Are family wine businesses outperforming in hard times?

Captain’s log, stardate: early 2006. Location: Oversupplied Australia. Issue: what would you rather be right now: a publicly listed wine producer with thousands of shareholders or a wine business owned and operated by a single family?

Food for thought, especially when you consider Australia’s third largest winegrape region, the Riverina. Orlando Wyndham, a subsidiary of Pernod Ricard, remains the only ‘corporate’ citizen in this region, which is almost entirely dominated by some of Australia’s largest and most successful family-owned wineries including Casella, De Bortoli and McWilliams. And despite some recent issues over grape prices, this region is about as secure as any other in Australia.

‘When the recent boom took off, the big companies came to Griffith to get as much fruit as possible’ says West End’s Bill Calabria. ‘But as soon as the glut appeared, they were the first to pack up and drive away. We live here and have a personal relationship with everyone, so we try to do the best we can with them. It’s a two-way street. When there’s a shortage, the growers look after you and when there’s a surplus, you look after them.’

John Casella, whose family’s Yellow Tail brand is the largest-selling wine brand in the US and accounts for just under four in every ten bottles of Australian wine sold there, believes that family-owned wineries have a big advantage with relationships with growers. ‘When there was a shortage of fruit we relied on these relationships to make enough wine to increase our market, and today we’re returning the favour by treating growers well’, he says.

Family companies, says Calabria, are likely to be twice as cautious when investing money out of their own pockets. ‘We are more willing to manage with one press when others might need two, and are more likely to put in longer hours’, he says. John Casella believes that because they can re-invest their money without shareholders objecting, family companies can better work towards long-term objectives. Casella says that publicly listed companies look more at short-term objectives, aiming to keep the market and the analysts happy. ‘Sometimes it’s better to take a step back, perhaps to lose market share in order to maintain profits’, he says. ‘It’s a more balanced way of doing business against guys who have to think short term.’

According to Casella, family-owned companies are leaner, more focused, more efficient, less prone to wastage and more able to address problems easily. Provided they have vision, he believes family-owned wineries are the most effective means to use capital and resources without the wastage he associates with the bigger companies.

George Wahby likes the long-term approach that family-owned wineries can afford to take. He couldn’t believe his ears at his recent first board meeting as CEO of McWilliam’s Wines. ‘Our board was talking about the necessity to still keep several of our wines for five years prior to selling them’, he says. ‘Can you imagine a public company taking that approach in a tough market? The family was unanimously behind a view that said: ‘We’ve been in business for 128 years and we’ve seen a few cycles. So let’s keep delivering consistent quality to the customer and not get caught up in the volume game. We’ll need to tighten some aspects to get through the next three years, but once we do that, we here for another 128.’

McWilliam’s is also choosing the tough times of the present to rationalise its winery facilties in Griffith and in doing so acting in a manner not unlike the larger companies, creating a new ‘super winery’ at Hanwood.

Wahby is convinced that the family business model is the most effective in the current market. ‘We’re retaining a focus on quality, so we’ll still have more than $30 million tied up in ageing inventory as we hold back Elizabeth Semillon and Philip Shiraz for five years. We work on ten-year plans that we break down into five-year blocks. So, having moved to screwcap for the Elizabeth, we still can’t activate the plan until four years down the track!’ Please login to post comment