Family Biz: For the love of wine

In a gutsy and well-timed move, Robert Hill Smith bought his entire family out. After the initial takeover discomfort, Yalumba Wines was his to grow and run as he wished.

On a warm day in 1989, some weeks before his 38th birthday, Robert Hill Smith gathered all the descendants of Samuel Smith together at the beautiful Yalumba winery in the Barossa Valley and announced that he wanted to buy them out.
 
It was ten years before Yalumba’s 150th anniversary and Australia’s oldest family-owned winery was being overtaken by a revolution in the wine business. Robert, a member of the fifth generation, had been managing director for four years and, with his brother Sam, owned a bit less than 40 per cent of the company. It wasn’t enough to do what was needed.
 
The family was profoundly shocked. There were 27 individual shareholders and their children. Most of them lived at the farm compound and all of them loved the historic marble winery and rolling vineyards that had been left to them. No one wanted to sell.
 
But Robert presented them with a fait accompli: he had been working for most of that year with the Adelaide merchant bank Michell NBD to put the bid together and had lined up a gut-churning loan from ANZ in a series of secret meetings in Melbourne and Sydney.
 
By the time June 2, 1989, came round he and Sam had everything covered and the price, he believed, was right – more than $35 million (he wouldn’t tell me the exact figure).
 
It took few weeks of cajoling and argument, but eventually the deal was done: Samuel Smith’s dispersed legacy became tightly controlled once again, and Robert Hill Smith, one of the youngest heads of an Australian wine business, was able to get on with doing what was necessary.
 
Samuel Smith was about the same age as Robert was in 1989 when he sailed from Dorset to South Australia. He’d been a brewer in England and so he and his wife and four children made the trip by bullock dray to the Barossa Valley, which had been settled a few years earlier and where the farmers had decided on wine grapes as the best crop.
 
He got a job as a gardener on the estate of South Australian pioneer George Fife Angas, after whom the town Angaston was named and soon had enough money to buy his own 30 acres. The Yalumba winery is still more or less in the centre of Angaston.
 
To get the capital to turn his small holding into a winery, Samuel, now 40, headed off to the Victorian goldfields hoping to trip over some nuggets. He came back four months later with 300 pounds in cash – enough to buy some more land, a plough, two horses and a harness.
 
And so Yalumba (aboriginal for “all the land around”) was born. When Samuel died in 1889, Sidney took over, followed by Walter Smith. It was Walter who brought the Hill name into the family by marrying the “formidable” (according to family legend) Ida Hill, sister of the Australian test cricket captain, Clem Hill (49 tests, 3,412 runs).
 
Whether it was because Ida was formidable or because he was a cricket fan, Walter and Ida called their children Hill Smith, and of them it was Sidney who took over the running of Yalumba in 1923, at the age of 26, while his father became chairman.
 
In 1938, Sid was killed when the airliner, “Kyeema”, crashed into Mount Dandenong on its way to Essendon Airport, carrying a group of wine industry luminaries from South Australia on their way to a meeting in Canberra. His brother Wyndham, Robert’s father, took over as managing director. It was Wyndham who moved Yalumba into table wines for the time and away from fortifieds, and expanded the business into the Eden Valley and Riverland.
 
The next MD after Wyndham was Mark Hill Smith, Sid’s son, and he ran the company until 1985, when the management switched back to Wyndham’s side of the family, and Robert Hill Smith.
 
At that time ownership was roughly evenly split between the children of Sid and Wyndham, with the descendants of Walter and Ida’s other children, Donald and Jean, owning smaller amounts.
 
So it was basically Mark and his family, still living at the Angaston property, who Robert was inviting to sell and move out of their home in 1989, and the success of that takeover offer meant that Wynham’s kids – Robert and Sam – had full control.
 
An era of stability and growth followed that 1989 convulsion. The Australian wine industry was going through a revolution, prompted by changing tastes and most of all the floating of the Australian dollar.
 
Just as it’s struggling now because the currency is at a post-float high, the decline in the exchange rate in the 1980s led to the Australian industry being internationalised, as local winemakers surprised and delighted the world with really good, affordable wines.
 
The great wine families of South Australia worked together to build distribution into Europe and America, and Robert Hill Smith rapidly restructured Yalumba’s portfolio of wines by selling the fortified wines business entirely to Mildara Blass and tightening the business model.
 
His big success was Oxford Landing Estates, grown on the Murray River near Waikerie, but Yalumba continued to be a solid brand, ranging from $10 for the “Y Series” to $150 for the Reserve.
 
I asked around the industry about how Yalumba and Robert Hill Smith were seen these days, and heard nothing but admiration – even anonymously. “No one has a better reputation than Robert,” said one.
 
In an industry split between large companies and old families, Robert is seen as a humble, affable bloke who’s in the industry for the right reasons, and also a great recruiter of winemakers.
 
Robert says the business is tougher these days than it’s ever been because of the high dollar, but he has no plans to sell. He’s not sure what his three daughters, Jessica, Lucy and Georgia will do: there is a Family Charter that sets down the process for the children to enter the family business and Jess is the only so far to have done that (Lucy is an interior designer and Georgia is still at school).
 
The company has an independent board chaired by Peter Barnes, who is also a director of News Corporation and chairman of Metcash, among other things.
 
Robert says it is too fragmented and needs consolidation, but the wine industry has been saying that for as long as I’ve been a journalist. Waves of consolidation regularly occur and they are nearly always disastrous (for the acquirer). Robert, wisely, says he neither wants to buy nor sell.
 
The thing is, this is an industry that will always be “plagued” by people who are in it for love, not money. It’s just the way it is and always will be. One of those people is Robert Hill Smith.

For more family business commentary click here.

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