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           Sydney Time



   Copyright © Ric Einstein 2009






A New Beginning for an Historic Icon (28 Aug)




Without a shadow of a doubt, Seppeltsfield is the jewel in the Barossa crown and there were howls of outrage and concern (and not just from me) when Fosters announced it wanted to ditch the property in June 2006. (Most wine lovers who reside outside of Australia have probably never heard of the Seppelt brand as it is not exported overseas, let alone Seppeltsfield, so if you don’t know what it’s all about, this feature in the Tour Diary will explain all.)


Over the past year, there has been much speculation about possible buyers who may have been interested in the property; most of them were already established names in the fortified wine making business, so when I heard the latest rumour to be making the circuit, I rang someone who “knows people” and asked him if he could try and get any sort of confirmation and details. When I was supplied the name, I was surprised for a number of reasons. They were not a fortified player and the business they were buying seemed huge in comparison to the winery they already owned.


I fired off a cryptic email and got an equally cryptic response that told me what I wanted to know by not telling me anything at all. The rumour was based on fact.  


Kilikanoon started life as a respected Clare producer, but because of vineyard constraints in that area, in order to expand, they introduced new labels for the wines sourced from other areas.


Originally there were two legal entities involved in Kilikanoon. The first is Kilikanoon Wines Pty Ltd which is the winery and marketing machine. Watervale Private Trusts owns the vineyards that supplies Kilikanoon with the grapes. Watervale Estates is a private investment trust and in 2003 when I first spoke to them, they owned thirteen vineyards but were on the vineyard acquisition trail. They also supply grapes to many of the major producers although Kilikanoon has first option on any new grape contracts. The two companies have a common Managing Director and probably boards. This operation is very forthright about their profit motivation and whilst they might be clever investors, unlike some other investors, they are committed to the wine industry and care deeply for it. 


Due to the dual structure of the organisation all the grapes are costed and sold to Kilikanoon at market rates and these grape costs are factored into the price of the finished wine, something that wineries that own their own vineyards would not necessarily take into account. It's just one example of the business and profit methodology used in running this operation. Another crowing achievement was in their dealings with Heritage Fine Wines (that went broke in spectacular fashion.) Kilikanoon was smart enough to be paid upfront for their wines before they were even made, let alone delivered, so these guys know which way was up financially. And Kevin Mitchell makes good wine too, (that always helps.) 




Fast forward to today when it was announced that the historic Seppeltsfield had been sold to Kilikanoon. Nathan Waks is the MD of Kilikanoon Wines and CEO on the group; I spoke to him about the purchase.


The first question I asked Nathan was what made you do it. He laughed and then said, "It was an opportunity. When the property was first put on the market, we were certainly not looking for it. The original proposal was a lot more complex with a much larger suite of assets, including properties in Denman (NSW), a number of different brands, and a storage facility. It had been targeted to large overseas companies who were looking for an immediate presence in Australia.


Fosters were not just looking at dollars; there were a number of other things they wanted as well. The survival of the solera system was of prime importance. The restriction on the use of the Seppeltsfield name, and the concerns relating to the retention of fruit from the vineyards, made the deal difficult for most potential buyers.


After a period of time, it became apparent that that original proposal was not going to work, and the offer was changed. Once that happened, the sale was negotiated very quickly. We reached a heads of agreement in a very short period of time, and the last 30 days has been spent completing the due diligence process.”


The Seppeltsfield Estate Trust is purchasing the assets. The owners of the Trust include Kilikanoon Wines, Kilikanoon’s major shareholders Nathan Waks and Bruce Baudinet (Chairman of Kilikanoon), and two new people to the group; Janet Holmes à Court (Vasse Felix,) and Greg Paramor (managing director of Mirvac Group with 30 years experience in the funds management and property industries). That’s an incredibly strong, well-back and successful bunch of owners and with wine experience too! The two new partners bring more than just money to the table. There were any number of potential financial backers for this deal, but these two were selected because of other skills and attributes they brought to the deal.


The sale includes the following:

1.       The Seppeltsfield historic site with its suite of heritage-listed buildings

2.       The complete range of fortified brands and the stock currently sold under the Seppelt brand, including the unique Centenary Collection of Para Liqueur Tawny (Port)

3.       Two wineries on the site - a modern 12,000 tonne capacity winery and the revolutionary (for its time) and fully restored 1880s gravity-fed winery designed by Benno Seppelt.

4.       Approximately 100 hectares of Barossa vineyard planted to (old bush-vine) Grenache, Cabernet, Touriga, Palomino and including several icon Shiraz blocks (the highest blocks make Grange and RWT etc.)


This is not a simple or easy deal. Although Kilikanoon have made a massive purchase, it's not a matter of simply handing over the cash and Fosters walking away from the business. The two companies are going to be intertwined and have a very close working relationship for quite some time. Let’s face it, Kilikanoon has absolutely no experience in fortified winemaking, and the sale of the Seppeltsfield site did not include the range of Penfold Ports, which Foster's will retain.


As a result, the numero uno of fortified winemaking in Australia today, James Godfrey, will continue to make the fortified wine for both Seppeltfield and Fosters, which makes a lot of sense for all parties concerned. James will continue to be employed by Foster's. Kilikanoon and will employ junior winemakers to learn the black arts of making fortified wine from James. Anyone who has seen the solera barrel system at Seppeltsfield knows what a humongous amount of stock is maintained on site; and looking after that "system" needs an experienced pair of hands. The winery, under James Godfrey's guidance will continue to look after all the barrels, and the staff involved in the maintenance of the barrels, will be employed by Foster's too.


In an interesting twist, although Kilikanoon has bought the hundred hectares of vineyards, Foster's will lease back and manage the vineyard and will take the lion's share of the fruit. That is so they don't lose the fruit going into their icon Shiraz labels. Seppeltsfield will then buy back a limited amount of fruit, mainly for their fortified wines, as well as estate table wines.


It will be very interesting to see how these two companies work together.


Although it is early days and nothing is locked in concrete, the plans the new owners have for the slight are very exciting and take many forms. Nathan said, “The Trust intends to revitalise the Seppeltsfield Village, based around the unique fortified wine collection. Over time, this will include sympathetic redevelopment and adaptive re-use of many of the Heritage Buildings in line with the Seppelt family’s original wide-ranging food and beverage interests.”


Getting past the “PR” speak, the original village had 150 people working there. There was a dairy, a smokehouse, they made vinegar, raspberry cordial, and there was even a cooperage on site. The new owners will look at reinstating all those things, and anything that makes sense they will do. The buildings are in excellent condition, hence the term "adaptive re-use." Kilikanoon already makes olive oil, so that will be a definite; they will look at having a cooper, and a glass blower may be employed to make special bottles, and even a boutique brewery will be considered; the possibilities are endless.


At this point, you can't even get a cup of coffee or a sandwich on the site. Incredible! Changes to the availability of food will be the first order of business and the existing kiosk will be re-opened. There may even be five-star accommodation down the track.


Both wineries will be utilised. The original gravity-fed 1880s winery will have a crusher and a basket press installed which will make it fully functional, hopefully it will be up and running in time for the 2008 vintage. The wines made in this winery, will be made under a new label. It may even be called “The Gravity Fed Wine Company.” It will also make a number of boutique wines, and it is quite possible that respected winemakers may be invited to make their own small batches of wine there. The emphasis will be on hand-made, high-quality, boutique wines.


The bulk processing will be carried out in the modern winery. Seppeltsfield will be making wines under contract in this facility for Fosters, as well as making the service available to others. It is also possible that some of the Kilikanoon brands such as Killerman's run may be made here.


Violinist John Harding and cellist Nathan Waks, two of Kilikanoon partners, will ensure the arts take centre stage in the future, with a Seppeltsfield Festival high on the agenda. Visitors can look forward to good music performances, food and the continuation and improvement of sites cultural heritage.


Seppeltsfield is already a major destination in the Barossa because of the trees and the historic buildings, as well as the free picnic facilities. Currently, people have reasons to visit but they don't have reasons to spend all day there, or enough reasons to spend money. The new owners hope this will change by better utilisation of the existing facilities and by improving the range of attractions and goods offered.


Everyone who knows anything about the Australian wine business knows the Australian fortified wine market is not regarded as a growth industry. In fact, it has been slowly receding for many years, so what makes these smart individuals want to get into the fortified wine business?


When I post that question to Nathan he said, "Export! We are looking at this globally. The Seppelt fortified wines, which are the greatest range of fortified wines in Australia, are basically not exported. The growth will be international. In the future, if we sell as much overseas as we do in Australia, we won't have enough stock. There is an inherent limitation with the older wines. We are acquiring wonderful stocks and we will certainly look at expanding the quantities we make, but that is something we will be discussing in detail with James, because we don't want to downgrade quality. It's a very complicated process he goes through to make these great wines, so we will start off with ‘business as usual’ and then take opportunities to expand, as the means become available. If there is an opportunity for a wine we are not making, we will look at making it. We do have a long-term vision, but there is plenty of aged stock to keep us going. The range of things there are wider than people would know. There is even some ancient XO brandy.”


The Last Word


Nathan Waks said “Seppeltsfield houses the world’s greatest collection of fortified wines dating back to 1878. We are proud to become the next custodians of this priceless national treasure and will work hard to ensure that Australia’s already fine reputation in this area is enhanced.


It is an historic icon site, but making it a living, icon site will be the challenge, and that's what we have to do. This is not a passive investment for any of the players. It will certainly change my life. Over the next couple of years I will be progressively doing less orchestra work which will give me more time for this endeavour, and I am looking forward to the challenge.”


Good Stuff! The Trust’s gain is Fosters loss. Sure the sale by Fosters to a sympathetic party is commendable, and may be within the shareholders best interests, but it epitomises just how all-encompassing the corporate profit drive has become when it happily ditches a part of our history. Corporate heart? That’s fast becoming an oxymoron just like Army Intelligence. Speaking of intelligence, I can't believe that Fosters doesn't have the intelligence or resources to make this site work. They do have the intelligence; they just don't have the heart.


All Australians, and even overseas wine lovers who will now get to try the Seppeltsfield wines, should be glad that people like the new owners do have that sort of heart. 



Feel free to submit your comments!

From: Denise Rowe

08/28/2007 02:34:56 This is great news and I am so pleased the Solero system will remain intact. Thank you to Ric for such an enlightening article.

From: Chris Robinson

08/28/2007 05:06:11 Altruism aside, We have to recognize that the marketing people at Fosters are top class and that for them to "ignore" a so called icon's potential may well be just sound business. The fact is anyone trying to export Aussie fortifieds will need deep pockets and lots of time on their hands. The overseas sherry and port business is very narrow and drinkers are unlikely to easily give up their European standards for the Oz variant.

The description of all the additional entertainment that will be added to Seppeltsfield makes it sound like Wine Disneyland. These things start with a blast and then slowly the glass blower is no longer there, the wine museum is closed for repairs, etc, etc. I for one think this will be a less than viable proposition.

From: Tim

08/28/2007 05:27:19 Firstly, fantastic article, a great deal of research and "phoning a friend" has been done. Well done Ric.

Secondly, while on the face of it, Kilikanoon don't obviously appear to be stalwarts of the fortified wine industry, their contribution as an emerging force in the industry as a whole should not be overlooked.Think Torbreck and Two Hands...just an observation, but relatively "new money" in the wine industry...

Savvy enough to retain the services of James Godfrey,and entrepreneurial enough to recognise that the future of the site's success will not just be based on a couple of hundred cases of the country&'s, if not the world's,best fortified wines, they have taken a global view to the purchase.

Throw in for good measure securing medium term income from the vendor in terms of lease back arrangements, and you have the Icon in the hands of a visionary purchaser.And even further, noting the potential for the site's future contribution to local economy in terms of accommodation, the arts, and food, how much more interia do you need to make this changing of the guard succeed?

As a mug punter and local, as well as enjoying wonderful opportunity in that same industry, it's heartening to read of an acquisition where "the wine industry is the winner."

All power to the new players...

From: wayne ahrens

08/28/2007 06:09:51 Fosters marketing people top class, what a crock. Just look at T'Gallant for an example of how to turn an exciting, interesting company into corporate drudge. Having some people who actually care is the best thing that could happen to Seppeltsfield, good on Kilakanoon for ditching the Byrnes brothers as well.

From: Michael Leung

08/28/2007 09:17:17 Having visited Seppeltsfield for the first time in July this year and having a guided tour and tasting of their premium wines, including the 100 year old Para port (indescribably complex and nothing like anything else I had ever tasted!), I am glad to hear that it will stay in Australian hands with what sound like a sympathetic new owner with plans to revitalise the whole winery & surrounds.

Let's hope it's not just all talk and that the overseas market doesn't raise the prices of these fantastic fortifieds to what they should be worth! Thanks for letting me know who the new owners are, Ric.

From: Mike

08/28/2007 15:50:01 In terms of the marketing of the Seppeltsfield/Kilikanoon fortifieds overseas, we have to be realistic. Glug (http://www.glug.com.au/index_industry.php?sec=industry&art=07004) had an article earlier in the year about the difficulty that was being experienced in selling off Seppeltsfield. And noted "While this treasure trove of mixed fortifieds are the best that man can make the sales are very small, something that did not surprise me."

The DP117 Fino (winner of 8 Trophies and 42 Gold medals won in Australian wine shows since 1990) sells 20 bottles a day. The stunning GR113 Rare Muscat recipient of 9 Trophies and 35 Gold Medals in Australian Wine Shows since 1990 has sales of under 3 bottles a day.

With sales as small as these I now know why the cellardoor staff were so happy when Miranda and I carried off our purchases a couple of years ago.

There needs to be a serious attempt to investigate marketing these wines both in Australia and overseas; the $500K grant to the Muscat of Rutherglen group should help in this regard. But creating interest may not be all that easy. Parker has given Aussie fortifieds BIG scores, the sort of scores that create a feeding frenzy when given to a dry wine, but those scores have generated very little interest in fortifieds. OTOH things have improved since the late '80s when my retailer showed no interest at all in Aussie fortifieds.


From: TORB

08/28/2007 17:47:27 Mike,

I don't know where those numbers come from, if they are accurate, if they apply to CD only sales, or if they apply to sales all over Australia - including bottle shops. As such I certainly give them no credence.

Just because you read something on the internet does not make it true.

From: Mike

08/28/2007 19:26:28 Ric,

Information I have just received from Richard Farmer of Glug about the sales numbers of 20 bottles a day for the DP117 Fino and under 3 bottles a day for the GR113 Rare Muscat says that the numbers come from material in the document Southcorp prepared for potential buyers.


TORB Responds:

Mike, but it still does not say if those are CD only numbers or total Oz sales numbers.

From: Lee

08/28/2007 20:27:56 What a terrific story with so much future potential. I and a fair number of our friends would certainly love to see the site used once again as it was before. What better way to attract people up from Adelaide and elsewhere when you can spend the whole day there.

From: Danielle Paterson

08/29/2007 22:30:42 Look forward to seeing Seppetsfield revived. Fosters may have the intelligence to have done it, but what they lack is the passion to undertake such a venture, where dollars can't always be the priority.

From: nathan Waks

09/09/2007 00:13:49 Dear All

Haven't had much time to read these various comments on TORB's accurate and sympathetic article. but I can say a few things:

To Chris- I can understand scepticism, but there are no plans for Wine Disneyland. Just real artisans doing what they do best in a great location. Every activity on site must have relevance and be practised at the highest level. There will be no Knick Knack shop.

As to Foster's marketing expertise, I agree that they are first class, but their own Information Memorandum acknowledged that they had not put much focus on this category due to higher priorities...you can't buy it o/s because they haven't offered it...yes, the sherry and port business is narrow, but it is definitely growing.

To Mike- sales numbers of some of the lines are indeed low, and we hope that if the wines are available around the world the total numbers will rise, but in reality, there is a limit to growth if we keep the wines at their current age and standard (we will), as you need a lot of stock (which we have)for the solera systems to function properly. We are looking very carefully at all markets....
To others who have made comments; thanks for your kind words. We hope to not disappoint, but this venture will take time and patience, We have both.

Nathan Waks

From: Ronaway

02/24/2008 19:19:27 Great stuff. Just bought about the last 8 bottles of the Oloroso in Canberra! Seems that all the Fino and Amontillado has gone in Canberra too. So much for slow sales!

Copyright © Ric Einstein 2007