FILLER
Bob Oatley put Chardonnay on the Map down under
He was better known as the owner of Wild Oats but Bob Oatley made a huge contribution to the Australian wine business. Rosemount became famous for its big, bold Chardonnays, wines the late Neville Wran waxed lyrical about saying ‘you could drink them by the bucketfull.’ More Here
Huon Hooke said he saw Bob Oatley ‘as a thorough gentleman and a tremendously creative, innovative and energetic asset to the wine industry. From where I stood, he seemed an absolute straight-shooter as a person and in business. When he sold his Southcorp shares to Foster’s, Oatley created shock-waves throughout the wine world, but I’m sure he was acting from sincere motives and years later, he was big enough to admit to some regrets. He said he wished he’d acted differently – without going into details.
‘Oatley was a great Australian, and very patriotic: whether he was promoting wine overseas or sailing his Wild Oats yachts, there was always a sense that he was doing it for his country as much as for himself. When Rosemount merged with Southcorp in a kind of reverse takeover in 2001, he said a key motivation was the desire to keep Southcorp Australian owned. I’m sure he’d have loved to have a crack at the America’s Cup, if only he could buy a second lifetime.’
Would you pay $1.5 billion for a brand, and let it go down the drain?
Bob Oatley also pulled off one of the best business deals in Australian wine when he sold Rosemount to Southcorp. By the turn of the millennium, Rosemount was one of the most recognisable wine brands in Australia. It was the country’s fifth biggest wine company, and it was profitable. It made large volumes of cheap and cheerful Chardonnay under its diamond label, along with premium wines such as Roxburgh Chardonnay and Balmoral Syrah.
Bob Oatley sold Rosemount to Southcorp for $1.5 billion in 2001. Southcorp already had an enviable portfolio that included great Aussie brands like Penfolds, Lindemans and Wynns, so I wondered why they wanted Rosemount so badly. The analysts said the board was unhappy with the performance of its management team, while the guys who ran Rosemount were said to be a top crew. They’d built a small family business that started life in 1975 into Australia’s sixth largest wine company by the year 2000.
All in the Family no Longer
It was still a family business, run by Bob Oatley’s son in law Keith Lambert. Southcorp was a publically listed company with a messy history selling water heating systems and household appliances. The merger made more mess, which was handled badly by Keith Lambert who’d become Southcorp’s CEO, and was clearly out of his depth.
No one seemed sure if it was a merger or a reverse take-over. someone had lost the post-merger roadmap, if one existed. Some of Rosemount’s team took up key roles at Southcorp HQ. There was much overlap, the cultures didn’t mesh, there was lots of infighting, and many good people on both sides left for calmer waters. Philip Shaw and John Duval were made joint chief winemakers, and they both ended up leaving.
‘Lambert seems to have burned many that he has come in contact with,’ an article in The Age said, ‘from wine growers through to winemakers, marketers and distributors – and possibly the most unforgiving of all, investors.’ One retailer asked the reporter: ‘Have you ever the met the man? He is walking, talking arrogance.’ The reporter argued that ‘Lambert’s unstinting devotion to work, his assiduous hands-on approach to management and yes, his arrogance, were seen as forceful and positive attributes behind Rosemount’s success, something to set a fire under Southcorp’s somnolence.’
‘It’s alright to sit up there in your flash suits’
Lambert fell on his sword in 2003, and Southcorp had to write down the value of its investment by $240 million. Southcorp’s new CEO John Ballard told ABC radio: ‘As someone who has spent most of his life in the world of global brands marketing, let me say that the Rosemount brand is a wonderful brand. And its potential for this company is simply immense.’
A year later, Ballard faced a virtual shareholder revolt. ‘It’s all right to sit up there in your flash suits and get your big money,’ one shareholder told the board. ‘None of you fellas are suffering like we are. I’m an investor. I rely on the income [from dividends].’ A hasty restructuring exercise followed but did little to ease the flow of red ink.
That Sinking Feeling
Rosemount was just one of many leaks on the sinking ship Southcorp. Bob Oatley paid a heavy price after the merger, losing a big chunk of the 1.5 billion (in cash and shares) Southcorp paid him. ‘Soon after the merger,’ Angus Grigg at the AFR wrote, ‘Oatley spent $580 million on more Southcorp shares, taking his stake to 19 per cent and his investment to around $1.2 billion … The carnage that followed the merger, much of it thanks to Lambert’s heavy discounting across all brands, cost Oatley every cent and a bit more of the money he had spent buying those extra Southcorp shares.’
About $600 million dollars was the extent of the damage, and Bob Oatley felt that his best option was to find a buyer for Southcorp with the muscle to straighten things out. He approached Fosters and in 2005 the big brewer came to the party and bought Southcorp for $3.2 billion.
Diamonds and more diamonds
The marketing boys at Fosters wasted no time refloating the Rosemount. They knew they had to think big, and come up with a marketing master stroke. Taking their cue from the diamond-shaped label, they created a new bottle with a diamond base. No kidding. They also created a new ‘brand architecture’ to go with the new bottle: six distinct tiers of Rosemount wines, each with its ‘own philosophy and consumer proposition.’
Predictably, retailers disliked the hard-to-handle diamond-bottomed bottles, consumers thought they were gimmicky, and serious drinkers shook their heads and walked away. The new brand architecture remained a mystery to all. Fosters also sold the Rosemount winery in the Upper Hunter Valley and moved the cellar door to McLaren Vale. No kidding.
Five years later, Rosemount’s local market share had slipped to about 1% from a high of 5% in 2000. Late in 2010, Fosters announced that its newly demerged wine subsidiary Treasury Wine Estates (TWE) would carry out a high-level global review of the Rosemount brand, to be overseen by Foster’s global brand council and its most senior managers.
Delightfully Unpretentious
TWE presented the results to the trade in late November 2011. Industry veteran David Farmer confessed to some confusion about the ‘New Positioning’, which was supported by great lines like Rosemount Estate is everything you love about wine without all the pretense (sic). The new tagline for the Diamond label range is Delightfully Unpretentious, and the message on the bottle says: The bright fresh flavours of Diamond Label are the perfect expression of Rosemount Estate.
Despite Foster’s and TWE’s efforts over the last seven years, the Rosemount brand hasn’t recovered any of its former glory. It shows that you need to care for a brand no matter how big it is, and maintain a consistent, logical positioning that you can build on. Simple really, isn’t? As for Bob Oatley, he would’ve had regrets for sure, but he had much to be proud of.
Additional Reading
Does Rosemount Have a Future? David Farmer, December 13, 2010 http://www.glug.com.au/index_industry.php?sec=industry&art=10014
Rethinking the Shape of a Diamond, David Farmer, February 22, 2012 http://www.glug.com.au/index_industry.php?sec=industry&art=12001
Kim