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Keeping it all in the family

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The news, reported this morning at winebusiness.com, that Australian spirits giant Foster’s Group is in trouble leaves me shaking my head. Keeping up with the antics of these gigantic international alcohol conglomerates is like watching an old comedy movie — the Three Stooges or the Marx Brothers come to mind. Someone is always taking a pratfall, or getting clobbered or soaked or burned, or falling down a well, or getting chased by a lion, or stepping on a broom handle and getting whacked in the face. Somehow, they always survive, and it makes us laugh at the sheer silliness of it all.

Who can keep up with the game of musical chairs of the big wine companies? Foster’s, Constellation, Diageo, Ascentia, The Wine Group, Bronco, Gallo, Pernod Ricard…have I forgotten anyone? Someone’s always buying something, or selling it off, or consolidating, or rumored to be up for sale, or looking to buy, or morphing into something with a different name. It makes your head spin.

Those of us who’ve been around for a while remember the names of the dearly departed wine companies that are no longer with us. R.I.P. Heublein, United Vintners, National Distillers, Grand Metropolitan! They’ve all gone to that big Winery in the Sky, where every deal is a good one, profits abound, no one ever gets fired, and per capita consumption rises every year by double digits.

Unfortunately, here in the real world things are considerably more precarious. What always seems to happen to the companies that get into trouble is that they move too fast, too aggressively, and then find themselves in over their heads. They leap, in other words, before they look. (What happened to the old Robert Mondavi Winery is a prime example.) The winebusiness.com article (which was reprinted from guardian.co.uk) suggested Foster’s problems are the basic incompatibility of selling both wine and beer, and having too many brands to manage.

Well, duh. I could have told them that. In business as in life, the formula for success is to stick to your knitting. Find out what you do best, and do that thing better than anyone else.

On more careful analysis, the companies that seem to be the most plagued are the publically-traded ones, which Foster’s is. Their stock price is down about 50% this year, and pressure from anxious shareholders must be among the reasons why the company is considering breaking itself up, or selling its parts to whoever wants to buy them. But that same short-term clamor for profits must also be why Foster’s grew so rapidly and became untenable.

The most stable big wine companies are in private hands. When it’s just you and your family running the show, you can do things your way, in a more relaxed, considered mode. You don’t have to do something drastic every time the stock dips below a certain amount; you can ride out the tough times. In 20 years, there may no longer be a Diageo, Constellation or Brown-Forman, but I’ll wager my last buck Gallo and Bronco will still be players.

P.S. Please check out my other blog at Wine Enthusiast’s “unreserved”.

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