Following comments made by Foster’s CEO Fred Kunkel at the recent AGM, Crikey examines the phenomenal success of the Greg Norman Estates wine venture in the US.

Second sealed section: November 8

We recently speculated that Greg Norman is getting seriously rich after Foster’s CEO Ted Kunkel specifically mentioned the booming sales through their Greg Norman Estate wine joint venture at the Foster’s AGM.

Well we’ve now got some figures on the joint venture which are quite amazing.

Ted Kunkel is an old mate of Norman’s and wanted to use the golfer as the Foster’s ambassador in the US. Unfortunately, the asking price was a bit high so they decided to pay him through a wine joint venture that was launched in August 1999.

This was specifically targeted for the US market and the Foster’s insiders first thought they would sell about 15,000 cases a year.

The first visit to US distributors locked up sales of about 50,000 cases and we now hear that they are selling an incredible 300,000 cases a year.

At an average price of $170 a case, you are talking revenue of $51 million a year and we hear that the premium pricing is meaning the profits of $20 million a year are being booked.

Foster’s sells the wine into the joint venture at a fixed margin and then also scores 70 per cent of the profits because Norman’s share is only 30 per cent.

However, we hear that Norman is pocketing about $5 million a year in clear profits which is very handy when all you are doing it lending your name to something.

This is an example of how Foster’s promotes the wine and the tasting notes:
Greg Norman Estates.

This really is an “only in America” story. Australian wine consumers are far too sophisticated to be sucked in by some high-priced offering branded with a foreign sporting star’s name.

Sealed section: October 29, 2002

For the first time in a year yesterday, Crikey actually got off his butt and managed to ask questions at 2 AGMs on the one day, SMS Technology followed by Foster’s.

After labelling Foster’s Australia’s biggest sin company, this was one not to be missed.

The Melbourne Concert Hall was about two-thirds full and it took 90 minutes to get into the action as about 20 different shareholders spoke, including John Safran’s dad Alex, who was not happy about bonus payments.

The board copped more stick than usual and shareholders were particularly unimpressed with the Beringer acquisition which has kept a lid on earnings and share price growth over the past two years.

Two different Save Albert Park types, including Greens candidate for Albert Park John Middleton, got stuck into the board over the Australian Grand Prix in Albert Park.

I backed them up but only on the grounds that Bernie Ecclestone is a charlatan and Foster’s should be conscious of the reputations of those it deals with. Chairman Fred Swan stressed that their contract was with the Grand Prix Association, not Bernie’s secretive Bermudan trusts directly.

I also raised the succession issue and pointed out that former wine boss Terry Davis, now happily running Coca Cola Amatil after getting shafted by Foster’s CEO Ted Kunkel, collected another $1.3 million from Foster’s last year relating to his profit share deal on Cellarmaster. This was up from $800,000 the previous year and Kunkel said this was the final payment in what we believe was about $10 million that Davis has collected.

Chairman Swan was keen to stress that Kunkel’s pay had fallen from $2.9 million to $2.7 million last year and it appears likely to drop again this year as Ted picked up 220,000 free shares based on the company’s financial performance last year but only pocketed 160,000 free shares in September this year.

There is also a good story in the Greg Norman wines joint venture as during his speech Ted said it was one of the key growth drivers in the Australian wine division. Norman is great mates with Kunkel and gets Foster’s provided to him all over the world. Norman and Kunkel even played golf together with Bill Clinton. Norman owns 30 per cent of the wine joint venture with Foster’s and if sales are good enough for Kunkel to specifically mention it in his speech we suspect that Norman is making many millions from what is probably a free carry interest.

I asked for more details on the joint venture but Kremlin Kunkel (or “Mr Knuckle” as Rupert Murdoch’s distant cousin Richard Malone called him yesterday) would only say that the wine is sourced from the Yarra Valley, the Coonawarra and the Barossa.

Disclosure was also initially weak on the new Victorian smoking laws. Kunkel would only say that trading was “soft”. I insisted on more detail and Kunkel said it might cost $5 million in profit, which expanded to $12 million over a full year at the press conference after the meeting.