Two different approaches to the same business

This week Southcorp announced the closures of some cellar door operations, including one of this countries best; Lindemans in Coonawarra. This got me thinking about the difference in attitude and philosophy between our many wine producers. In summary (and as a vast generalisation) I have come up with what I believe are the two major ways to approach the wine business in Oz today.

1. Make the largest profit possible and do it by making wine.

2. Make the best wine so you can possibly make in order to make a profit.

In both cases you are in the business of producing wine, but in the first case, the primary objective is profit and the method used to achieve that objective is the production of wine. In the second case the objective is to make the wine and profit comes from doing that activity well.

To further illustrate the first case, lets examine Southcorps Mission Statement as outlined in their Annual Report which states:-

Our Mission is to generate superior shareholder value by:

            *Continually enhancing the value of our brands

            *Providing outstanding value to our customers

            *Deliver world-class business performance

            *Demonstrating that people are the company’s most important resource

            *Behaving with integrity

The best way to illustrate the second case is for you do it yourself. Take some time out and visit some small wineries. In many cases when you get to the cellar door you will be speaking to the winemaker or a member of their family that is involved in the business. Speak to them, ask them questions and notice the passion they have for their craft and the love they have for their business. Feel the enthusiasm being exuded when they talk about their produce.

So which is best? Well that depends which way you look at it. If you are the average wine consumer that just wants a bottle of wine to drink it doesn’t matter. Many times the large companies may be best as the wines will be freely available, consistent from vintage to vintage and inexpensive. If you are a shareholder in a publicly listed wine company, then you would prefer the first approach too.

However if, you are a serious wine lover then in many cases the second may appeal more. The winemakers in this class are all about making great wine, not “enhancing brand value.” (But what a great way to “enhance brand value.”) These wines are often more interesting than mass produced wines too.

However, there are also of shades of grey in this scenario with many mid sized wine producers in the equation. Some will fall into the first category and some in the second, but it’s a bit like being pregnant, you either are or you aren’t. Or is it possible to be just a little bit pregnant? (Grin)

The wine landscape is changing rapidly. More and more we are seeing the growth of companies whose business happens to be wine. Luckily to help balance this we have contract growers who are starting to produce wine from the best grapes rather than on selling them. One must also wonder what will become of all those winemakers who fell victim to corporate mergers; hopefully many of them will start their own wineries.

Keep drinking

Ric