Established Australian winemakers like SA’s Yalumba are facing tough challenges from international competitors and the changing domestic hospitality culture, says company chairman and proprietor Robert Hill Smith.
Hill Smith reflected on the current state and future shape of the wine industry in an interview with InDaily after stepping down in early March as managing director after 30 years at the helm of Australia’s oldest family-owned winery and taking on the role of chairman.
“Our problem, as a country of winemakers, is not with the trade and the influencers, the writers and the gatekeepers, it’s really about perceptions and the fashion cycles of the industry with consumers,” he said.
“In the end it’s a money trail – if consumers put money in the pockets of the retailers, the retailers will buy from the wholesalers, wholesalers buy from the importers, and importers will buy from the producers.
“It’s not that difficult, but to get ourselves back into fashion as a credible, respected producer of premium wine, rather than just good-value wine, is going to be a serious challenge.”
Asked where Yalumba is now, Hill Smith replied: “I would say we are bumping along the bottom and we are going to start relaunching”.
“With consumers, we have flopped out of their repertoire as a country.”
Hill Smith said if Australians wanted to be taken seriously with the premium winemakers from France, Italy, the United States and Spain, “we have got to get into that coterie”.
“So that when you go and read wine lists in New York or London or Montreal, you see a quality Australian wine you trust and you want to drink it, rather than seeing a label you’ve never heard of, at a price that’s clearly inflated but which occupies an Australian slot on the list.
“That’s the frustration. It’s a consequence of over-supply and rampant entrepreneurism and opportunism, but in the end many other countries have that same scenario.”
Hill Smith said Yalumba would continue to do what it does well and was not sitting on its hands, but added: “We have a lot of work to do in communicating why we are relevant and why some of the best restaurants in Australia, let alone London or New York, should support some of the great wines of provenance we bring to market”.
Turning to the local scene, he has a somewhat jaundiced view of the attitude he says prevails in many food and wine outlets.
“There is a pushback from this laneway culture and this hip theatre of hospitality to neglect the great names of Australia and jump on the new lotus leaf of what’s brand new and flaky rather than what is bloody good,” Hill Smith said.
“I get quite annoyed about this whole thing in hospitality where (restaurants) are putting on inferior, imported wines – they may be importing themselves and taking extraordinary margins – and foisting fairly ordinary wines on consumers, while at the same time neglecting the great wines at their own backdoor.
“It happens in Adelaide all the time; it happens in Melbourne all the time.”
The burgeoning popularity of craft beer is also having an impact in the extremely competitive alcoholic beverage market.
“There is a global swing to craft or artisanal discoveries, sometimes at the expense of quality, and sometimes the excitement of the discovery outweighs the enjoyment of the flavour. But because the discovery is more exciting than the taste, the flavour profile is accommodated as a victory in itself,” Hill Smith said.
“So, that’s challenging to an established but innovative company like us that is actually leading edge in most areas.”
Hill Smith says that rather than “trying to anticipate the next big thing, we are looking at refinement and polishing the diamond”.
But he cites Yalumba’s development of Viognier as an example of where the company successfully broke new ground.
“We took a high risk with our focus on Viognier and deliberately avoided a ‘me too’ focus on other varietals that were on trend in the market at the time.
“We tried to establish a point of difference and a quality advantage and it’s delivered for us. We have a relationship with the grape that has Yalumba and Viognier linked at the hip.”
Yalumba recently announced a significant ‘changing of the guard’, with Peter Barnes retiring after 12 years as chairman to be replaced by Hill Smith, who vacated the managing director’s chair and was replaced by Nick Waterman, who had most recently been the company’s chief operating officer.
Asked if a family company was still an effective vehicle in the 21st century corporate world, Hill Smith said no one business structure guaranteed success or failure, “but I think family businesses do typically have one advantage and that is not having analysts crawling all over them … so we can look at things long term rather than short term”.
“We say the wine game is a game of patience and patient capital, and you take decisions today that won’t necessarily deliver benefits for some three to five years.
“So, from that point of view, you are building something that is sustainable, and if business and liquidity issues are all equal, then I think that family businesses can deliver long-term advantages against the impatience of the other models.”
One area of the business environment in which Hill Smith would like to see reform is labour relations, suggesting that it is “absurd” that hospitality workers, for example, are paid the same rates across Australia despite major regional disparities in operating costs.
“The mindset of Australia in government is that, even though everyone talks about us being in a transformed 24/7 society, we are still living in a stone-age template,” Hill Smith said.
He maintains that South Australia “has been complacent and careless since Playford”, that the “private sector is blunted and demoralised’”, and that governments should “be leading from the front”.
“You have to take control of your own future rather than be dependent on government to lead you out of a morass, but in the end if you are looking at doing things that have a higher risk level attached to them, you certainly would want to be cognisant of the way that the government is going to behave after you have invested the money,” he said.
In 165 years of wine-making, the Hill Smith family and Yalumba have successfully prevailed through many difficult times. From Robert Hill Smith’s perspective, there are exciting times ahead – notwithstanding the well-known and hidden challenges, both in the vineyard and beyond, with which the next generation of family and winemakers will have to contend.
