FOREIGN INVESTORS VS OZ DUOPOLY

Roger Drake, who founded the independent Drake's Supermarkets in 1974 ... a true blue Aussie who remains absolutely dedicated to his customers, who include his suppliers

Pondering foreign investment
and the Woolies/Coles duopoly:
what's the best for this country?
by PHILIP WHITE
 
Roger Drake, founder of Drake's Supermarkets, spoke to Ian Henschke the other morning on ABC891. Roger founded Drake's Supermarkets in 1974. Today this group is the biggest independent supermarket chain in Australia, with fifty stores in South Australia and Queensland, and 5,500 employees. They've just had their first billion-dollar turnover.

"The company's strength lies in operating on the principles of a family business and supporting local manufacturers and suppliers," is their mantra. "Drake's Supermarkets has kept its focus on the important aspects of the business. THE CUSTOMER. This is the company's competitive edge, along with its family values and Australian heritage."

Having started by saying he didn't like public speaking or radio appearances much, and preferred to keep in the background, getting on with the business, Roger went on to say a lot of very challenging things about Australian consumers and our addiction to the duopoly of Coles and Woolworths.

He spoke about the big two and their increasing dependence on their own brands, which gradually replace anything which is not theirs and always occupy the shelves at the customer's eyeline.

He spoke about how they buy that stuff anywhere, at the cheapest price. Once they've forced the  primary and/or secondary producer to their knees they'll take them over and cut every cost possible. Which had me wondering how they balance their allegiance to their shareholders with their respect of their customers and suppliers.

 

He spoke wisely about the need for honest, easy-reading labels on foods, so we don't need a magnifying glass to find out where stuff comes from and what's in it.

And he spoke with scary frankness about how in our determination to save a few cents we destroy our Australian farmers and suppliers. I paraphrase him; it went like this:

"Australians complain all the time about foreign ownership of our biggest companies and smallest farmers and suppliers. We whinge whenever China buys this or Japan or America or some other country takes that. But the reason these businesses are on the market is that they're failing because the customer refuses to pay a fair price."

If I was a muesli eater, I woulda choked on it. I'd never heard Roger speak before, and I'd rarely heard anybody who'd so successfully put their money where their mouth is speak so simply about a problem we have come to accept as being beyond us. Apart from basic racism, xenophobia or other breeds of prejudice, which we deny anyway, we seem trained to believe that foreign investment is bad but it's too complex an issue for ordinary bogans like us to understand.

Another thing I liked about his attitude is that the Drake folks treat their suppliers as valued customers, too.

I thought a lot about this at the weekend, when I had the pleasure of dining with two giants of the international winemaking world. We were guests of the California-based Canadian Jayson Woodbridge, who comes to McLaren Vale every year, buys Shiraz grapes from the Barossa and McLaren Vale, makes wine from it and takes it back to America.

Jayson Woodbridge (left) and Chris Carpenter ... photo Philip White

 

Jayson got very famous with his stellar Hundred Acre Napa Valley Cabernets at US$300+ a bottle, but really kicked in with his Layer Cake wines, which he sells at around five per cent of that price. Jayson and his entourage, led by his Kiwi partner, Helen, constantly travels the world making this wine. Like he makes his various models of Layer Cake in California, Argentina, Italy and Australia, and sells it in the USA.

Jayson is coy about just how much Layer Cake he makes, but soon after he invented it, he was reported to be pushing between 20,000 and 80,000 cases of each of the five Layer Cakes annually, and hitting 35% annual growth.  That was four years ago. He has more lines now and speaks as if there's no abating. As a former merchant banker, he knows how to talk to banks.

And given the fame of his very expensive premium wines, he certainly understands quality.

The other guest was Chris Carpenter, the mountaintop vineyards king of Napa Valley Cabernet, who works for Jackson Family Wines. Their Kendall-Jackson brand covers the biggest-selling suite of wines over US$15 per bottle in the USA. Like Jayson, the Jackson Family also sells numerous very expensive luxury wines, like the Cabernets Chris makes. The Jacksons are into buying and developing great estates.

At the Hickinbotham Clarendon Estate for the launch of Chris Carpenter's first wines from that upland vineyard in 2014: viticulturer Michael Lane, winemaker Shelley Torresan, Fino chef David Swain, Yangarra/Hickinbotham manager Peter Fraser, winemaker Chris Carpenter holding Fino manager Sharon Romeo aloft and winemaker Charlie Seppelt ... photo Philip White

 

Jackson Family owns the famed Hickinbotham Vineyard at Clarendon. Chris comes here several times a year to make four luxury reds from that fruit at their Yangarra Estate near Kangarilla. I rent a small cottage in one of their vineyards. I like to watch.

So there we were at Port Willunga, eating a lamb Jayson had just butchered, while the two big Cabernet Kings talked about the wine world. And there I sat listening, wondering too about Roger Drake's wise utterings.

Accuse me of being too close to the action to be truly impartial; consider me economically naïve, that's up to you. But it seems to me that these people are good for Australia. The Jackson Family has the wealth to buy great vineyards, build wineries, employ people. Jayson has the money to buy good fruit and lease winery space to make wine the way he wants it; he does not buy bulk wine.

While these North American investors are begrudgingly accepted by local rivals who lack their push, even their nous, the reaction to Chinese and Japanese investors is more cynical, and sometimes plain racist. 

Some criticism of some Chinese is fair: there are many opportunists there who simply don't understand wine, and many grapegrowers and winemakers have been ripped off naïvely trying to get into China the quick and easy way. But many have been ripped off by unscrupulous Americans for the same reasons.

These Chinese will soon understand the business and its extreme time scales. They have been a mercantile nation for 5,000 years. Their investments in Bordeaux are always increasing, and it's pretty tricky to fail to understand the wine business once you've unlocked the arcane nonsense of the Bordeaux wine trade.

Which you will inevitably do if you start buying famous Châteaux. Which the Chinese began doing once they realised their fetish for luxury wines was pushing the prices up.

Due to hypocritical government restriction, backed by stupid winemakers, Drake is not permitted to sell liquor in its supermarkets, while Coles and Woolworths own most of Australia's alcohol retail. Woolies has its own wineries and vineyards and is even beginning to export its own wine into China. Through its strangehold on wine bottling - it is Australia's largest contract wine bottler - it has also become a sort of de facto wine bank, extending credit to small winemakers until they're forced to buckle.

I believe these huge discounters and own-brand manufacturers are a bigger threat to Australian grapegrowers and winemakers than the Chinese or Americans I've mentioned above. After a brief dabble in the discount wine world, the Jacksons were quick to retreat: they have no cheap wine.

Jayson's Layer Cake rarely drops below US$15.

Like Drake, these family businesses support local manufacturers and suppliers, and concentrate solely on supplying their customers with really good quality for the money, honestly and clearly labelled.

Which is not what you could say about the poison berries, the locally-baked bread from Ireland, or the sorts of labeling that earned Saskia Beer  and then her famous Mum, Maggie  stern smacks on the bum from the Australian Competition and Consumer Commission.

So. If you really don't want to see more productive farmland fall to foreigners, be prepared to pay for it yourself by shopping more judiciously. Support your local growers and makers; shop at Drakes and your local farmers' market for food. Support the honest labelers. And if its drinks and you can't always attend your favourite winery for supplies, point your purse at the brave independents we are lucky to still have: you know where they are. Make friends with them, and they'll love you for it.