Flying the flag for Kiwi wine

Sir George Fistonich says global owners don't have a passion for New Zealand. Photo / Paul Estcourt

The wine glut has been a challenge to the New Zealand wine industry this year, as it grappled with a "freak of nature" grape harvest in 2008 which yielded 40 per cent above its usual quantity.

For those who didn't have strong brands it was extremely tough, says Sir George Fistonich, patriarch of New Zealand's largest private wine company, Villa Maria Estate.

"We knew from our experience that the surplus would lead to discounting and price wars, however, we managed to sell all our stock because of our strong brand and international connections."

Villa Maria's consistent international award winning stood it in good stead.

But Sir George takes the situation seriously for the NZ wine industry. "I think there's a danger of New Zealand losing our strong place in the international market, so it's very important that we control our crops and get back into balance - or we could end up like Australia."

Last year Australian wines dropped in volume by 20 per cent in the US and prices went down 30 per cent.

The glut was unwelcome to Villa Maria, but in the scheme of things it was a mere bagatelle in comparison to the challenges this winery has been through in its near 30-year lifetime. Receivership in the mid-1980s, thanks to Sir Ron Brierley, was a rather more serious challenge.

And when he first launched the business, in 1961, Sir George, a carpenter from a Croatian family, broke into a market where no one had heard of chardonnay or pinot noir, where there were no licensed restaurants and where the quaffing wine of the day was a sweet American hybrid. Most Kiwis preferred beer in those days, says Sir George.

But the winemaker, who was the new kid on the block - companies like Nobilo and Delegat's began in the 1940s - had detected an emerging consumer interest in New Zealand table wines of dry reds and dry whites.

"I just had a passion for making wine, I enjoyed drinking quality wine and I knew what I wanted to achieve at Villa Maria."

Sir George first began winning awards in the early 1960s, which set him up as a name to watch, but it was a long haul. "Throughout the 60s I was a one-man band with my wife Gail who also looked after the three children. In the harvest we were helped in the traditional way by relations and friends."

In the 1970s Villa Maria expanded quite rapidly, establishing contract growers widely in Te Kauwhata, Gisborne, Hawkes Bay and Marlborough. The company bought Hawkes Bay's Vidal in 1976.

"Over the next couple of decades, restaurant licensing accelerated, and got more people into appreciating wine," says Sir George. Meanwhile he invested in winemakers, to ensure quality. He went to Australia, hired Kym Milne, now a Master of Wine, as his winemaker and Kate Radburn, now MD of CJ Pask, as his assistant.

Supermarket sales of wine did not exist until 1990. Retail in the 70s and 80s was dominated by the three major breweries, DB, Lion and Ballin, who owned the hotel bottle shops, and hotel licences. The breweries mainly stocked the large wineries of that period: McWilliam's, Penfolds and Corbans. "If you weren't part of that group, you had very restricted access to retail outlets. Many small companies stayed in business by selling after hours or on weekends, at the home (farm) gate," says Sir George.

The industry was expanding. Cooks, in the 70s, became established as a brand new public company and was purchased by Brierley Investments Ltd (BIL). In the early 80s there was a big surplus in the wine industry which led to the biggest challenge in the history of Villa Maria. Sir Ron Brierley decided that the wine industry should mirror the brewing industry and that there should only be two main players. He launched an aggressive pricing war which brought many smaller wineries to their knees, costing the New Zealand wine industry $30 million, says Sir George.

"In 1985, the end result was we went into receivership followed by Delegat's. The Nobilo family was under intense pressure and had to sell off assets to survive."

But Villa Maria had just won three major wine awards in Australia and then NBR journalist Warren Berryman decided to champion the winery.

Sir George cites his article: "No one blamed Fistonich ... wine distributors were united in their opinion that Villa Maria was steamrolled flat by the Brierley/Cooks/McWilliam's combine."

"There was a lot of public support," says Fistonich. Villa Maria survived - Sir George took on a financial partner who bought a 50 per cent share, a share he has long taken over again. He didn't look back. In 1987 Villa Maria bought the Esk Valley winery in Hawkes Bay.

In the late 80s Sir George pushed a strong focus on viticulture, on the quality of grapes. "In the early days grape growers were trained to be quantity driven. We started paying for grapes on quality, not quantity, and providing viticultural support."

Villa Maria was the first company to employ professional wine viticulturists, and today sources grapes from company-owned vineyards and contract growers in Marlborough and Waipara in the South Island and Hawkes Bay, Gisborne and Auckland. "In the early 80s we decided that there should be different tiers: Private Bin, Reserve Tier and Cellar Selection," says Sir George.

Villa Maria began exporting in 1988 to the UK where it now supplies Tesco, Majestic, Threshers and Sainsbury's among others. In the mid-90s Villa Maria expanded to the US and is now in 50 countries, including Russia and India.

Although there are a few squabbles over who was first with the screw-cap bottle, Villa Maria says it was the first major wine company in the world to go to 100 per cent screw cap.

There has been a huge improvement in the quality of wine, says Sir George. The wine ages more gracefully.

"At the Air NZ wine show we always had to send three bottles in because one could be rejected," says Sir George.

Coming to the end of 2009, Sir George rues the swallowing up of the private family companies he grew up with, the Delegat's, Selaks, Nobilos, and Yukich's (Montana).

"We are the only major private wine company left in New Zealand," he says. Montana, Penfolds, Corbans, McWilliam's, and Cooks Wines are now all part of the Pernod Ricard group. Nobilo, Selaks and Kim Crawford are owned by Constellation, the US-based second largest wine company in the world. Matua belongs to Fosters Australia and Wither Hills is owned by Kirin, the Japanese brewery.

Why didn't the others hold out for independence? "I think for a variety of reasons, financial pressure," he says.

But these global owners don't have a passion for New Zealand, says Sir George. "There is a danger that wine in NZ only becomes recognised as Marlborough sauvignon blanc. We need to get the world to appreciate that we also make very good pinot noir, chardonnay, riesling, fantastic bordeaux reds, and superb syrah."

As Sir George gets nearer to 70, he is putting a lot of thought into how his family business will carry on. His eldest daughter Karen, a former banker married to Milan Brajkovich of Kumeu River Wines, is Villa Maria chairwoman, while Sir George is managing director. Karen, who started off as a director 20 years ago, has been involved in the development of two specialist vineyard companies in the 1990s and the development of the new Auckland winery, which opened in 2005.

She worked on the development of specialist publicly owned vineyard companies, the Seddon and Terra Vitae Vineyards, which are now merged and known as Terra Vitae Vineyards.

With his son and other daughter not involved in the family business, Sir George is intent on building up the board. Currently there is Karen, Fabian Yukich, executive director and national wineries manager Rob Aitken, who used to be financial controller of Montana. Two new appointments are planned next year.

"In the modern world when the founder goes, there can be a tendency for CEOs to come and go and be reasonably short term. The wine industry needs continuity and there is more continuity through the board function," says Sir George. "I think it's important that a company has a strong board of directors, which appoints a chief executive and sets strategy."

Today Villa Maria has two large state-of-the-art winery facilities in Auckland and Marlborough. The Auckland winery is on a lush 40ha property near the airport.

The winner of the 2005 Ernst & Young Entrepreneur of the Year award now hosts many board meetings at the Auckland winery for the likes of Air New Zealand and Fletcher Challenge. "People find peace in the vineyard setting," says Sir George.