this report, we accept no responsibility for information, which may later prove to be misrepresented or inaccurate, or reliance placed on that information by readers. Provisions of the Copyright Act 1968 apply to the contents of this publication, all other right reserved. For further copyright authorisation please see www.wineaustralia.com.

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