STATE LIBRARY OF SOUTH AUSTRALIA

J. D. SOMERVILLE ORAL HISTORY COLLECTION

OH 692/52

Full transcript of an interview with

PERRY GUNNER

on 7 March 2002

by Rob Linn

Recording available on CD

Access for research: Unrestricted

Right to photocopy: Copies may be made for research and study

Right to quote or publish: Publication only with written permission from the State Library

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OH 692/52 PERRY GUNNER

NOTES TO THE TRANSCRIPT

This transcript was donated to the State Library. It was not created by the J.D. Somerville Oral History Collection and does not necessarily conform to the Somerville Collection's policies for transcription.

Readers of this oral history transcript should bear in mind that it is a record of the spoken word and reflects the informal, conversational style that is inherent in such historical sources. The State Library is not responsible for the factual accuracy of the interview, nor for the views expressed therein. As with any historical source, these are for the reader to judge.

This transcript had not been proofread prior to donation to the State Library and has not yet been proofread since. Researchers are cautioned not to accept the spelling of proper names and unusual words and can expect to find typographical errors as well.

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OH 692/52 TAPE 1 - SIDE A

NATIONAL WINE CENTRE, WOLF BLASS FOUNDATON ORAL

HISTORY PROJECT.

Interview with Perry Gunner on 7th March, 2002. Interviewer: Rob Linn.

Perry, just about yourself in the first instance. Where and when

were you born?

PG: I was born in ‘46 in Adelaide. Educated in Adelaide. Did agricultural

science at Waite Institute. And began my career as an entomologist with

the Department of Agriculture.

True?

PG: Yes. I’m actually a trained entomologist. I was a class of one in the

final year of agricultural science because, as you can see from that, it

wasn’t a popular discipline.

Having functioned as an entomologist, both for the government and

Bauer(?), the German chemical company—I got involved with Bauer in the

market side of things and decided that I thought that I was more of a

commercial and marketing type person than a scientist, and then began my

career in the wine industry.

So in the first instance, how did that come about—in the wine

industry? Where did you go and who did you meet?

PG: I think probably one of the events that caused me to think about the

wine industry was that I was staying at the Waikerie Hotel, of all places,

working as an entomologist for Bauer, and Brian Croser was staying at the

hotel working for Hardys. And he started to talk to me about the wine

industry and all his plans and ambitions for it, which were all materialised,

looking back. And this meeting would’ve been some thirty years ago, and

it started to make me think about the wine industry. I had a little bit of

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involvement through my role with Bauer with grape growers in the

Riverland.

And I just happened to be on holidays down at Robe, opened the Advertiser

and there was a position of Personal Assistant to the Managing Director of

Orlando Wines. I applied for that position along, I think, with about three

hundred other people, because the wine industry had started to become a

bit of a flavour of the month. This is 1970 when the multinationals had just

moved in. And I was successful in that position. So that’s how I got into

the wine industry.

There was really no family history. It was, I think, my personal realisation

that I wanted to be involved more in the commercial side of agriculture,

and the wine industry, at that point in time, was becoming quite

commercial with the advent of Reckitt & Colman, Heinz, Rothmans, Colgate

Palmolive etc, and were beginning to drive the wine industry in a quite

different way.

Did you have a personal interest in wine prior to that?

PG: Not really. I think we consumed a fair few flagons of Coolabah Claret

at University barbecues, but I had no real involvement. Andrew Gramp

was in my class at primary school, and I did know the Gramp family, but

had very little knowledge of the industry or the products other than, as I

said, a bit of a fan of Coolabah Claret. (Laughter)

So who did you end up working for at Orlando at this time? This is

not long after they’ve taken it over.

PG: Yes. I joined in ‘73. The takeover took place basically at the

beginning of ‘71. So Reckitt & Colman had owned the Orlando business for

two years. I worked for Denny O’Grady, the Managing Director, as his

personal assistant, which was a very good way to understand the business.

He actually was not enjoying the best of health at that stage and so I was

probably left to do more things than I normally would’ve had to in such a

role.

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After about twelve months he asked me to go to Rowland Flat to be the

Operations Manager, and I must say for an entomologist that was a bit of a

quantum leap, because I had very little knowledge of engineering, and

probably not a lot of interest, but it did involve some of the agricultural-

type issues to do with vineyards and the science of winemaking.

So I took on that role, reporting to Günter Prass. And so that was, again, a

very good introduction into the wine industry because I was where the

rubber was meeting the road in those days. Günter was a very

predominant person in the business. And of course, had followed Colin

Gramp in the role of running the Rowland Flat business. We had just

bought Griffith so there were quite a few trips across there.

At the same time as buying Orlando, Reckitt & Colman bought Morris. So,

again, there were a few trips to Rutherglen, enjoying some wonderful old

Muscats with Mick Morris.

So in that period I was in that role for three years … I did see a lot of the

wine industry and a lot of the technical side of it.

Can you describe Rowland Flat to me as you first knew it, Perry? The people and the place.

PG: Yes. I think back then, and we’re talking ‘74, most of the employees

were locals. And so there was a real Barossa tradition about the workforce.

They had a particular work ethic. They worked hard. They didn’t

complain. They would see off any union person who dared show foot on

the place. They were completely non-unionised. They had quite a

propensity towards the product. (Laughs) One of our great challenges was

to prevent too many rubber hoses going into the best barrel of Port at the

back of the cellar, and the sort of sampling going on there. And the

vineyard of course, it was very difficult to make sure the thermos of tea

actually was a thermos of tea, but it was a very good working culture.

They enjoyed it. They had a relationship and a familiarity with the

industry. There were lots of local activities and the sorts of food things

were around in those days in the Barossa Deutsch.

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But slowly and surely, as the industry expanded, the workforce

availability—locally—couldn’t keep up and so more and more people started

coming from Gawler and the northern suburbs of Adelaide. And that did

begin to change the type of culture in the place. It certainly wasn’t as

close-knit.

We started to do a lot of night shift work, particularly in bottling, just to

cope with the volume increases. Because this is the start of the cask boom

where consumption of wine in Australia almost doubled in a fairly short

space of time. And so it really put a lot of stress and strain on the facilities

at Rowland Flat.

And so there’s night shifts and people not meeting people. I mean, people

could’ve worked there for two years and really only know two or three

people that worked in the place. So it changed it [the character]. And of

course, that’s continued on. It’s become very automated. All those

manual tasks have pretty well been replaced. There’s a lot more out-

sourcing, a lot more contractors. We had a cooperage, when I started,

with two full time coopers. All those sorts of things have gone. We had

painters. We had carpenters. It was all ‘you did it yourself’ mentality.

And, you know, it’s not like that any more. So it has changed significantly.

Perry, was Orlando at the time at the forefront of technology?

Because it had a history of that going back even twenty years at

that point.

PG: Yes. I think we would’ve been—still. That can be attributed to Colin

Gramp and Günter Prass. They introduced a lot of new technology into the

Orlando business, from cold fermentation of white wines, the pressure

fermentations, Barossa Pearl. And it was a company that was always

looking for a scientific breakthrough. It was very proud of its

achievements, and I think has continued in that vein. And certainly in

modern days some of the bottling facilities have been the best in the world

when installed. You know, the quality assurance programmes etc have

been rigorously pursued. So I think Orlando was definitely at the forefront

of technology then, and has done whatever it can to stay there.

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I think the big difference is that it has become particularly good at

marketing in the meantime, and that is [because of] the influence of

Reckitt & Colman, who were the owners of the business for a period of

about twenty years. They brought in the marketing disciplines, the

financial disciplines, and bolted them on to the tremendous production

skills that the business had. [The combination of all this] has made it into

an extremely successful company.

Perry, you were saying that at the time you came in—and I remember this well from selling booze as a teenager—that there’s a

time when the cask wines come in when you’re beginning to come

into the industry.

What were the products that were shaping Orlando at that time?

PG: When I joined in ‘73 the biggest seller was Starwine. It had replaced

Barossa Pearl. It was the second stage Barossa Pearl. Second biggest

seller was Yellow Label Sherry. Our sales were predominantly in—well, we

had our major market shares in South Australia, Western Australia,

Victoria. We were very weak in New South Wales, Queensland, where the

New South Wales based businesses such as Penfolds in those days were

much stronger than we were. So, yes, it was sparkling wines and sweet

sherry, and southern States distribution. That’s what made up the

company.

But Coolabah was in flagons. Only in flagons when I joined. Was a

reasonable seller. I think almost the day I joined we were approached by

the Scholle people, the producers of the cask bag. It’s a Chicago based

company who developed the cask concept, mainly used in catering. Things

like battery acid [were stored in it]. But they had the concept that wine

could be used as a product from the cask that had been developed, I think

by Wynns and Penfolds, which was just the plastic bag that you speared

with a skewer. That was a great concept but technically not very proficient.

Scholle had this technically proficient concept that they’d developed for a

number of years, and brought it to us. And I think within eight weeks we

had it on the market.

8

Within eight weeks?

PG: Within eight weeks, which is something you wouldn’t even

contemplate in today’s world. The marketing people would still be doing

the market research. There was just absolutely no market research. It

was just a matter that the bags were flown in, the machine was flown in,

and we started putting Coolabah in it.

So you would’ve had to do design and art work and -

PG: Well, the art work was just plain coloured. It was either red or

green—the cask. Just old cheap corrugated cardboard. We just put the

existing Coolabah label on it. I think it might’ve had the two litres crossed

out and four litres written in.

I reckon it was blacked out. You’d overprinted it.

PG: There weren’t all the requirements of labelling that exist today. They

simply stuck a label on it and away we went. And it took off like one

would’ve never expected. And all sorts of reasons were given but

convenience was clearly one. It was often said about white wine, that

[with] a cask of wine in the fridge, no-one actually quite knew how much

you were drinking. You could go back and have a few more glasses, and

instead of having to open a flagon that might oxidise before you got to

drink it, here was a wine that was being preserved all the time during

consumption. They even suggested that when Mum and Dad were away

the children would go and help themselves to the cask of Coolabah in the

fridge. So it become omnipresent, as we used to say, in households

around Australia.

I mean, there was a point where 70% of people had a cask of wine in their

house, which had gone from zero to that sort of level in a space of less

than ten years. That’s when wine consumption in Australia, as I said,

doubled in litres per head. So Orlando actually were behind two of the

things that drove consumption of wine in Australia. Firstly, the Barossa

Pearl and, secondly, the Coolabah cask.

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And the problems we had at a production level with Coolabah casks were

quite horrendous because whilst they may’ve been designed for tomato

sauce and things like that in a catering situation, wine, being of low

viscosity, [suffered through] any slight hole in the bag or imperfection in

the seal and then wine leaked out, and the number of leakers we used to

get in those days was incredible. The machinery wasn’t precision tooled to

make sure that everything fitted properly. You know, trucking it all around

Australia. We even exported at one stage, and there’s stories of containers

being opened at the other end and [people finding] literally a sea of wine.

Because if one started to leak, the whole [carton structure] would collapse

around it.

So there were challenging days, but from a marketing viewpoint I think we

did very well with Coolabah. ‘Where do you hide your Coolabah?’ became a

very well-known advertisement in Australia. I notice today that even the

beer ads are copying the same style of advertisement. So it’s lasted the

test of time.

And it also coincided with quite significant changes at the retail end when

Coles, Myers, Woolworths—the chains—Davids—got into wine retailing. So

not only did you have a product in Coolabah in a cask that had an appeal to

consumers, you had retailers that were now really pushing wine—putting it

in front of consumers. And those two factors led to this very significant

increase in the consumption of wine.

Of course, there was not a massive grape planting programme that went

ahead of this, because normally if you get a huge increase in the

consumption of wine someone would’ve planted the grapes in the years

prior to that. But the fortunate thing was that Australia had this very large

tonnage of dual purpose grapes, the Sultana and Gordo in particular. The

real success of Coolabah was in Riesling, Moselle, Chablis—those neutral

sweet white type blends, and of course the dual purpose grapes were ideal

for that. So the grapes really came from the dried fruit industry.

Who were in the pits at the time.

10

PG: Yes. It was the saviour of those sort of people. I think a lot of them

would’ve gone out of business, and today the better ones are guys that

would have massive plantings of Chardonnay, Cabernet, Shiraz. I mean,

they’ve converted their vineyards and expanded their vineyards to provide

the modern grape requirements.

Perry, can you recall—were you were drawing most of your grapes from the irrigated areas at that time along the river?

PG: The river was predominant in those days, but we were Barossa based

and had lots of Barossa growers, and we did have a Barossa Cabernet and

a Barossa Hermitage and Barossa White Burgundy. So we did have a

range of table wines.

There was a lot of emphasis on high quality Ports. So the Shiraz from the

Barossa would’ve been going into high quality Ports. But the Riverland was

probably, for Orlando more than anyone else, a major source of supply.

For the bulk wines in effect?

PG: For the bulk wines, yes.

Can you tell me, was there a movement towards bottled table wine

at that time as well? I know the red boom is beginning around the same time.

PG: I think it was pretty stagnant—the bottled wine business. We did

have a couple of products that were very popular at the time. Barossa

Riesling, which is the product developed by Colin Gramp. We also had a

product called Barossa Blue Ribbon Spaetlese, which was again a very

popular wine made from Frontignac grapes. And they were advancing in

sales. But the Barossa range of the Cabernet, the Hermitage, or Shiraz as

we’d have to call it now, the White Burgundy, were pretty static.

And, in fact, that’s really what led to the launch of Jacobs Creek. We had a

range called the Miamba range as well. We saw that our bottle ranges

were going nowhere. We were getting increasingly better grapes coming

through. People were doing some planting in the Barossa in those days.

Other areas were expanding. And Padthaway had come on stream.

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Orlando were involved in, I think, the second vineyard ever planted down

at Padthaway. Seppelts -

Yes, Seppelts had the first.

PG: - had the first one. So there were more varietal grapes suitable for

premium bottle wines coming into the cellar, and we were beginning to

accumulate fairly large volumes of this wine in bulk because we didn’t have

the product range that could cope with the supply.

Could you tell me the story of how Jacobs Creek evolved, Perry?

PG: Well, depending on how many people you interview, you might get

different versions.

This is about 1980, is it?

PG: It’s prior to 1980. As I said, we were concerned about our lack of

success with bottled table wines. We were concerned about the volumes of

these wines that we had in our cellars. We decided to launch a mid price

range, as I think we described it at that stage, which was also known as

the Vineyard range. And it consisted of a range of wines, predominantly

white wines, because white wines were the go in those days. We had a

(sounds like, Lin-dale) Riesling, a White Burgundy, a Spaetlese, a Moselle.

And finally we added to the range—and if I can recall correctly, there was

some debate as to whether there would be a red in the range because reds

really were going nowhere at that stage. I think the Finance Director

pointed out that we still had two or three years of Barossa Cabernet and

Barossa Shiraz sitting in barrels, and it would be a good idea if we found a

way to move those. So we decided to include a red in the range, and that

was Jacobs Creek Claret.

The interesting thing was that about then, and I’m sure we didn’t foresee

it, there was a real resurgence in red wines. And I think that’s gone on and

on and on and on and on. I don’t think the relativity of red taking over

from white has slowed down since then. So we’re talking twenty years.

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And because everyone was launching white wines and we were the only

ones that launched a red, suddenly Jacobs Creek became a very popular

brand. It was a very good quality wine, well priced, and it became the

stand-out in the Vineyard range to the point that we slowly de-listed some

of the other products. In fact, eventually, all of the other products. And

the Vineyard range consisted only of Jacobs Creek Claret.

Then we moved, after again some debate, to launch other products under

the Jacobs Creek range, which included a Riesling, a Chardonnay, and most

recently the sparkling wine variant. So it was a product that was perhaps

born out of as much a need to make something happen to move the red

wine stocks that we were accumulating, but it was always based on the

principle that it would be varietal. And of course, that Claret has become

Shiraz Cabernet and we’ve made it into a varietal range, but that was the

idea of calling it a Vineyard range. It had to relate back to the grapes, that

we would use the blending skills of the winemaker, so it was never going to

be specific to any one vineyard or any one variety. The skills of the

winemaker to get the product that delivered value. And the rest is history

a bit. It has become the flagship of Orlando Wyndham, and arguably one

of the best known wine brands in the world. Certainly one of the most

successful.

I might come back to that, Perry. It must be pretty awesome in

one sense to look at how that’s gone, when you look at the beginnings coming out of an excess of red in the cellars. (Laughs)

PG: Yes.

Perry, what were some of the outside factors impinging on Orlando

at the time—late 70’s into the 80’s?

PG: That was a period where a lot changed. You know, there was a

change in consumer tastes. The government became more active. They

started to impose taxes on the industry. Because what a lot of people

forget, when I joined the industry, there was zero tax on wine. Today it’s

effectively 46%, with all the various taxes.

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So that was about the beginning of the government beginning to see the

wine industry as something they could tax, and they haven’t lost the

veracity to do that in the period.

That’s irrespective of persuasion, too, isn’t it?

PG: Well, the wine industry has tried very hard, and spent a lot of money,

to dissuade the Treasury in Canberra from some of their views—some of

their theories—about the impact of taxation on the wine industry. I guess

the export success of the wine industry has made it quite difficult because

our own success has brought a situation where the government knew they

could probably tax the industry without sending it to the wall. And it would

be interesting to know what would’ve happened had we not had the export

success and we were still relying totally on the domestic market, which as

everyone’s well aware, when I joined the wine industry in fact Orlando had

just established an import division and saw the future for building their

business more in imports than exports. And in fact, when I raised the

issue of exports in my first week at Orlando back in 1973, I was told that

there’s no hope for the Australian wine industry in exports. We have no

reputation. We’re on the wrong side of the world and we could never

produce it as well, or as cheaply, as the Europeans, and there was an

absolute defeatist attitude in the business, and I think in the industry,

about what we could do in the export arena. It’s amazing how things can

change.

It is.

TAPE 1 - SIDE B

Perry, just stepping back for a minute from your role within the company. You’ve been describing some of the outward factors that

are beginning to change the face of it. Could you talk about some

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of the personalities you came across in those years? Both within

and without Orlando.

PG: Well, within Orlando there were some very influential people, both on

the company and the industry. Firstly, Denny O’Grady, who was the

Managing Director when I joined, became the President of the Winemakers’

Federation, or its equivalent in those days. I forget the name. I think it

was called the Wine and Brandy Producers’ actually. And he fought quite a

battle with Canberra over the taxation issues, and there was a lot of high

profile stuff there. And I think he was one of the people, and there’ve been

many since, that started to galvanise the industry, which had been family

based. It was a family based industry that the multi-nationals had moved

into in that period. Course, it’s changed now. They all went away about

twenty years later, and I don’t think any of them made very much money.

I think they left about ten years too early.

But it started to galvanise the industry, at least about one issue, and that

was taxation, whereas the families were friendly in one sense but very

competitive in another sense. The wine families were pretty good at

wanting to outdo each other in many ways. So he was quite an influence.

Obviously Colin Gramp was around the place, and he was certainly a

person who had made a great contribution to the wine industry and had

always wanted to push on.

Günter Prass. A very skilled man. Very dedicated man, who had had a

huge influence on the Orlando business, and its consequent influence on

the wine industry.

Mick Morris. Quite a character. Very laid-back, but a great producer of

Muscats and Tokays, and reds. I think of some of the [great] reds that

Mick produced over the years.

I can recall a very young Wolf Blass back in those days standing up at a

dinner in the Barossa Valley—I think it was the Bacchus Club—and

delivering quite a sermon about a couple of wines, and I wondered who this

guy was and what he was on about. (Laughs) But, subsequently, I’ve got

to know Wolf very well and he’s been very successful—but he was quite a

15

character. And he was the type of person that changed the perspective of

the wine industry. You know, we were suddenly out there. And, as I said,

not only were we having products that were more consumer friendly and

we were having retailers that were supporting us, we had the identities

such as Wolf Blass.

Len Evans, of course, was doing a lot to promote wine at a lot of levels. In

those days he was prevalent on television and in the press and never lost

an opportunity to promote wine, but in that real outgoing style, and I think

that the wine industry hadn’t been used to those sorts of characters back

then that were so very outgoing. I think the community lapped it up. I

think they liked those sorts of characters. The Peter Lehmannns that came

along a little bit later, really helped drive the image of winemaking in

Australia in that sort of style.

And then, of course, the Brian Crosers. Perhaps not as outgoing as Wolf

Blass, but in his own way has I think delivered the quality message, and

the capability message, for this industry.

Perry, what about for you personally? Where were you heading at this time within the company?

PG: Well, having been Operations Manager for three years and learnt a

lot—very steep learning curve for an entomologist, as I said—I was then

seconded by the parent company, Reckitt & Colman, to work for them in

Sydney, then Indonesia to start up a business for them, and then back in

Sydney for a while. So I actually spent nearly ten years outside of Orlando

but still in the group, and then I came back to Adelaide as the Commercial

Director in charge of sales, marketing and exports. And subsequently

became Managing Director, and then Chairman and Chief Executive.

So when you came back, is this the mid 80’s? Late 80’s?

PG: This would have been the mid 80’s.

What was it looking like export-wise at the time, Perry?

16

PG: Nothing was happening really. We were starting to do reasonably well

in New Zealand. Some of the Pacific islands were attracting a bit, but it’s

prior to any push into the UK, which is when things really started. And that

push began about ‘85, reached its peak in ‘86 where, if one can recall,

there was quite a surplus of wine in Australia. We had been planting

Chardonnay in response to quite a boom in Chardonnay in Australia,

particularly in the eastern States—during the early 80’s. And I remember

Mark Tummel, the chief winemaker of Orlando, saying at one stage in the

early 80’s, ‘You guys will never be able to sell all the Chardonnay that’s

going into the ground’. He was right, but it forced us to look elsewhere.

And so we had lots of Chardonnay. We had a dollar that was down at 60¢.

Now that actually sounds high today but, at that period, was quite low. It

had fallen from well above that to 60¢. So it made us very competitive.

We had South Africa facing sanctions all over the place through Europe.

We had the Italians being caught putting methanol in their wine. The

Austrians were putting anti-freeze. So they lost markets. So there’s three

countries that disappeared off the face of the earth in, let’s say, the UK.

We had the Masters of Wine from the UK come out.

That’s right. That was quite a pivotal visit, wasn’t it?

PG: That was a very pivotal visit. They could not believe what they saw. I

was with them at Rowland Flat—it was towards the end of their visit—and

they just were in awe of the quality of the wines we were producing, at the

price we could afford to sell them at. They just could not believe that such

a country existed. (Laughs)

And so they went back, talking up the Australian wine industry like you

couldn’t believe. And given all those other things that were actually [in

place]—we were ready to go. We had the wine, we had the vacant spaces

on the shelves, we had the dollar in our favour, and we just literally were

able to walk into the door.

And Orlando had spent one year trying to find an agent.

This is in UK?

17

PG: In the UK. We’d hung the shingle out at the London Wine Trade Fair.

We just could not get anyone interested. Then suddenly, after the visit, we

found one person—still only one person—who was interested, perhaps

driven by the fact that they were the major importers of Austrian wines

into the UK and had just had a phone call from Sainsburys to say, ‘Come

and pick it all up’. They were in effect bankrupt because this would’ve

bankrupted their business. And so they agreed to take on Jacobs Creek on

the basis that we lent them enough money for them to stay in business.

We paid a certain amount of their overheads on a monthly basis, but they

did it for a very low commission fee. And the rest is history.

We had a budget the first year of 5,000 cases. We sold fifty [thousand].

Last year, fourteen years later, we did two million cases. So it has been an

incredible success and, as I said, perhaps based on a little bit of fortune at

the time. But, as an industry I think we can be very proud of the way

that—whilst getting the door open might’ve been easy—we’ve kept it wide

open to the extent that Australian wines continue to gain market share in

the UK, and now a lot of other countries. And there are always prophets of

doom about the wine industry, and surpluses, and when we’re going to hit

the brick wall, but if the dollar stays where it is I can’t see that brick wall

being in the near distance.

Well, so many people in the UK would say still that, you know, for

about nine quid you’re buying a wine half the price of anything that they can get from anywhere else in the world.

PG: Yes.

And much better quality.

PG: Yes. As I said, at the current exchange rates, while that’s the case,

that at nine quid you can’t buy from any other country, they’ll keep buying

from us. I mean, if suddenly our prices went up, then who knows how we’ll

be judged. It doesn’t mean that we’d lose our market share. It’s just the

value equation would move against us.

Has the style of the product changed, do you think, Perry?

18

PG: I don’t think so. We failed in two countries in launching Jacobs Creek

back in the late 80’s/early 90’s, and in both instances we tried to change

the wine to meet the style of the country. Failed both times because then

it was just like any other wine. I’ve always felt that the success of

Australian wine is because we didn’t change it, that it had its own

distinctive flavour profile, and wines of the sun, as they’re often called. If

you believe in the marketing adage of differentiate or die, then that’s what

we’ve done. We’ve been able to differentiate Australian wine from other

wine. And that’s the sort of thing that encourages me to think that we’ve

still got a long way to go, because if we are able to produce a different

wine, and for a lot of people a better wine, and certainly a better value

wine, three to four percent of the world market doesn’t actually seem to be

the sort of level you’re going to stop at. I think you are talking at levels

way beyond, in the longer term, than may even be contemplated today.

There’s

no reason why we couldn’t become 10/20% of the world’s wine industry.

The French have got there. They got to a higher percentage of that. So

it’s possible.

Perry, could we talk now about the movement of Reckitt & Colman

out of the scene at Orlando, and eventually the management buy-

out, and how all that occurred?

PG: Yes. The multi-nationals, who all came in around 1970, I believe had

a profound effect on the wine industry. They focused it on marketing and

on financial disciplines. But it wasn’t the sort of industry for them. If you

take a Reckitt & Colman [as an example], the company was used to

producing a disinfectant where you just made it on the spot as required.

You didn’t export. You made it in each country. You didn’t invest in

vineyards, and in wood, and the cash flow requirements of a wine business

were just foreign to them. They look for positive cash flow and investment

in new businesses. Here was a business that just soaked up cash like you

wouldn’t believe. And particularly, in those days with very high interest

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rates, the funding of vineyards and wood and all of those sort of things—

stainless steel storage—they just couldn’t comprehend.

And it seemed to me that most of those companies came to the same sort

of conclusion about the same time. It was after the crash of the stock

markets. Their share prices had plummeted as a result of that September

[1987] crash, I think in the year ‘76—certainly late 70’s—their share prices

were under a lot of pressure. They started to look to what they could

divest and where they could better use that money. And Reckitt & Colman

came to the conclusion that a wine company in Australia was not the best

thing they could invest in, that they should invest in household businesses.

For example, in the US, which is what they did. So they sold Orlando and

invested in a company in the US.

In the process of selling there wasn’t a lot of interest. Their Chief

Executive came out to Australia with the brief to sell the business. Found

there was very little interest. Got some very low offers for the business.

And that led the management to think that, well, if you think the business

is only worth that, because you’re prepared to sell it to someone at that

sort of level, we think it’s worth a lot more so how about you sell it to us?

And they agreed to do that. And in fact I think for them it was a preferred

option. ‘88 had been a very bad year. There’d been frosts in that Spring

so the ‘89 vintage was looking -

Just hang on a tick, Perry. We’re talking about the ‘87 crash then

when they lost their grapes?

PG: ‘87, sorry.

Not the ‘76, are we? I was just trying to work that through as you

were talking.

PG: Better go back and edit that out. Yes, September ‘87 crash had led

them to think that share prices had collapsed under pressure from

shareholders, how can we improve shareholder value? How can we get our

share price up? What’s tying up our cash? Could we better invest it

elsewhere? So that led to the decision.

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Sorry, you were describing the ‘88 vintage, I think.

PG: Yes. The ‘88 vintage—well, the ‘89 vintage, if I recall, was the one

that was affected. ‘88 had very severe frosts in Spring. So it was all

looking a bit doom and gloom in the wine industry.

However, we had started to export Jacobs Creek. ‘87 was the first year

that we actually had it in the market, having spent ‘86 getting someone

interested. So there were a few signs—50,000 cases is not big, but we felt

pretty confident as management. And so there was a management buy-

out.

We did find that we were right in that the export success was going to

definitely happen. Interest rates started to go through the roof. We could

see that as a management group we just would not be able to fund this

business going forward. We looked at what we might be able to divest,

whether we could sell maybe Morris Wines but there was too much

integration of all the businesses.

We did sell a product called Claytons.

It was a cola based drink, wasn’t it?

PG: It was a cola based drink that Reckitt & Colman had bought a couple

of years prior to that and had moved it into the wine division. We sold that

to create some cash, but it became very evident to us that we wouldn’t be

able to go forward.

We did, I think, say to ourselves that one thing we’d achieved is that we

could now determine who the business was going to be sold to. Because

the only two people that had shown any interest at the time of Reckitt &

Colman selling it were SA Brewing, who owned Seppelts, and Adsteam,

who owned Penfolds, and we knew what would happen to everyone in

Orlando if that happened. There’d be no Orlando and we all would’ve lost

our jobs. So, you know, I think there was a pretty good feeling that we

now actually could determine who was going to be the eventual owner.

And at about the same time Pernod Ricard knocked on our door, and they

were actually looking for distribution for their spirit range in Australia.

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They were looking for someone with a national distribution network, which

we had by then. We’d certainly beefed up our distribution in Queensland

and New South Wales. So we came to an agreement to sell part of the

business to them. And eventually, like all of these joint ventures between

management and a multinational base in Paris, that’s never going to work

either. So we put the whole of the business to them and they became the

owners.

The interesting thing in hindsight is that the great thing that’s come out of

it for them is not the distribution of their spirits in Australia, which we have

been able to substantially improve, but the distribution of Jacobs Creek

through their networks around the world. And in many countries, and

probably most countries of the world, the biggest seller for the Pernod

Ricard group is Jacobs Creek.

Is that right?

PG: It is their predominant brand. Even in countries like the UK, they

don’t have a product in the top twenty, maybe not even the top fifty, but

Jacobs Creek’s right up there in the top two or three of products sold

through licensed outlets. So it’s been very good for them through Asia.

And of course, the big potential now is in the United States where Pernod

Ricard have just bought part of Seagrams. So now Jacobs Creek can go

effectively into the Seagram’s distribution network. And I think we’re quite

confident that what we’ve been able to achieve in the UK, we’ll now be able

to achieve in the US. And perhaps within five years may sell even more in

the US than we do in the UK.

Perry, could you talk a little bit about how your role’s changed in the last few years?

PG: Well, having worked for the wine industry for twenty-five years, I

decided I’d got to that stage of life where I might like to do a few other

things. I could see that I was still fit and keen and interested in lots of

other things. So I retired, if you like, at a reasonably young age as Chief

Executive. Stayed on as Chairman.

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So you continue to be Chairman?

PG: No. I was Chairman until the end of 2000, and from 2001 I remain on

the Board. And in the meantime have pursued one of my other interests,

and that’s rural interest, and have large beef [investments] and am

involved in a large dairy enterprise down in the Meningie area of South

Australia. I have [also] become involved in a number of other businesses.

Some are agriculturally based. I’m on the Board of Ausbulk, Chairman of

Origin Olives, on the Board of the Australian Dairy Corporation. Still on the

Board of Simeon, which is an off-shoot of Orlando, and other things such

as chairman of WorkCover Corporation in South Australia. So I’ve found

that quite stimulating to be involved in other industries other than the wine

industry, and I still learn something new every day, and I think that while

you’re doing that you remain keen to go on. So I still have an involvement

with Orlando but obviously considerably less than when one is Chairman

and Chief Executive.

And it was, I’d have to say, fairly hard going. When we were just a

domestic business and the customers were in Melbourne, Sydney,

Brisbane, Adelaide and Perth, it was not too hard to get around the place.

But suddenly when you’re in forty countries and the Chief Executive has to

front on a reasonably regular basis to keep things going, it was an

enormous amount of travel, and that’s not easy. It’s not the jet set holiday

that a lot of people think that it is. It’s hard work. You know, you get off

the plane and you’re straight into it.

But things don’t stop back in Australia. The business was getting bigger.

The vintages were getting bigger. We probably were growing faster than

our ability to manage it and develop people to manage it. There were all

sorts of issues—the costing systems, for example—and it was a pretty

tiring time. Pretty hard work. And I think that led me to believe that it

was a pretty good time to get out.

Well, Perry, thank you very much for giving so much of your story

today. It’s been a real pleasure to hear.