Readers Write

                 Sydney Time

           Copyright © Ric Einstein 2008

Foster's has announced it is selling off some more assets it no longer requires. The Jamiesons Run winery (the old Mildara site) is still on the market and Rothbury Estate has just been bought by Michael Hope, who owns Hope Estates. Now on the block are Rosemount's original Denman winery (Upper Hunter), three-quarters of the Penfolds Nuriootpa winery, and the 150 year old Seppeltsfield winery in the Barossa.

Foster's is now a heavyweight in the wine industry and is undergoing a metamorphosis in a number of ways. It is not just a beer company who happens to own a few wineries as well, and since the takeover of Southcorp there's a lot of unfinished business. Foster's knows it must absorb the old Southcorp without getting bogged down the way Southcorp did with the Rosemount takeover.

I wondered if ditching the Denman winery was just as much a symbolic gesture, as a move to cut costs. Foster's will keep the very valuable, premium chardonnay Roxburgh vineyard as well as the other Upper Hunter vineyards; they are adamant they are keeping the Kirri Billi vineyard in Coonawarra, and the Ryecroft vineyard in McLaren Vale. Denman was the heart and soul of Rosemount; its sale shows Foster's is cutting off all old ties to Rosemount, and in particular the Oatley family, who once ran Rosemount from Denman. In a way, things have come full circle. Back in the 1970s, the Oatleys took the best bits of the original Denman Estate and bought the Wybong winery from Penfolds (when it got into financial trouble), and in the blink of an eye, became a major wine producer. Now Foster's has stripped Rosemount down, gutted it and is just keeping the bits it wants.

At first glance, it's a bit difficult to see how Foster's came up with selling "three-quarters" of the Penfolds winery. The reality is that Foster's is closing down the white wine production there and moving it to their facility at the Wolf Blass Bilyara winery (also in Nuriootpa). This is clearly about cutting costs and achieving capital efficiencies, which will make the bean counters very happy. It's not surprising, something like this had to happen; the Penfolds white wines are not all that fantastic (in spite of all the work that has gone into them in the last ten years) and they are not up to the standard of the Penfolds reds. Conceivably, it means Penfolds is basically being turned into a red winemaker, and objectively, perhaps this is where Penfolds real value lies. Personally, I am not grieving about it either.

I imagine a lot of people are upset to hear that Foster's is dumping the old Seppeltsfield winery. This is where the Seppelt fortifieds are made by James Godfrey. The stocks held there are over 130 years old, are extremely valuable, and if something should happen to them, they could not be replaced.

The fortifieds like the famous Para Port, Rare Tawny DP90, Rare Rutherglen Muscat GR113, Rare Rutherglen Tokay DP59 and Sherries are the epitome of their wine styles and world-class. They also represent a living history that just cannot be measured in dollar terms. I would've thought for anyone who makes fortified wines, owning it would be the stuff of dreams. Clearly Foster's doesn't want to be in this segment of the business. It's a reality check because apparently less people are drinking the stuff these days - and Foster's thinks it must pay its own way.

The worry is not so much that Foster's is selling Seppeltsfield, but who will buy it and what will happen to it. Some weeks ago, James Halliday wrote an ode to the truly great Seppelt fortifieds (featuring the 1906 Seppelt Para) in the Weekend Australian. In it he cautioned - "It would be a tragedy if Foster's Wines Estates, or any future group corporate owner, was tempted to break up the collection and sell the stocks piecemeal. Not, I hasten to add, that I have heard any such rumour or suggestion."
Either someone with deep pockets and a passion for the art of fortifieds will buy it or it will be broken up and sold in bits and pieces. Foster's says it would like it to go to the right person and is including the immediate vineyards and "Para" name in the sale, and this could enable it to happen.

But what does this mean for the Seppelt contracts in Rutherglen? These vineyards supply fruit for fortified wine, but obviously Foster's doesn't want to be a fortified winemaker. I looked at some old Southcorp vintage reports and they mentioned Wahgunyah and Tuilleries, but there are probably some others that are privately owned too. From Foster's point of view they don't have a problem, because they don't have to offload vineyards they don't want. With all its resources, Southcorp looked at other areas in the past, such as Barooga and the Barossa, but it has always come back to Rutherglen for the muscat and tokay, and any new owner of Seppeltsfield will need those contracts to keep making them. But will any new owner of Seppeltsfield have the same contracts and carry the same weight? Will everything change if the new owner is not a big company with lots of resources like Southcorp?

Rutherglen has long links with Seppelt - even after the 80s when Seppelt (and Lindemans) pulled out of Rutherglen. Seppelt tried to sell their holdings in Rutherglen in one go, but it was broken up and sold in pieces - the Pfeiffers got Wahgunyah and the old Seppelt distillery (which became their winery), and took over as the managers of Tuilleries. The old Clydeside Cellars which was Seppelt's Rutherglen home became Jolimont Wines (now Rutherglen Estates, etc). All this happened a generation ago when the Adelaide Steamships company (the SA brewer) owned Seppelt and Penfolds, so maybe history is repeating itself, but the difference is that the new owner, Foster's, doesn't want to be in the fortified business. And I wonder what impact it will have if Rutherglen loses a major player like Seppelt. I say a major player because I read somewhere that Seppelt makes about 45% of all the muscat and tokay.

The relationship between Seppelt and the growers runs both ways - Seppelt needed quality and a reliable supply and the Rutherglen region had a big buyer year in, year out. As well as the treasured old stock and associated costs required to make these fortifieds, every year there's the long-term investment in the brown muscat and muscadelle - usually taking up the best vineyards produce. While drinking tastes may have changed, the Rutherglen wineries still have a heavy investment in fortified wine production. And in a real sense as much as we enthuse about the heritage and their role as custodians, it is being heavily subsidised by the rest of their business. Will this have a domino effect on the others in Rutherglen - and will they think making fortifieds may no be longer viable? It is this aspect that worries me the most. What happens if the Seppelt's connection to Rutherglen is lost and what sort of ripple effect will it generate?

I am more positive about the future of Seppeltsfield itself. Optimistically, it will be kept intact and based in the Barossa. The name of Para Port will go on and the surrounding vineyards will keep the production of port viable and it will run profitably somehow. I'd like to think of this as the story of the three little pigs. The first pig (Rosemount) had built a house of straw and the big, bad wolf (Foster's) blew it down and ate the pig. The second pig (Penfolds) had built a house of wood and the wolf blew that house down and ate him too. The third little pig (Seppeltsfield) had built a house of bricks and the wolf couldn't blow it down. The third little pig didn't get out much of course, and spent his days pottering around in his house and became a master blender of old port.