An Interview with John Ballard, Southcorp’s CEO

As his first year as Southcorp’s chief executive hastens to a close, John Ballard still appears to be enjoying his first job in the wine industry. Having grasped what many still consider to be a poisoned chalice at the helm of Australia’s most important wine producer, he is keen to reinforce the message that rumours of the company’s death – past or pending- are grossly exaggerated.

Ballard is emphatic that the company’s problems were commercially based and had little to do with production issues. He is confident that with developments such as the renewal of the substantial Wynns Coonawarra Estate holdings and the emergence of new large Shiraz vineyards in the Victorian regions of Great Western and Heathcote, that Southcorp has plenty left in its hand with respect to quality.

Clearly, the most significant damage was with the retail community in the UK and Australia, where he concedes the company ‘lost its way under the previous administration’. In Australia, he says, that problem is now resolved, but while they are substantially mended in the UK, the work hasn’t finished yet. ‘We now have an appropriate and professional relationship with each of our major trading customers there in the UK, but to realign our product offer with the structure of the UK market is a continuing process that will take some time’, he says.

‘We have multiple brand offers in the value market – as others do – but we will be paying particular attention to the middle market, where Australian wine also represents standout value for money. As an industry, Australian wine has to share with the British consumer the knowledge of our regions, varieties and wines. At a higher pricing point we offer the same value for money as we do with cheaper wines. We are being realistic about the time it will take to turn around our business in the UK, but are confident of making good progress this year.’

Responding to recent concerns from the finance sector that Southcorp will need to increase its prices, Ballard states that there is no short-term intention to do so. ‘Our hedgebook, which will dampen the impact of the strong local currency over the next few years, enables us to make considered judgements on pricing adjustment and gives us some choice as to when we do’, he argues.

Southcorp is constantly hammered by the sections of the media and the financial community because of an apparent mass exodus of winemaking talent. ‘The facts are that our turnover of winemaking personnel has remained constant for something like eight years’, he responds. ‘I’d argue that right now the talent we have at the senior level is the envy of the industry. The company employs around fifty winemakers, and the quality of our top-level winemakers has attracted considerable talent beneath them. Two of our winemakers – one each from the old Southcorp and Rosemount sides of the business – have recently been acknowledged as Young Winemakers of the Year by The Wine Society.’

Two of the examples that emerge most frequently are Ian McKenzie and John Duval, but they remained an active part of Southcorp’s team after leaving full-time employment. There’s also still a representative of every generation of Grange winemaker involved in the final grading of the Grange classification. The only one missing is actually Max Schubert. Ballard enjoys the notion that ‘while today’s management make the final decisions, it’s like a Church of Grange, where all the old Cardinals and Popes assemble to have a view’.

‘In reality, as a large company we expect a turnover of winemakers. We’ve also come to realise that as such we will inevitably train many of the better Australian winemakers for other companies’, he says.

Some, if current rumours are anything to go by, suggest that such is the depth of Southcorp’s problems that the company would prefer not to crush any fruit in 2004. Ballard’s reaction to that notion is a mixture of humour and concern. ‘You have to be joking’, he says. ‘The truth is that we really need a larger vintage of high quality. But if it’s large enough to hold some high end wine back for release later on, we will.’

While I attribute any perceived ‘style changes’ in Southcorp wines from the vintages 1999-2001 inclusive to seasonal variation, it remains a constant accusation that the company’s wines have been Rosemount-ised across the board. Ballard responds by pointing to the various Coonawarra reds released under the Wynns, Lindemans and Penfolds labels, saying they clearly illustrate a strong commitment to retain each of the styles and heritage associated with each brand. I would add that the new Thomas Hyland reds from Penfolds are clearly made in the distinctive Penfolds style.

‘If people drink the wines from these different brands, they’ll see for themselves that each is being kept individual and unique. Our structure is designed to protect those styles for all time. The winemaking and marketing team behind each brand lays down the philosophy of what each brand is all about and what makes it distinctive.

‘What makes Southcorp an unusual company is that we’re a collection of individual companies, three of which in Lindemans, Penfolds and Seppelt have each over 100 years of heritage. Sure they share a common ownership, but that brings some real advantages such as a lower cost of funds and more importantly, access to the best viticultural and winemaking science available’, he says.

Looking forward, Ballard acknowledges that work must be done to mend Southcorp’s bridges with the finance sector. ‘What we’re doing now is to deliver the numbers and let them make up their own minds about us. What we have released to this stage shows that we did a little better in terms of debt reduction in the second half of last year, and the new numbers that will emerge in February will give some idea of how successful the new management team has been in the first six months of the new financial year.’

Nobody is more aware than John Ballard of how important these numbers will be. Please login to post comment