Little Consolations From Giant Consolidations
To bastardise the words of Aeschylus, Hiram Johnson or Oliver Stone, the first casualty of wine is integrity. An almost inevitable result of the spate of mergers and acquisitions that seemed to characterise and redefine the Australian wine industry around the turn of the century was the loss of many of the things that had led to the companies involved being worth so much money. It's almost as if there is a strange collector's mentality at work: an ongoing competition to see who can build the largest and most prestigious wine division yet with no real concern about what happens after the cheque has been signed. Many of Australia's historic wineries have become trophies to be taken home, shown off and then locked away out of sight and mind for evermore until they tarnish and crumble. Such was the case with Seppelt and its Dorrien vineyard.
As can be seen from the potted history of Seppelt below, the complexity of the wine industry today illustrates just how easily even the most highly esteemed labels can be lost in the mêlée of high finance consolidation.
In 1851, Joseph Seppelt purchased 158 hectares of land in the Barossa Valley and founded the Seppeltsfield estate with the aim of growing tobacco. When it was discovered that the land was unsuitable for producing quality tobacco, the estate’s focus switched to growing wheat. Thanks to the gold rush of the 1850s, this was a very lucrative endeavour. Shortly thereafter, thanks to a knowledge of liqueurs gained from his merchant days in his native Silesia, Seppelt recognised the potential for producing wine on his estate and began to plant vines. These flourished and, by 1867, he had begun the construction of a full-scale winery.
Unfortunately, Joseph did not live to see its completion as he died in early 1868. Joseph’s eldest son, Oscar Benno Seppelt, inherited 55% of the winery with his younger siblings, Victor and Ottilie, inheriting 30% and 15% respectively. Benno soon bought them out, paying them 5% interest per annum, and worked hard to bring his father’s dream to fruition. Like much of the Australian wine industry, and Australian consumer preference, at that time, Seppelt’s production focussed upon fortified wines. By 1878, a magnificent stone port store had been built on the estate and, to celebrate its completion, Benno selected a puncheon (a 500 litre barrel) of his finest port and declared that it would be allowed to mature on that spot for 100 years. This tradition continued every year and the idea of Seppelt’s Para 100 Year Old Tawny Port was born, with the first bottles being released in 1978, with subsequent vintages being released every year since.
Around the same time as Joseph Seppelt founded Seppeltsfield in the Barossa Valley, a young Frenchman named Jean Pierre Trouette followed the gold rush to Victoria and formed a partnership with Anne Marie Blampied and her brother, Emile. In 1863, they planted the first vines in the Grampians region in the historic St. Peters vineyard at Great Western. Bought by Joseph Best in 1865, he founded the Great Western winery and, in 1868, he commissioned local gold miners to excavate the famous underground cellars that became known as the Drives and which are still in use today. After the tragic death of Joseph Best in 1888, Ballarat businessman Hans Irvine purchased Great Western and he produced Australia’s first sparkling Shiraz on the estate.
By 1900, Seppelt was the largest winery in Australia with an annual production of two million litres. Hans Irvine and Benno Seppelt met in 1902, and soon formed a partnership. Seppelt continued the expansion of his company, purchasing Château Tanunda in Barossa from the Adelaide Wine Company in 1916 and building a new winery at Dorrien in 1918. That same year, he also expanded his operation into Victoria when he purchased Great Western from Hans Irvine, quickly gaining a reputation for exceptional quality sparkling and still wines. After Benno’s death in 1930, the legendary winemaker Colin Preece was the first in a series of exemplary winemakers who ensured that B. Seppelt & Sons went from strength to strength over the ensuing decades. By 1982, Seppelt was Australia’s largest wine brand.
S.A. Brewing Holdings Limited acquired B. Seppelt & Sons in 1984, and when the Adelaide Steamship Company hit financial difficulties in 1990, it spent a further AU$400 million purchasing the stricken company’s wineries. These included Lindemans and the Penfolds Group, hence the renaming of the wine division as the Penfolds Wine Group. Lion Nathan purchased S.A. Brewing in 1993, changing its name to Southcorp Holdings in 1994 to better reflect its South Australian heritage.
In 1997, Southcorp earmarked AU$405 million over five years to double its red wine production and it also began to sell off its industrial operations. However, this substantial investment program coupled with the low value of the Australian dollar depressed the company’s share price. Instead of accepting its fate, Southcorp went on the offensive and bought the young but fast growing Rosemount Estates from the Oatley family for AU$1.5 billion in 2001.
In what is often seen to be a reverse takeover, Rosemount’s CEO Keith Lambert took over as CEO of Southcorp and a great deal of internal disharmony followed. Many of Southcorp’s top people were either replaced by Rosemount staff or left in protest, including the likes of Grange winemaker John Duval. With the sheer number of wine brands in its portfolio – some reports suggest over 1,000 different labels – it was impossible for Southcorp to attend to all of their individual requirements and many simply faded into history. Great names such as Seppelt, Wynns and Lindemans ended up as vacuous brands managed by people who lacked any appreciation of the history or quality of their charges.
Such was the extent of its overspending and of its mishandling of its wine portfolio that by January, 2003, Southcorp’s profits had dropped by 97% over those of the previous year. Foster’s Group was the next major brewer to take the plunge into the wine industry, purchasing Southcorp for AU$3.3 billion in 2005, but unfortunately proved to be no kinder an owner to its wine brands than its predecessor.
In 2007, the Seppeltsfield Estate in the Barossa Valley and its stock of 9 million litres of fortified wine were purchased from Foster’s in a management buyout and its reputation is gradually being restored to its former glory.
The underperforming wine division was always a drain on the Foster’s Group’s highly profitable brewing business, and by 2011 the company was forced to write down the value of its wine business by half since acquiring at the peak of the market six years earlier. In May of that same year, 99% of the shareholders voted in favour of demerging the Foster’s wine business from the group and Treasury Wine Estates was born.
Little seems to have changed for the brands under the Treasury umbrella, except for the jewel in its crown, that is. Instead of attempting to restore the fortunes of the roll call of great brands in its portfolio, Treasury has opted to milk Penfolds for all that it’s worth (and more) with a cynical policy of vicious price hikes for Grange, for the top Bin wines and for a frankly ludicrous series of limited releases. Some analysts even estimate that the top Penfolds’ wines now account for over 50% of Treasury’s profits.
Aside from alienating loyal Penfolds customers the world over, Treasury currently finds itself facing bigger problems. After being forced to write off some AU$160 million of out of date stock in the USA in 2013, 2014 has seen its CEO admit that Treasury owns too many brands and that it will likely target 20 of the 80 for growth in its high-end portfolio. Milking more of its cash cows, by the sounds of it. Treasury’s US arm has been linked to takeover bids from rivals Pernod Ricard and Constellation Brands, and a AU$3 billion complete takeover offer by a private equity company was also recently rejected. To stave off takeover bids and falling profits, Treasury has announced its latest cost cutting exercise which takes the form of shedding up to 5% of its workforce, potentially saving AU$35 million over the next year.
The Great Western winery in Victoria remains a part of the Treasury Wine Estates portfolio and, should the parent company survive long enough, it would be a great shame if Seppelt didn’t make it onto the list of twenty estates earmarked for success.
From a seven hectare vineyard of fifty year old vines in the Barossa Valley that really shouldn’t produce Cabernet Sauvignon of any note, Dorrien was one of Seppelt’s icon wines made only in years when the quality of the grapes was regarded as exceptional. Handcrafted by chief winemaker Ian McKenzie, the 1993 Seppelt Dorrien Cabernet Sauvignon (13% ABV) spent 18 months in American and Nevers oak before being bottled. As I have mentioned previously (see my blog post An Old Flame), I was not the only person to appreciate its charms as this prodigious medal winner was once counted amongst Australia’s finest wines.
Still deeply coloured, but now definitely in the garnet region of the spectrum. Slightly volatile on the nose and possibly drying out a little after twenty years, although the earthy, ripe blackcurrant fruit, gentle woody cedar/cigar box aromas and a soft herbaceous character formed a sweet, harmonious and inviting whole.
Dry, and unfortunately drying out, on the palate; the firm acidity promptly sprang to the fore. However, ripe cassis and black cherry fruit soon fought back and harmony was restored. Moderately firm tannins completed the structure. Well-judged creamy and spicy oak flavours on the mid palate led into a long and black-fruited finish, tempered once again by the acidity as well as by oak spice and by the gentle herbaceousness first encountered on the nose.
Well balanced and lovely to drink, this bottled piece of Barossa history was not at all overblown or overly alcoholic. Although elegantly crafted, this was unmistakably a new world wine and it possibly lacked some of the complexity gained by blending Cabernet Sauvignon in the Bordelaise fashion, but it was as enjoyable as it is now rare. For many years this vintage of Dorrien was my favourite Australian wine, and I still have a very soft spot for it even as its glory starts to fade.
The final vintage of Dorrien to be released was 1999, although it is rumoured to have been made in 2000, also. Subsequently, there have been reports that the Dorrien vineyard’s grapes were used in Penfolds Bin 389 and in a couple of vintages of Saltram Winemaker's Reserve Cabernet Sauvignon. There is even talk that Treasury Wine Estates is contemplating a revival of the Dorrien label, although the vineyard is believed to have been replanted with a higher yielding clone of Cabernet Sauvignon back in 2004. I’d certainly be very interested to hear from anyone that might have any further information that they would like to share.
If you wish to read more about the turbulent recent history of Seppelt, Lindemans, Rosemount, Penfolds etc., whilst picking up some great tips on bottles to look out for, you could do far worse than read the highly informative Australian wine blog Best Wines Under $20.