Allied assault

Rather than being naive, as some have suggested, Allied’s willingness to pay over the odds for Peter Lehmann Wines, indicates that Allied now sees wine as a major contributor to its bottom line

OUTSIDE there was a huge tin bath packed with Cooper’s Ale.  The buzz of the vintage was all around: the smell of fresh grapes, of fermentation, the sound of the trucks rattling onto the weighbridge.

Inside the Baron was holding court with leather-faced men who seemed to be moulded out of the surrounding earth.  There were plates of cooked meats, mugs of beer, the air blue with cigarette smoke and friendly curses.

This scene hadn’t been laid on for the benefit of this hack, it was the way that Peter Lehmann always did business; buying the grapes from his friends, from the growers he had kept in business when the Barossa looked like going bust.

It replicated the sense of community that is common in Europe at this time of year, but which you don’t often encounter so vividly in the New World, especially in these days of big brands and industrialised production.

It was my introduction to the Barossa and the first of many visits to the Lehmann house, those carousing nights with friends, family and fellow winemakers, the consequences of which made me wonder whether this big-hearted, bigdrinking region shouldn’t be renamed the Barocca Valley.

In the 10 years since it went public Peter Lehmann Wines [PLW] has built itself into a 600,000 case a year business.  No surprise, really, that it attracted the interest of Allied- Domecq, unwanted though that may have been.

I suspect that had Allied’s bid, and its drive to make PLW the next great Aussie branded wine, been successful, the days of the weighbridge ritual would have been over and another small part of Australia’s winemaking heritage would have disappeared.

So are things better now that the UK-based multinational has apparently backed out of the takeover bid and sold its stake in PLW to Hess?Certainly Peter’s happy.  The cunning old gambler has got the result he wanted – at a higher price than anyone would have expected.

 The family – and one suspects the shareholders closest to them – have also given it the thumbs up.  Certainly, while the link with Hess is a better and more logical fit, Hess hasn’t done what some analysts suggested would be a better long-term option, namely be like Yalumba and go private.

Though PLW is currently in a healthy position it remains a tasty morsel for the predators which continue to circle the Australian wine industry.  In many ways it’s surprising that the battle for PLW hadn’t happened before.

Precious few of the small and medium-sized firms which floated themselves during the first flush of the Aussie wine boom have survived intact.  They soon realised that being publicly listed may have brought an injection of capital, but resulted in their firms being prey to hostile takeovers.

Recent events show that the process is far from over.  Southcorp’s shareholders may be blowing raspberries at the board, but consolidation continues and inevitably it is those medium-sized firms which find it hard to go head to head with the big boys with their greater resources – and price-cutting policies – which are the most exposed.

The manner in which Allied stalked PLW and the fact that it has already spent in excess of £1bn on acquisitions, indicates how serious it is in building a global wine division, a fact underlined by the firm’s willingness to pay over the odds for PLW.

Rather than being naive, as some have suggested, it indicated that Allied now sees wine as a major contributor to its bottom line. It saw the Barossan firm as a well-established operation which could be built into something significant.

While it may have been thwarted this time, Allied won’t walk away from Australia.  Its next target(s) will already have been lined up.  The strategy is clear.  Allied needs an Aussie brand. After all, "Brand Australia" is still strong.

Or is it? Looking at the offering on the UK high street it strikes me that while the facings may have increased, the offering has been reduced.  Australia’s edge is disappearing. Instead of developing diversity it is retrenching.

Price and branding is more important than individuality.  Maybe I’m a hopeless romantic, but I suspect that most consumers like to think that the wine they are drinking has a sense of place, reflects the people who made it.  All of that runs counter to branding.

The majors don’t care – at the moment – but down the line it may be a different story.  By failing to realise that consumers want choice not homogeneity they run the risk of torpedoing the evolution of Brand Australia.

The weighbridge has been saved.  But for how long?