STATE LIBRARY OF SOUTH AUSTRALIA

J. D. SOMERVILLE ORAL HISTORY COLLECTION

OH 692/99

Full transcript of an interview with

STEPHEN MILLAR

on 21 March 2002

by Rob Linn

Recording available on CD

Access for research: Unrestricted

Right to photocopy: Copies may be made for research and study

Right to quote or publish: Publication only with written permission from the State Library

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OH 692/99 STEPHEN MILLAR

NOTES TO THE TRANSCRIPT

This transcript was donated to the State Library. It was not created by the J.D. Somerville Oral History Collection and does not necessarily conform to the Somerville Collection's policies for transcription.

Readers of this oral history transcript should bear in mind that it is a record of the spoken word and reflects the informal, conversational style that is inherent in such historical sources. The State Library is not responsible for the factual accuracy of the interview, nor for the views expressed therein. As with any historical source, these are for the reader to judge.

This transcript had not been proofread prior to donation to the State Library and has not yet been proofread since. Researchers are cautioned not to accept the spelling of proper names and unusual words and can expect to find typographical errors as well.

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OH 692/99 TAPE 1 - SIDE A

NATIONAL WINE CENTRE, WOLF BLASS FOUNDATION ORAL

HISTORY PROJECT.

Interview with Stephen Millar on 21st March, 2002.

Interviewer: Rob Linn.

Stephen, where and when were you born?

SM: I was born in Melbourne on 18th November, 1943.

And who were your parents?

SM: Stephen, my father, and Marjorie, my mother.

What type of neighbourhood did you grow up in, Stephen?

SM: I grew up in the Northcote/Thornbury area of Melbourne. I suppose it

was a working class suburb, about five miles from the CBD. In those days

it was miles so when I think back then I think in miles rather than

kilometres.

And Stephen, were you educated in the area?

SM: No, I was educated at CBC—Christian Brothers’ College—in Clifton

Hill. The school no longer exists but that’s where I did my education.

I know of that school. That had quite a track record over the years.

SM: Yes.

So Stephen, did you go on to tertiary work at all?

SM: Yes. I moved to Adelaide and started my work with BP Australia at

North Terrace in Adelaide, and shortly after that took up accounting studies

at the Institute. It was called the Institute. It’s now the University of

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South Australia. So I graduated as an accountant. I’m a CPA. That’s my

background.

And then from there, when I moved and I was working with General

Motors, I was selected to do post graduate studies on a scholarship at their

university in the USA, which is Kettering University in Flint, Michigan. So

Kay and I had just got married and we went over there for two great years,

studying and working in the States in post graduate scholarship with

General Motors.

Would this be the late 60’s/early 70’s?

SM: Well, I’m just looking at my ring. Graduated from there in ‘70. So it

was ‘68 to ‘70.

That must’ve been a fascinating time in the States.

SM: A fabulous time, yes. I’m of that older generation and so it’s just

wonderful to see the young Australians, the way they travel. It was far

less general in those days. And so to have been given the opportunity to

study and to work in the States then was a unique experience, and one

that’s really stood me in wonderful stead right through my working career.

So Stephen, what were some of the things that you felt that

Kettering gave you for your future?

SM: It had a very specific education in accounting. And their university

had a much broader range of subjects to study. In that period of time I did

four solid semesters. But you do eight subjects a semester. So as well as

the accounting and management I got into some engineering subjects, like

production processing, some simulation, and certainly public speaking. It’s

just a wider focus on education as well. Australia was very specific [at the

time]. The Americans had a combination of specific and a of more general

[subjects]. And so certainly, in the early days, computer programming,

public speaking, management subjects and there was even some history

there, which was quite interesting. It was very much a broadening of one’s

specific knowledge, which I found very valuable.

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And you came back to Australia in 1970 you said?

SM: Yes.

Back to GM?

SM: Yes, back to GM in Melbourne at Fishermen’s Bend, and I was given

the job of putting together a strategic—a critical—path plan from a model

conception through to model launch. It was over a five year period. So it

was a very interesting critical path plan. It took up the four walls of the

office, it was so big. They were very exciting times.

Where to from GM?

SM: While it was a great company, to me it was a bit stifling in

accounting. If you wanted to know what you had to do, you looked up

page 76 of a 700 page manual. I then joined a publicly listed company

SABCO Limited in Adelaide and moved back. I joined them in ’71/’72. I was

there for about twenty years.

Was that as Company Secretary?

SM: No. I moved back as Financial Controller. Then I moved, with them.

They had to manage a business in Sydney called the Addis Brush Company.

They were the original inventors of the toothbrush. So I went there as

General Manager to turn it around into profitability. I then came back to

SABCO. The company had bought Hostess, which was a plastic house-

wares company. So I managed the integration of that business. I became

the Deputy Managing Director and Managing Director for three years before

leaving to join Berri Renmano Limited in ‘91. So I had twenty years in that

company.

Stephen, what was the context of your coming to Berri Renmano?

SM: Well, it was really a changing at SABCO. There was a view there that

I’d had a very successful three year reign as CEO. It really finished in a bit

of a disappointment in that we’d had three great years, but it was time for

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me to leave at that point in time. You know, as an MD you have to be

totally responsible for your own actions and for the direction you want to

take. If you find that that you are not going in the same direction as the

Board, then you’re not confident that the way the Board wants to go will

actually work. [In those circumstances] you’re really silly to hang around.

So it was with great regret that I thought, ‘The way they want to go isn’t

the way I think will work’, so I started to look elsewhere. That was the

issue. Now, it doesn’t give me any pleasure to say that I was proven right

but they were the decisions that I had to make. And they were pretty

tough decisions, especially when you’re very comfortable in a company.

And you’d been there a long time.

SM: I’d been there twenty years. I’d achieved my ambition of being the

MD, but things had changed. It had certainly been a very exciting time.

So in ’91 I joined Berri Renmano Limited.

How did that joining come about? Did John Pendrigh approach

you?

SM: No. There was an ad in the paper. (Laughs) It was very basic. So I

decided to apply. John was retiring at that stage. There was the

Chairman, Rob Chabrel, who’s the Deputy Chairman at BRL. He was the

Chair of Berri Renmano Limited. John had been the MD and he was

retiring. There was a committee put together to find John’s replacement.

It consisted of Rob Chabrel, the Chairman of CCW, Jim Brammell(, the

Deputy Chair, John Pendrigh and Mark Davison—they were the four people

who advertised around Australia, looking for their next CEO. And,

fortunately for me, I was selected.

What attracted you to the wine industry at the time, Stephen?

SM: I lived in South Australia. There weren’t a lot of businesses that were

growing strongly. I thought that there was potential in the wine industry. I

wasn’t much of a wine drinker but it seemed to me that it was an

opportunity. I’ve always worked in companies where the product was very

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much a marketing driven product—one that was very much used in every

day life. And I enjoyed that. I felt that I had a very good understanding of

business, of finance, and what actually was required to drive a consumer

product. I enjoyed the association with the product that was used every

day in a household So I thought that, ‘Well, this is an interesting

opportunity, I’ll apply and see how I go.’ The more I went through the

process, the more confident I became that there was something that I

could perhaps contribute to.

What condition did you find Berri Renmano in, with both the people

and the places?

SM: They was interesting times for the industry. The industry had just

been through tough times and there had been some great things put in

place. Previously, in the mid 80’s, the Berri Cooperative and the Renmano

Cooperative had joined together and they’d just recently moved to become

an unlisted company. The industry was just starting to enter times where

there was some opportunity [for growth]. And so the groundwork was in

place. But the actual performance at that time [was not quite as it should

have been]—we needed to lift the performance to achieve the potential

that had been established and the opportunity that had arisen.

From memory, Stephen, at the time Berri Renmano was very much

involved with bulk product, and was also building up the premium end of its product. It was just in the very first phase of that

change. And you still had a loyal group of growers that were

behind the former cooperatives. Would that be true at the time?

SM: Pretty much so. What we had was a very interesting opportunity

based upon the great sense of history and tradition in the Riverland. There

had even been community owned hotels. And so the cooperative spirit and

the community-mindedness of that region was very strong. And they had

a great asset in the Berri winery, which had acquired the Renmano winery.

While the business had become a publicly unlisted company, the owners of

it were the growers, who were the original members of the cooperative.

And the ground work had been established.

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They had been very successful in three areas. They had started to develop

some brands in the United Kingdom. They had established their own sales

and marketing team in Australia, and that’s a very costly and a slow

process. But their real strength was some sales and bottle sales into the

UK, cask sales in Australia, and a supply to the industry. But they had a

very strong facility that had been there for some time.

And so I joined in September ’91. I remember the industry wasn’t in boom

stage at that time, but there were the signs that if the industry continued

to drive its international opportunities, then there was potential for the

wine industry to achieve its rightful place—something I guess its achieved

in the last ten years. That was an exciting challenge. Clearly, what they

lacked was brand strength in both the domestic and international markets.

Exactly.

SM: About three months after I joined, the Hardy business was put on the

market. I had been travelling around the world to look at our operations

and I arrived back in Australia to find that the Hardy business was on the

market. I spent the next nine months of my life trying to secure that and to

list our company, too. That was a very exciting nine months.

It would’ve been more than challenging, Stephen, to be involve in

that process?

SM: It was a lot of fun but for about nine months of my life I very rarely

got to bed before about two or three o’clock in the morning. I can

remember many mornings when I was eating pizza at four in the morning

along King William Road as we tried to negotiate the various moves. It

took nine months. I think we started in November and we listed in

September. We were basically able to secure the deal about July/August.

So it was a very exciting time, funnily enough. It was also very difficult

because we’d just had the collapse of the State Bank as it was then and

they were the bankers to both BRL and to Thomas Hardy. Clearly, there

was a lot of pressure. It was a good business, the Hardy business, but it

had to sell, and it was interesting as to whether we could raise the

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finances, both in an equity sense and in a borrowing sense—a debt sense—

to secure it. I think that possibly the reason that we were successful was

that a lot of people underestimated our determination to make it happen.

What were the first directives that you brought into play with the

new company, BRL Hardy? What was driving you in bringing it to

the industry? Was it a marketing focus or were you building up

product? How did you see the first stages going?

SM: Of the merged company?

Yes.

SM: It was very much a marketing focus. We had an enormous

opportunity. We had great production facilities and access to fruit—

grapes—through BRL, and we had a wonderful brand name in the Hardy

brand. So what we had was a combination of potential. And that’s all it

was, potential, to marry a production base to a marketing base—to provide

an up-side for our shareholders.

Now, from day one it was all about marketing. You had to take a product

that the consumer believed represented great value for money—of course it

hadto. Then we had to build that into a brand, both domestically and

internationally, that could satisfy the consumers needs, and of course at

the same time, provide a superior return to our shareholders.

Stephen, although you’d only been in the business a short time when this came about—the BRL Hardy transaction came about—tell

me a little about some of the people/characters that you met at the

time.

SM: They were numerous. Certainy I think that one of the great

characters of the time, one of the great founders and a person that showed

that profit could be made in the Australian wine industry, was Ray King

from Mildara Blass.

The Silver Fox.

SM: The Silver Fox.

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And, of course, Ray was very much our competitor, and he was the other

person bidding for Thomas Hardy & Sons. The industry owes great credit

to him for showing that a professionally managed wine company can

actually generate returns for its shareholders. He was really the first

person to do that. Certainly, he stands out.

Wolf Blass was a director of Mildara at that time. He’s a wonderful

character who has brought great credit to the industry, through his ability

to blend wines from differnet regions and to produce a superior product. I

met him not so much to do with the merger but prior to that because of

our association. We were also supplying some wines to Orlando, and of

course Orlando brought a great thing to the industry by showing that

Australia could develop a world brand in Jacobs Creek. I think those three

all made a very significant contribution. They were some of the characters.

But then of course, I met others at various stages—Peter Lehmann and

Murray Tyrrell who, of course, was a wonderful character. We were a great

supplier of wine to Murray. So my association with them went back to my

very early days with BRL. These were just some of wonderful characters.

Later, I met the Evans’ and the Hallidays, but really in the early days I

think the three great credits go to Wolf for blending wine, to Ray for

showing how to make money, and to Orlando for creating Jacobs Creek.

And, fourth, to Murray for just being a lovely, crusty pioneer of the

Australian wine industry.

Good words, Stephen. ‘crusty’ yes I think that describes him very

adequately.

SM: Absolutely. A lovely guy.

Stephen, coming from the background you did with a strong commercial marketing sense, was the wine industry unlike

anything you’d struck before?

SM: A lot of people spend a lot of time trying to tell you how their industry

is different, and generally most consumer products aren’t all that different.

Now, all industries have their little quirks, I guess, but basically industries

are industries. If you’re selling a consumer product, you have to win the

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hearts and minds of the consumer or you don’t win. But to win those

hearts and minds you have to do two things. You have to provide a

tremendous service to the retailer, who is your conduit to that customer,

and you have to supply him well. You have to service him so that you can

get to the customer. And the second thing: you have to deliver quality in

your product. So we that became our guiding light, so to speak; this is

what we have to do to succeed.

I’ve forgotten the question now. (Laughs)

The difference in the industry.

SM: In some ways we are very fortunate because while the wine industry

is one of the oldest industries in the world, it really doesn’t have a big

international player. I talk about this a lot. There’s no Microsoft. There’s

no Coca-Cola. There’s no Kelloggs. There’s no General Motors or Ford, nor

the Japanese companies. But there were not [world wide] drivers in the

wine industry. The wine industry was very fragmented, driven by lots and

lots of small players. And this was an enormous benefit, because as we

tried to develop our business we weren’t coming up against these big

multinational companies that were developing in sectors such as beer and

in spirits. A lot of the developments that I’d experienced at SABCO

through looking after the major customers like a Coles, or Woolies etc etc,

weren’t being used in the wine industry. This was quite amazing. The

company was only formed in ’91, and yet had the potential to get right on

the front foot. We went to some of the biggest retailers in the United

Kingdom—I mean these are very, very big retailers. And we talked about

five-year plans, and turnover rebates and how we could build business

together. Their comment was, ‘Well, you’re the first people that have

spoken to us about this’.

So this is like the Sainsbury group?

SM: The Tescos.

Now, that’s quite remarkable because that had been in consumer goods

marketing for twenty years previously. There was this marvellous

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opportunity for an Australian wine company to take the lead. Not just in

carving a niche for Australian wine, but to actually, over the next hundred

years—and I also say fifty so I’m being more conservative—become the

leader in the wine industry around the world. Normally that opportunity

isn’t available in an industry. It actually is available in the wine industry.

So is it unique? No. But is it opportunistic that nobody around the world

had done that? Absolutely. You know, it’s just an amazing opportunity

that exists that you wouldn’t think would exist.

Stephen, with the blending of Berri Renmano and Hardy, did the

Hardy tradition also give an assistance to the fact that you had an

established name in Australian terms? Did that help at all?

SM: Oh, enormously. That was the whole concept of bringing the two

companies together. We had a wonderful history and tradition, in both

companies, but one had a great tradition of producing great value for

money wine, and in the process of building its brands. You had the other

company that had a wonderful brand and a wonderful history, and a

heritage, that really needed access to better wine and to take advantage of

the name. So they had built the Hardy brand to be an enormously valuable

asset. Perhaps some of the brands underneath it just lacked enough

‘oomph’ to create the value for shareholders. And so it was the bringing

together that created this potential. And [in the process the merger gave]

the whole of the BRL Hardy team, as the new team, an opportunity to start

to make decisions, to really drive and to be part of the future direction of

the company.

Well, could you just for a moment talk a little bit about the team

that were around you and some of the people that helped you at the time?

SM: Yes, the interesting thing with our company is that from the very

merger, and the listing in ’92, we’ve had very little change. There were

people from both sides. Clearly there were a lot more people from the

Hardy side because they were a much bigger business, but there were

people from the BRL side as well. And we started off with myself and

13

Wayne [Jackson], and Wayne made a great contribution for the twelve

months, until he moved into his next opportunity.

But we had David Woods, who was originally from Hardys, and he was the

Australian trading director. We had Angus Kennedy, who was from BRL,

who’s our operations and technical director. We had great people like Peter

Dawson, who was actually the chief winemaker at Houghtons, who moved

over to become chief winemaker within about six or twelve months of the

merger. Brenton Baker, who was with Hardys, who’s our chief viticulturist.

And I’m probably forgetting people that I don’t mean to.

You had Vicky Greaves, who was from Hardys, who’s the Australian

marketing manager. Jim Humphries, in corporate operations from Hardys.

We had Steven Davies who had driven our international business as the

international trading director and was a director of our company. It is very,

very sad that Steven contracted liver cancer and died at the age of forty.

That’s really the only very senior executive person that we’ve lost, and that

was a tragedy because he played an integral role. But it was Angus

Kennedy, David Woods and Steven Davies who really drove it initially. And

Peter Beckwith, who came in from outside in finance. And John Whelan our

company secretary was actually the accountant at Piper Alderman, who did

all the work with us, and then joined us later because he really enjoyed

what he did and saw the opportunity. He joined us as our company

secretary and general counsel.

So it’s really been that the people from both of the companies have

continued and have driven it. Probably the real change was that both

organisations had a great culture of work ethic, and that’s very, very

important. We decentralised the control, to give more power to individuals.

So instead of having one or two decision makers we tried to have two or

three hundred decision makers—all at various levels. And I think the

decentralisation and the ability to get on and look for enthusiasm in our

people has really worked very well for us.

Stephen, how long after taking over did you realise that there was

a great future ahead of you as a company?

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SM: I realised it before we took it over. Certainly I think the initial focus

when we took it over was that we knew we could do much better in the

Australian market, and we saw potential internationally. And so we started

to drive that. I think it was probably about a year or two later that we said,

‘Hey, as high as our goals are,’ and they were very large when we started

for we had very strong ambitions, ‘we actually are aiming too low,

particularly internationally.’ So we became even more aggressive and we

raised our sights even further.

Now one of the things that I’ve noticed about the industry in

Australia at the time was that companies like Hardys and BRL had an enormous range of product.

SM: Yes.

From fortifieds right across, just beginning to move into the

premium wines in a big way. But public taste was moving away

from the broad range to more particular. Did you address that issue?

SM: We actually had a pretty good base because we had access,

particularly in those mid 90’s, to the fruit that the industry needs. [It’s

important to note that] what has really made Australian wine

internationally isn’t the $30 and $40 bottles of wine. That’s about our

image. What drove Australia, at least initially, was Jacobs Creek followed

by the Lindemans Bin range. Now, of course, some of the big brands are

the Hardys brands, which is the Hardys Stamp of Australia, the Hardys

Nottage Hill and Banrock Station. Again, it is our access to quality fruit out

of the Riverland that gives this value for money proposition. It gave us the

potential to exponentially grow our business. We have probably spent

more than any other company in developing our premium wine businesses

as well, from the West, through Clare, through the Barossa, through

McLaren Vale, through Langhorne Creek, through Padthaway, through

Coonawarra etc. But still the heart and soul of the Australian wine industry

is driven by quality Cabernet Shiraz and Chardonnay out of the Riverland

regions. And as our strength, our history and our tradition is there, it

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places us in an enormously strong position to really drive those big volume

brands, which are growing all around the world.

Did you find the breadth of the operation that you were in,

particularly with the Western Australian interest from Houghton, was something that enabled you to build very quickly?

SM: Oh, there’s no doubt about that. And we saw that from the

beginning. It was this combination of opportunities with brands and the

ability to source grapes, both regionally and even more nationally, that

gave us opportunities that were enormous. But certainly the breadth of

the range was never a concern. In fact, right from day one we’ve

continued to expand the breadth of that range, both in terms of brands and

in terms of facilities. When we started we probably had about seven

facilities. We probably now have about fourteen. So we’ve added

substantially, and we think that’s a very important part of the ongoing

opportunities that exist.

Stephen, I wonder if we could focus just on a couple of the

manoeuvres that you were involved with at the time. Could we talk about the export move that Hardys have made in the last decade?

SM: Yes.

What is the progress up to the present? How’s that going?

SM: It’s been very interesting. When we looked at first there were lots of

opportunities. But, for us, the core opportunity was the United Kingdom.

There was no doubt about that. In fact, in ’92, when we started, we were

exporting about 40,000 cases. The year just ended we did over 5,000,000

cases to the United Kingdom.

And we said initially that there were two stages in that. The first was that

you had to invest ahead of the growth, and the investment—we’re always

investing back in Australia in quality and brands—was [of the nature] that

if you’re going to succeed you can’t leave it to third parties. You have to

drive your own business. So we established BRL Hardy Europe. Initially it

was BRL Hardy UK, and then it moved into Europe. We put together what

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we knew was needed—which was the best sales marketing operation you

could find to take advantage of the opportunity that existed in that UK

market. We supported it from day one. In fact what we said in the early

days was that we didn’t expect the distribution part of it to make the

dollars but we always expected the brand to make the dollars. Now we’ve

got to the point that not only are we making the brand margin but we’re

making a very good distribution margin as well. But the ability to set up

sales and marketing operations in the key markets of the world is

fundamental to our success.

Now the distribution market, could you just enlarge on that.

SM: Well, there are two [factors to consider]. If we were selling to an

agent, say, in the UK, we would sell it at an arms length price that gave us

a profit on the brand—on the brand and the margin we would make from

that brand. Then that agent would have his own sales force and he would

make a distribution profit. We operate our UK business exactly the same.

We sell product to BRL Hardy Europe as if we were selling to an agent, and

then that agent would run his business to try and make a profit out of his

distribution.

In early days, if you are using an agent, [you would probably find that]

they wouldn’t put the resource into that distribution that we would because

they have to make a profit. Our view was, that when we were establishing

ourselves, we didn’t have to make that distribution profit, we always had to

make the brand profit. And so we were able to accelerate our growth by

the right strategic decisions. The brand margin always has to be there.

That comes from the price-quality relationship. With the distribution

margin, though, we are always prepared, when we’re developing a market,

to over-invest in it to bring us the economy of scale we need. So that’s

what I mean when I talk about the distribution margin versus the brand

margin.

And has it been your planning and working with the large retailers

in the UK that’s helped the Hardy brand grow?

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SM: There’s no doubt about that. But we just don’t deal with the large

ones. We deal with a full cross section of the market. We have big

ambitions. We want to be, in the next fifty years—beyond my time—the

number one wine company in the world. We think that’s achievable. So

we’re not going to do that if we don’t deal with the majors. Equally, we’re

not going to do it if we ignore [other sections of the market]. We need to

supply the entire cross-section and we need to prioritise; for we need to

see where your initial growth comes from. Our ability to make progress

and to drive our brands through the major retailers of the world is one of

the fundamentals on which our success will be determined. Through our

ability to service the key retailers of the world, who can then get to the

consumers of the world, we can show that consumers like Australian wine.

The good thing is that they absolutely do. (Laughter)

TAPE 1 - SIDE B

Stephen, I wonder if we could look at a couple of operations that

BRL Hardy have set up in the recent past that have made their

name in Australia. Banrock Station is the first one I’d like to talk about. Can you tell me a little about how that came to be?

SM: Yes. It’s a very interesting history. When we look at the Riverland,

we have a great group of suppliers there. And we bought Banrock Station

for two key reasons. First was that we never wanted to be a major grower

of grapes in that region, but we wanted one facility that did two things. We

wanted to be able to use it to experiment and as a showpiece for our

growers so that when we gave advice on the progress we need to make in

vineyards [it was in front of their eyes]. It’s one thing to talk about it, it’s

another thing to show it. One of the reasons for the investment in Banrock

Station was to provide a quality base for use in field days and to involve all

18

of our growers with changes in viticulture. The biggest increase in quality is

going to come from viticulture and not from winemaking. So that was the

first.

The second was to provide [a source of premium juice] if we had a bad

year, for example, in the Riverland. In that instance we would be producing

wine at the top end of the quality range and could blend that with some

other wine that didn’t quite reach it. It was really a quality enhancement

project as well.

There was probably a further reason and that was that there was not much

Semillon grown in the Riverland, and so we planted some of the grape

varieties in that region that weren’t planted in volume.

So it was, in the first instance, a viticultural exercise to accelerate the

improvement in quality for the Group from that region.

We had an amazingly successful product called Hardy Stamp of Australia,

which was a great blend for the UK. A lovely wine. It was decided that

this blend was so successful and so consumer friendly that we should

launch it in Australia. David Woods picked up the idea and said that we had

to give it a USP, a unique selling point.

We needed something special about it. A tag. We were working with

Wetland Care Australia, and we had associations with Landcare Australia.

We thought that this was a very fragile part of the State and that we were

working to improve this wetland. We saw that perhaps there was a way of

working together.

So it really came from this germ of an idea—I was saying we should launch

the Stamp blend in this country, and David [saying that what needed a

selling point]—and of course that’s where the germ of the idea started.

Then came some gold medals, and I think a trophy, for some of the first

wines and all this helped. From this we really put together the concept of

Banrock.

As we’ve got involved in the process it’s just been remarkable. Because

the wetland, particularly the Banrock wetland over twelve kilometres of

River Murray frontage, is unique.

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Wetland Care said that their aim was to replicate what the river used to do.

It used to flood and recede and that regenerated it. And because we had

locks at both ends of the Station, we could actually close one and open the

other and thereby drain the wetland. This practice replicated what the

river used to do in the old days.

The first time they did it they pulled sixty ton of carp out. And—what was

it?—some 2.1 million River Red Gums started to grow. It’s just

remarkable. When we were talking with the Wetland people up there, who

were very keen on it, they said that of the sixty endangered bird species in

Australia, thirty-eight of them inhabited Banrock Station. The project grew

from there.

As we got involved we all became very aware and very proud of what was

being achieved. Then Tony Sharley joined us, and the brand really caught

on. It is not because it is a gimmicky green thing, it is very, very real.

We built the visitors’ centre. Then with support from the State

Government and with our own money, we built the board-walks. You can

walk over the wetland without hurting it. It’s come back to life. Prior to

the [regeneration] the carp used to feed off the bottom, stir up the mud,

the sun couldn’t get through to the weeds and so it had all died. Now, with

a lot of the larger carp out and only the young carp there, the birds are

back in. The pelicans round up the small carp and eat them like you

couldn’t believe. The place has just gone from being dead to being very

alive. All of us get a great kick out of it. But equally, commercially, it’s

been a very sound investment. And it’s gone from nothing—I think we

launched the brand in about ‘95/96—to now, where domestically and

internationally, we sell over 2,000,000 cases of that product. It’s just

remarkable.

The next one that I’d like to ask you about is Kamberra—the centre over in ACT. What is the story behind that.

SM: That’s really more about a medium term investment. Certainly the

Canberra government approached us, and one of our big customers there

who believed that there was an opportunity to make wine in Canberra.

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Was that Jim Murphy?

SM: It was Jim Murphy, yes.

And they said that they believed there was an opportunity in Canberra. We

were taking grapes out of Canberra, particularly some Chardonnay. It was

going into Eileen Hardy. And we had a respect for that region. We had

been very successful with Houghtons as the number one Western

Australian brand, and we had found it difficult to establish ourselves in the

Hunter because it’s never really been our home. In many ways Canberra

has a similar opportunity, [being on the rim] of New South Wales and close

to Sydney. So we took a long term view of it as a good opportunity.

We did a lot of analysis and we thought that the Canberra region could

make some very special wines. We believed that, longer term, the

investment could pay off because we could take a leading role [and, at the

same time] we would be welcomed with open arms [by the smaller

producers]. They believed that they needed a larger company there to put

a stamp, or a footprint, over that Canberra region. That’s how we

established the Kamberra winery, and we believe that in the future it will

be a good investment.

Certainly I found over there, Stephen, that there’s enormous

warmth towards BRL Hardy for coming in. Many of the smaller

winemakers around the Murrumbateman area have just been applauding it non-stop ever since.

SM: I think we were fortunate—or unfortunate, whichever way you want to

look at it—in that there was a particularly very bad vintage in Canberra.

Occasionally you can get that because of its climate. It’s right on that

cutting edge. That’s why you can make great wines, but that’s why

occasionally you’re susceptible.

The first year we were there, there was a very bad vintage and a lot of the

Canberra winemakers were in real trouble. We were able to sell them

some premium wines from around the region to keep them in stock, and I

think they appreciated that. That helped [them to see that we were]

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actually nice people. When they hit trouble some of them came to us and

said, ‘Look, we’re a bit short of wine. Can you help us?’ And, of course,

we said, ‘Yes’. That action reinforced the fact that we weren’t there to try

and take over that region, so to speak. We wanted to be the dominant

player there, but they are as important to our success, hopefully, as we are

to theirs. And we recognise that. Together we can create—over time—a

very interesting region in Australia.

And Stephen, Stonehaven Limestone Coast, that’s becoming a very, very interesting label and another interesting region. Was it one of

the challenges along the way for you?

SM: Yes. When you look at our strength, we had it in Clare with

Leasingham; with our association with BVE in the Barossa; with our home

and heart and soul at McLaren Vale; and of course the Riverland. And a

very strong presence in Western Australia. We had these great vineyards

in Padthaway, and as we had a bit of a shortage in Coonawarra we had

been buying vineyards and developing them at Wrattonbully. We had a

very big presence in that region, but we didn’t have a facility.

The decision to go to Padthaway was because of the great vineyards we

have there, and the opportunity to create a brand that’s Limestone Coast,

Padthaway, Wrattonbully, Coonawarra focused. Equally, we’ve got

something like 12,000 tonnes of fruit coming out of there. Quality-wise,

you want to process as close to your growing base as you can. That was

the reason for the decision to build Stonehaven. It’s been a very good

decision.

Well, what about in Europe proper? That was part of what Hardys

had been about. Has that been a challenge—continuing challenge?

SM: The French winery? La Baume? Yes, it has. There is no doubt about

that. Initially it was losing money. That was turned around, and it’s made

money, with the exception of this year. It struggled a bit because of

overstocking. That’s both good and bad. We’ve found that even though we

make great wine out of La Baume, the good part of it is that while it is hard

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to sell it and hard to build a business, the reason it is [selling and growing]

is because Australian wine is so much on people’s minds. It is better that

we have trouble building our French brands. (Laughs) Because if we could

build our French brands and we were finding Australian brands tough, then

life would be a lot harder for us. But nevertheless the La Baume business

has been very, very useful. It’s helped us to understand our competitors,

who are the Old World. It shows how tough it is there. That gives us

confidence. But more importantly, we’ve now built La Baume to the point

where it can now start to drive its own business. And so we’ve moved on.

Part of the reason for a small loss this year was that we went from La

Baume being totally supported to the point where they have had to make

their own business. Because we’ve never found a business yet that’s

successful by relying on other people to do the work for them. The

management at La Baume, just over the next few years, will quietly take

over its own marketing challenges. It doesn’t mean that we’ll abandon it

as far as putting it through our operations, but it won’t be driven by

ourselves.

And part of the reason is that if we put a French brand through our UK

distribution, and they put a resource into it, they could build a 250,000

case brand. If we put a similar brand through Australia with a similar focus

they can probably do a million or a million and a half cases. So the danger

was that we would put too many resources into a business that didn’t have

the same potential to grow as quickly as an Australian business. More and

more we’re putting the resource to the fore, as we’ve got on top of the

production issues.

We’ve teamed up. There’s a small investment from the local French

cooperative of 10% of La Baume. We’re very much becoming part of that

French winemaking in that region. As we can allocate the resource to La

Baume to drive its own business, whether it be through the Hardy

distribution or if that isn’t appropriate something else, at the end of the day

we’ve given that operation a chance to show that they can do it. And I

think they will. We’ve provided the initial base until it could get on top of

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things. Now, this is the interesting opportunity for the La Baume

management to really take control of their own business. At the end of the

day we’re not going to run the business successfully from here when it’s

over there [in France].

So it’s been more of a nurturing situation.

SM: Very much so. Successfully. To the point where now they have a

chance to really show what they can do. And I think they’ll succeed.

Now, Stephen, two last points.

We’ve talked a lot about the challenges and some of the different

aspects of the business. Have there been political factors that have been fairly difficult to overcome in the recent past?

SM: The answer to that I think is both yes and no. If you talk about

politics within the industry, I think that’s its real strength, as distinct from

politics with the politicians. What we have is that there was a great deal of

work done in the 80’s—people like Peter Barnes, John Pendrigh, Brian

Croser, and I’m probably missing somebody and I shouldn’t, maybe Ian

Mackley—where the industry came together. There was this tremendous

goodwill that existed within wine companies that was made up of two

aspects.

There is, firstly, the fact that Australian wine had opportunities off-shore.

There are times that the industry should work together, not in any sense of

collusion, but it ought to work together for the benefit of all. But

underneath that umbrella we’re going to drive our own brands and our own

opportunities, and we’ll be as tough a competitor as you can possibly

imagine. Very few industries do that. And I think that’s a great credit to

that group of people who put that in motion.

What has also been important through the 90’s is that the Winemakers’

Federation, that was set up on a model with equal representation from

large and small, and basically has a need for consensus, has really kept the

industry very tight. Within the industry there are areas of disagreement

but there is a wonderful forum to sit down and work it out. It is very rare,

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almost without exception, that on the key issues, the industry has not

presented a united front, through the Winemakers’ Federation. And I think

that will continue. And I think that’s an enormous strength. It doesn’t

mean that outside of the Winemakers’ Federation, if one or two groups

haven’t got their way through this whole process, that they don’t act

outside of it, or have other issues at times. But both the large and the

small have never got to a point where there hasn’t been a united voice. As

I said, there are splinter groups. Not even splinter groups. That’s unfair.

Dissident voices?

SM: Yes. Different voices that haven’t got what they want. But the

industry has always spoken with one voice. So politics within the industry I

think is strong, but positive. Positively strong, rather than negatively

strong.

Our focus with governments has been fairly disappointing. An industry that

creates jobs, tourism, regional development—all of those issues that this

country is screaming out for—has tended to be taxed by both sides of

politics. It started n the early days of BRL Hardy with the Dawkins attack,

then came the wet tax. We’re possibly biased I guess. Certainly I think

that probably the channels of negotiation between the industry and this

government are probably the best they’ve been for a very long time. We’re

hoping to see some positive results out of it, because the industry right at

the moment is finding it tougher, particularly the smaller to medium sized

players, and they need some support. But any support that’s given will

enhance the government tax take. Rather than try to squeeze it out of the

industry, you should get the growth out of growth rather than just trying to

charge an industry.

So politically, yes, we’ve still got a big job in front of us to convince Federal

governments of the benefit of the industry to this country. It shouldn’t be

that hard to do, but we have found it difficult.

Stephen, you just said something then, about the nature of future

directions. I’ve always had the sense that BRL Hardy is really

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about growth funding growth, as you just said. Would that be a

fair summation of the future for you?

SM: Absolutely. Although some of the markets are tight, we think that

our potential today is actually stronger than it’s ever been. It’s actually

stronger than when we started.

What we do say, though, is that the level of performance that we’ll need to

deliver to achieve that wonderful potential is higher. That is because our

international competitors are getting stronger and our domestic

competitors are getting stronger. But right now, Australia genuinely has

the potential, in the next fifty years, way beyond my time, to be the

leading wine nation in the world. We unashamedly say that we want to be

the number one wine company in the world. We’re not saying that we’ll

definitely achieve that, but we’re saying that we have the potential to do

that. The growth potential for our company is enormous. In the Australian

market, we have something like 25% by volume. That is a mature market,

but we must maintain that position.

In UK, Australia now has 20% of the UK market. I think Australia can get

to 30%. We have a very big share of that and we intend to keep it.

We have mainland Europe. We have three of countries in particular. In

Germany, the largest importer of wine in the world, Australia is very much

in the missionary stage. It’s not making a lot of impact but we’re slowly

starting to get that recognition.

We’re growing faster in both Denmark and Holland. Two very big markets,

but Germany still remains a wonderful opportunity over the next ten/fifteen

years.

In New Zealand, we have a very strong presence. We’re very fortunate

that we’ve bought into New Zealand because our New Zealand subsidiary

has an opportunity, not only to take more market share in New Zealand,

but to take New Zealand wines to world markets through our sales and

distribution networks. And those sales and distribution networks are

finding that selling Australian wine is not all that different from selling New

Zealand wines. So it’s well placed.

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But the US represents still another five to seven years of very substantial

growth. Because we focused on Europe initially, we still have the potential

in North America. The great thing about North America, is that not only is

there volume potential—enormous volume potential for us—but also,

equally importantly, it’s the highest margin market in the world. Our

growth has occurred out of what are generally considered the lower margin

markets of Europe and Australasia.

The other big thing to note is that the biggest and most profitable market

in the world—the US market—has to be split it into two. There is the US

market for US wine, and there’s the US market for imported wines. Now

the US market for imported wines, where Australia’s making enormous

progress, is 25% of the market. The biggest and most profitable market is

the US market for US wine. And through our joint venture with Pacific

Wine Partners we’ve bought Blackstone, and we expect to get a big share

of that pie as well. Unless you do that [sell American product] you’re not

going to be a truly international wine company.

There are lots of challenges ahead for us, but we think our growth

prospects are as strong today as they’ve ever been, and we’re looking

forward to funding our growth with further growth. We are a growth

focused company.

At some stage—ten/fifteen years out, I don’t know how long—there’ll come

a point where you’ll have to be less growth focused and more expense

focused. Certainly that won’t be in my time. We’ve got another

five/ten/fifteen years of solid growth ahead of us before that really has to

become a major issue. So there are very exciting times ahead in the

Australian wine industry.

Well, thank you very much for talking to us.