Brown Bros buckles to the dollar's might

BROWN BROTHERS will close its London office to help reduce costs in the face of a rising Australian dollar and changing industry dynamics.

The family-owned winemaker has opted instead for a distribution model to sell its wines into the British and Irish markets.

The closure of the London office on June 30 will result in the loss of half a dozen jobs and hand over partial control of its well-known brands to a third party.

Advertisement: Story continues below Internally, however, it was decided the move was crucial for Brown Brothers to have a viable, sustainable presence in Britain.

Late last year the 120-year old Brown Brothers signed a management and distribution deal with PLB to distribute its wines in the region.

The new Brown Brothers managing director, Roland Wahlquist, said the closure of

the office after a 20 year presence was being driven by the appreciating dollar.

''The high dollar has cut back our margins, we have had to put our prices up, and so that's reduced our volumes, and its got to the stage where the volume and profitability meant we could no longer support having our own office with our own staff there,'' he said.

Brown Brothers exports to more than 30 countries and employs 300 people.

Mr Wahlquist said budget cuts at British supermarket chains had slimmed their wine buying departments. Buyers were making fewer trips to Australia and it was becoming difficult for winemakers to get access.

The distribution deal with PLB should help keep Brown Brothers in front of these buyers.

The strength of the Australian dollar over the past 12 months, particularly against key currencies, has robbed sales for many local exporters. The nation's wine sector is suffering a harsh downturn in sales to North America and Europe.

Foster's, one of the world's biggest winemakers, has estimated that every 1¢ increase in the dollar against the US dollar stripped $3 million from the pre-tax earnings of its wine division.

Casella Wines, the Griffith winery whose blockbuster Yellow Tail label has bloomed to become the most popular imported wine in the US, suffered a 70 per cent slump in profit in 2009-10 because of the strength of the dollar.