Journey of discovery

Andrew Leyden FCCA has spent most of his career travelling the world. Now based in Australia as CFO of global wine company, Beringer Blass Wine Estates, he talks to Colette Steckel about the appreciation of premium New World wine

Since the release of a critically-acclaimed road movie about two buddies exploring the wineries of California, sales of Pinot Noir, the wine of choice for the movie's protagonist, have reached record levels in the US. Likewise, Merlot, despite being the subject of some disdain in the movie, has seen a hike in sales and continues to rank as one of the top wines sold in the US ahead of Cabernet Sauvignon. Consumer analyst ACNielsen was prompted to ask whether Sideways has put wine sales on an upward trajectory. Perhaps, but what the movie has done rather well is to encourage consumers unfamiliar with wine varietals, like Pinot Noir, to try them out. 'Wine is a discovery category and that's why people enjoy it,' says Andrew Leyden, CFO of Melbourne based Beringer Blass Wine Estates, adding rather eloquently: 'Wine has romance and it's unique.'

Leyden explains that consumers are learning about wine and are becoming increasingly sophisticated in their wine choices. 'In most consumer goods categories, consumers educate themselves. Wine is no exception. People might start off drinking some of the cheaper, quaffing wines, some of which are great from a quality perspective. But once they start developing a taste for wine, they move onto more premium brands. They become more discerning and able to differentiate wine styles, characteristics and countries of origin.'

Which is where Beringer Blass comes in. With a pedigree dating from the 19th century, Beringer Blass has grown into a leading global wine company with key markets in North America, Asia Pacific, and Europe. It controls 8,000 hectares of vineyard plantings in California, Australasia and Europe, and includes 40 wine brands in its wine portfolio, among them flagships Beringer (California) and Wolf Blass (Australia).

Explains Leyden: 'Our focus is at the premium end of the market rather than the bottom end because it's hard to differentiate yourself at that level. What we're about is producing great, innovative wine from Australia and the US that appeals to consumers. It's a fabulous environment to work in and an intriguing category, which, in recent years, has displayed typical FMCG characteristics.' While the fast moving consumer goods sector is one characterised by branded products, Leyden argues that wine purchases are influenced by a number of factors. 'When consumers shop for wine, they tend to focus on colour, varietal and occasion. We don't believe that branding is what is uppermost in consumer's minds. But once decisions on colour and varietal are made, then the choice of brand becomes important.'

Brand awareness is on the rise. In a survey conducted last summer by ACNielsen, Wolf Blass was among the top 10 wine brands consumed in the UK where Australian wines get top billing and generate sales of more than A$2bn a year. In Australia, Wolf Blass became the country's number one brand by volume and value. While in the US, an advertising campaign for Californian brand Beringer is likely to impact on sales this year. 'There's a lot of growth potential for New World wine and the wine market globally is not yet mature,' notes Leyden. According to the US based Wine Institute, per capita wine consumption in the US, UK and Australia is around 20 litres per annum compared to almost 60 litres in Old World wine stalwarts France and Italy. 'We've a long way to go.'

Beringer Blass' marketing and branding strategy is a key part of a wine trade review announced in 2004, shortly before group company Foster's released its 2004 financial report. With the performance of Beringer Blass described by Foster's CEO Trevor O'Hoy as unacceptable (earnings declined by 32% to A$291.7m), the focus is on bringing the business to heel. 'That was a challenging year,' explains Leyden. 'Most of the issues were North American. The Californian wine industry was oversupplied and that led to a whole series of imbalances in terms of wine supply and pricing dynamics that needed to be put right. We weren't the only wine company affected.'

Leyden remarks that the review, in which he was involved, was an opportunity to think through Beringer Blass' strategy. 'It was about trying to understand the dynamics of the industry and differentiating ourselves in the future, growing our brands and our business, as well as determining an efficient and flexible supply and production structure to match demand with supply.' The half year results, released in February 2005, put earnings at A$137.2m, which is deemed a solid result given the investment in brands.

Takeover bid

What is likely to make FY05 interesting for the group's global wine business, if things go according to plan, is Foster's hostile takeover bid for Southcorp, a major Australian wine producer. The intention is that Southcorp's premium wine portfolio, which includes Penfolds and Rosemount, will complement brands from Beringer Blass and strengthen Foster's position in the global wine industry. In January, Foster's acquired an 18.8% share in Southcorp and the offer has since been extended to all Southcorp shareholders, valuing a 100% stake at A$3.1 bn. (The outcome of the bid was still being anticipated at the time of going to press). The whole saga has been played out in the media with Southcorp disputing Foster's share valuation and suggesting a merger, while Foster's is standing by its original offer price and takeover proposal. Leyden refuses to comment but notes that Foster's move on Southcorp reinforces the group's strategy. 'We're right in the middle of determining the future of our wine business. The bid for Southcorp, irrespective of the outcome, demonstrates our commitment to becoming a leader in premium global wine.'

Leyden admits that what appeals to him most about his role in the wine industry is nurturing the development of tangible products. 'I like having an emotional connection with brands,' he reasons. Aside from a brief stint learning the ropes in the finance departments of Sun Life in the UK when he finished university, Leyden has spent most of his career working with popular brands. Early in his career, he joined Gateway Foodmarkets - a £3bn turnover business that was one of the largest British retailers - and stayed for over five years, leaving with a wealth of finance experience. 'I ended up staying longer than I expected because the environment was dynamic and I got a very broad overview of what made the business tick. It was a good experience for me and has served me well ever since.'

His first leadership role came in the mid-1990s, courtesy of German household-cleaning business Benckiser, which later merged with Reckitt & Coleman. Leyden was appointed finance director of the UK business but, with the company's expansion in Eastern Europe, he was asked to move to Poland. It heralded the beginning of his expatriate life and a love of international travel. 'You learn a lot about yourself in a new environment, especially one like Poland which was going through such a period of change in the mid-1990s. It was a great learning experience and a cultural awakening as well.'

A role as finance director for the Asian business of Reckitt Benckiser Plc followed in 1999 and saw Leyden restructure operations in China, Indonesia and Korea; his first multi-geography assignment. In 2002, he moved to Australia where he became finance director for the Asia Pacific business of Beringer Blass. He was made CFO of the global wine business last year.

'What I've learned from my experience is that the role of the finance professional has changed immeasurably and for the good. We're now regarded as the custodians of performance management. That might sound a bit grand but I think it's true,' reflects Leyden. 'Of course, we focus on compliance, apply financial standards, and bring efficiency and pragmatism to our roles. But the single most important thing we do is work with our colleagues to build an understanding of the key drivers of performance and how to deliver value. And that's what really counts. It's also the basis on which we, as finance professionals, are primarily judged these days.'

Leyden admits he has been fortunate in his profession. 'I've enjoyed a rewarding international career and that's been fabulous for me. But, ultimately, opportunities are closely linked to the successes that the business enjoys. Long may that continue.' After jetting all over the world, which he describes as an adventure both professionally and personally, he and his family feel quite at home in Melbourne. And even with his strong work ethic, he makes time to enjoy the Australian lifestyle: sport (including the Foster's sponsored Australian Grand Prix) and, of course, wine. So has working in the industry transformed him into a wine aficionado? 'Certainly not,' he laughs. 'Unless you spend a lot of time educating yourself on the finer points of wine, I think it's difficult to become a connoisseur. I don't think I could ever be. But I do enjoy cracking open a good bottle of wine.' I dare say many would agree with him.