The BRL Hardys story charts all that went wrong with Australian wine
In 2003, Constellation Brands bought BRL Hardy Ltd and became the largest wine company on earth. In 2008, BRL Hardy became Constellation Wines Australia (CWA). Changing its name didn’t change the sad state of the company’s balance sheet, and a fire sale followed: In West Australia, CWA sold the Goundrey and Amberley wineries and closed the bottling lines at Houghtons. Other wineries were closed or sold, and workers dismissed. Long-standing contracts with grape growers were cancelled.
In case you think the word barbarians is harsh label for these faceless people in their shiny suits, consider this: they also sold the original .8 acre vineyard planted to Cabernet Sauvignon by John Reynell in 1838 to Pioneer Homes, which built 41 high-density homes on it. John Reynell’s little acre was the birthplace of wine in South Australia, but don’t expect a sense of history from barbarians, or the South Australian state government or the Onkaparinga Council or the McLaren Vale Grape Wine and Tourism Association.
What CWA didn’t sell were the brands it owned, which included not just Reynella and Houghtons but the grand old names of Tintara, Hardys and Leasingham. Like true barbarians, these guys sucked the marrow out of their victims’ bones and hung onto the empty trophies. What they did to Leasingham is typical: they sold the vineyards in 2009, then tried to sell the winery, the cellar door and winemaking equipment separately.
A couple of years later, Tim Adams bought most of these at fire sale prices. CWA only kept the Leasingham name, which is a shame. Tim Adams had learnt his craft here under Mick Knappstein. Tim Adams could’ve rebuilt the old brand, but Tim now has to make do with labelling the wines he makes at Leasingham ‘Mr Mick’.
CWA somehow continued to produce wine under most of the labels it kept, until Constellation Brands sold CWA to Champ Private Equity along with its South African, European and UK operations. The labels Champ acquired include Arras, Banrock Station, Bay of Fires, Berri, Brookland Valley, Buronga Ridge, Crofters, Hardys, Houghton, Lauriston, Leasingham, Moondah Brook, Nottage Hill, Omni, Redman, Renmano, Reynell, Stave Dog Lane, Stonehaven, Tintara and Yarra Burn.
Champ Equity promptly renamed its acquisition Accolade Wines. Champ owns businesses in various industries, but wine is new territory. It spouted the usual blather when the deal was announced: ‘The management team is looking forward to working with the new owners who are bringing open mindedness, fresh energy and an expansive approach to the business.’ And that clever new name? ‘Management and CHAMP consider the new name to be consistent with their aspirations for the future of the company.’
What exactly are these aspirations? Anita Poddar, Accolade’s PR Manager, shared the company’s new vision with TheShout: 'To enrich everyday moments around the world ... We want our wines and drinks to shape everyday moments into memorable experiences as well as providing fitting tributes for special occasions,’ she explained. ‘Our mission is to put consumers at the heart of our global wine business, creating distinctive brands and trusted wines. ... Our vision is about more people enjoying our wines, it's about growth in key markets and consumer-led innovation.’
I’m lost for words here, so I’ll let industry veteran Tony Keys do the talking: ‘The company is doling out drivel. It lacks direction. I doubt the new owner, CHAMP, has any idea what to do with it ... Christensen [the MD] is a smart operator. What was this embarrassing nonsense he allowed his name to be put to? It’s his job to sell wine at a profit and ready the company so that CHAMP can flog it off within five years with a big wad of dosh in the pocket. It is not up to him to enrich everyday moments around the world.’
Reynella Farm was just 12 years old when a young Thomas Hardy arrived in Adelaide from Devon in 1850. Hardy worked at Reynella Farm for 3 years before joining the Victorian gold rush and then driving cattle for a while. On his return to Adelaide, Hardy bought a property on the banks of the River Torrens, and planted vines. Bankside did so well that Thomas Hardy was able to buy the Tintara Vineyard Company in 1876, one of the best equipped wineries in South Australia.
A century later, Thomas Hardy and Sons was one of the most respected winemakers in Australia, alongside Penfolds, Lindemans, Orlando and Yalumba. As the first wave of corporate raiders descended on Australian wine companies, Hardys was buying back the farm: in 1976 it bought the UK-owned Emu Wine Company, which owned Houghton and Morphett Vale. In 1982 Hardys bought Chateau Reynella, which became its headquarters.
Walter Reynell and Sons had fallen into the grubby hands of Rothmans of Pall Mall in the 1970s, and now it was back where it belonged: with the family that changed McLaren Vale from the cereal bowl of Adelaide to a vignoble famous for producing big-hearted Aussie reds. All should’ve been well, but an attack of hubris spoilt all of the wine.
Exactly what happened is hard to piece together today – I vaguely remember Hardys buying vineyards in France to take on the froggies on their home turf. The usually reliable internet is no help at filling in the blanks, except for this insight offered by David Farmer: ‘The deregulation of our banking system in the 1980s led to a period of speculative madness by bankers and borrowers, particularly from the small banks of South Australia. A few poor business decisions by the Hardy's board heralded the end ...’
The Ultimate Constellation
A shotgun marriage of very strange bedfellows followed, with the huge Riverland co-op Berri-Renmano (nickname: the oil refinery) holding the gun. ‘Blue bloods trying to be nice to farmers from the Murray,’ David Farmer wrote, ‘and how humiliating this must have been for the sailing hero Jim Hardy.’ The new entity was called BRL Hardy and it didn’t look back, not for quite a while at least. By 2003, it’s share of the Australian market by volume was 24%, and its share of all Australian wine sold in Britain was 25%.
Together with Orlando-Wyndham’s Jacob’s Creek and Southcorp’s Rosemount, BRL-Hardy’s designer label Banrock Station muscled its way into UK and US supermarkets, helped by the low Australian dollar and the idea of sunshine in a cheap and cheerful bottle. In 2003, US wine giant Constellation Brands bought BRL-Hardys (along with Robert Mondavi) to become the world’s biggest wine company.
The Fake Pinot Scandal
Most people and most companies seem to arrive at a point in their lives where they think they can do no wrong, and Constellation’s moment was about to come. The US wine market has long been a fashion market. I remember a trip in the nineties when the only red wine Americans would drink was Merlot. It wasn’t until the movie Sideways made them see that Merlot was passé, that Pinot Noir became the new red.
Soon there wasn’t enough Pinot to feed the new frenzy, so Gallo and Constellation turned to France for supplies. Between 2006 to 2008, they bought 18.5m bottles of Pinot Noir from several Languedoc wine producers, selling it under a number of brand names in the USA. It turned out that the wines they were selling as Pinot Noir were made from Shiraz and – you guess it – Merlot. Californian consumers launched a class action suit against the two giants which was settled out of court in 2012. Needless to say, both companies claimed they were duped by their French suppliers.
Stuff hits fan
By 2008, the Global Financial Crisis added more challenges for mega wine companies. Constellation decided to cut its losses – it had spent AUD$1.9 billion buying the Australian and UK operations (primarily distribution) in 2003. Over the next two years, the Sands brothers at the helm of the supertanker Constellation sold 80% of their holding for AUD$ 230 million.
Philip White wrote later: ‘... this writer sees no joy other than cruel ridicule in any of this: in their retreat, the Sands brothers clumsily butchered the main bits of their “premium” involvement, the grand old wineries of Chateau Reynella and Tintara. At the former, they last year destroyed a heritage-listed vineyard at least the historical equivalent of Grange or Hill of Grace to make a quick $5 million in a rude housing malignancy; the latter, Tintara, the last winery to survive in the main street of McLaren Vale, they mothballed.’
Another Marriage of Convenience
Just a few months ago, there followed a masterstroke of breathtaking courage, a high-wire act unequalled in the history of corporate asset stripping: Accolade Wines entered into a marriage of convenience with Treasury Wine Estates (TWE, owners of Penfolds, Lindemans, Leo Buring and other hallowed brands), signing reciprocal bottling and packaging contracts that meant Accolade Wines would bottle wines for TWE in the UK, and TWE would bottle wines for Accolade Wines in OZ.
Accollade Park, the firm's giant bottling and packaging plant at Bristol, UK
‘Our decision to enter a reciprocal bottling agreement with TWE underpins Accolade Wines continued success in Australia and globally,’ CEO Troy Christensen told the press. He added that ‘this agreement is important for the thousands of people in Australia and globally who rely on our business including employees, customers, grapegrowers and other suppliers.’
Weasel words. While Christensen signed the deal, Accolade closed its bottling line at Reynella and gave some 175 employees their marching orders. In other words, these barbarians will do anything to cross a few names off the payroll and save a few bucks, even if it means making a deal with their biggest enemy. PR manager Anita Poddar said the company had offered assistance to the redundant employees with counselling, financial guidance and job support.
How nice. Have a Merry Christmas, fellas. Remember, we want our wines to shape everyday moments into memorable experiences as well as providing fitting tributes for special occasions.
A pox on their houses
That’s how I finished my last piece on the barbarians that ran Southcorp and Fosters, and I can't think of a better line http://briard.typepad.com/get_the_picture/2011/09/how-fosters-and-southcorp-trashed-australias-greatest-wine-brands.html
I found a post on Philip White's wonderful Drinkster blog, from a fellow called Adam who sums it up this way: 'This is atrocious - I will now be boycotting Penfolds/Fosters brands AND Accolade for the rest of my life. The way they broke it to the hard working employees was shameful. All about the $$, never about the people, the history or the wine. Embarrassing for Penfolds to be a part of this mess, we'd expect it from Accolade. Goodbye, some of my favourite reds, I will never look your way again.'
In 1985 James Halliday wrote that ‘we have already reached the situation where the biggest 65 wine companies produce 98 per cent of the nation’s wine and the remaining 450 companies the remaining 2 per cent.’ A quarter of a century later, 55 companies produce 92 per cent of the nation’s wine and 1872 account for the rest.
Our hopes and aspirations lie with those 1872 wineries whose owners understand what wine is about, who get their hands dirty in real vineyards and in real cellars to make wine for real people. Bless them all.
Many Thanks to Philip White, David Farmer and Tony Keys for providing essential background information for this story.
Footnote: Accolade CEO Troy Christensen leaves abruptly