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Tony Leon is leaving the building

It’s common talk in the wine game that Dan Murphy’s — the biggest wine discounter in the land — slashes and burns its way to the top, even giving away its margins at times to prove a point. And the point, of course, is that no-one beats Dan’s on price.

There’s also talk that Dan’s gives away any margins the wine producer or distributor might have been counting on too! It’s a brutal price war allright, one suited to men with nerves of steel, a shrewd, calculating mind and a thick skin… men like Tony Leon.

Leon is a legend in wine retailing. He started out as Dan Murphy’s right-hand man in the mid 1980s when the fiery grandson of an Irish labourer was still in transition from traditional retailer to supermarketstyle discounter with his trolleys, his checkout chicks and his unbeatable pricing philosophy. Leon, the numbers cruncher, had the precision of an open-heart surgeon when it came to dissecting a deal. He still does, but come June 30 he is leaving the company.

After 23 years as general manager he considers it’s time for a change. At 50, he’s still young enough, he muses, to go into business for himself. He teases with the idea of wine retailing, perhaps a family-run independent wine shop, to see how the other half lives.

He’s gotta be kidding, right? Leon looks at you, poker face, and says “Hey, why not?” It’s the same face thousands of winemakers, distributors and fellow retailers have been trying to fathom for 23 years.

In 1998, when Dan Murphy sold his company to Woolworths for $55 million, there were just five shops, all of them in Melbourne. Annual turnover was $100 million.

Woolworths immediately consolidated, building an even stronger foundation in Melbourne and soon after Murphy’s death in 2001, set about taking a beach head in Sydney.

Today, there are 86 stores nation-wide from Perth to Brisbane, Sydney to Canberra and Melbourne. Annual turnover is close to $2 billion.

“A lot of people thought (that) in Dan Murphy’s I didn’t make a profit, I gave away liquor” says Leon in his idiosyncratic Australian-ese (the result of learning English from his co-factory workers after arriving in Melbourne from war-torn Lebanon in 1979).

“We made more profit in Dan’s than any other retailer in liquor by far.”

The reason, he says, is quite simple. When it comes to wine he is dispassionate.

“A lot of wine companies get confused between smelling the wine and selling the wine and making a profit. I separate this in my business.”

Some retailers, he sniffs with obvious derision, enjoy the high life with long lunches and expensive wines (Leon, on the other hand, allows himself one hour for lunch). They’ve taken their eyes off the ball and the real nature of the business, which is to make a profit.

Leon knows his numbers. He expects the same of his suppliers and when they don’t, he asks, is it his fault? Here he is referring to the now infamous Southcorp foray into discounting in 2001 that led in no small way to the dismissal of Southcorp CEO, Keith Lambert.

Lambert had wanted big volume sales through the supermarkets and in 2001 delivered his four big brands — Lindemans, Penfolds, Wynns and Rosemount – directly to Leon’s door. Leon sold the wines at prices well below the rest of the retail trade.

Southcorp, not surprisingly, lost friends among the independents and fell deeper and deeper into the arms of Tony Leon. Within one year, supermarket sales that had accounted for 29% of Southcorp’s business rose to 42%. Shortly after, Lambert’s head rolled.

Leon says not only was Lambert “arrogant,” he didn’t know his numbers. There’s a lesson there.

Today, Leon’s opinion of Foster’s (which bought Southcorp in 2005) isn’t any kinder. “Southcorp,” he says was “hopeless.”

“They destroyed Rosemount, Penfolds, the whole lot. You can’t be that stupid, I’m sorry to say.”

Of those he does admire, he seems to hold a special place for one winemaker in particular, Robert Hill-Smith of Yalumba. “Yalumba do it very well,” he enthuses.

”Every time I see Robert he knows what kind of deal I get from his managers because he’s so close to his business.”

“De Bortoli, Brown Brothers is very good, McWilliams, Taylors . . . they have good value for money wines.”

If the speed at which Dan Murphy’s has spread its national base frightens some (especially rival Coles Myer), don’t expect it to lessen any time soon. Leon believes the success of Dan Murphy’s has been built around the power that first, Dan Murphy, and then Woolworths gave him to make decisions quickly, and he does. “There’s no committee, just me.” He hopes that his successor, Martin Smith (who has worked with Leon for six years) will enjoy the same freedom.

And the future?

“If we keep doing what we are doing we will have very strong business in five years’ time, untouchable almost.

“We have 86 stores today and we have a five year plan that will give us close to 200.”

He believes the only serious competition to Dan Murphy’s will come from First Choice, the pseudo-discount arm of Coles Myer that was launched in Melbourne in 2005.

“Definitely, because only a few years ago they didn’t have any shops and now they have 48, I think.

“But I visit them regularly to check how they are going and they don’t have the customers. I was in Toowoomba a couple of days ago we had a shop full of customers and we went to their shop and they had only three customers.”

Yes, Tony Leon checks out the opposition religiously and in person.

It’s part of his old school approach to business, a lesson learnt from a master

This article first appeared in the June issue of Australian & New Zealand Grapegrower & Winemaker — the best-value wine industry trade publication available and the biggest-selling magazine in Australasia.

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