Recruitment in the time of Cholera...who to work with post Liquor Deconsolidation, Life after Conviviality
Magic Realism Art, Painting by Esteban Simich
The Liquor market changed last week and now the sages will tell us they had seen this coming for an eternity.
What has happened, has happened. Why it happened will not stop it reoccurring in some distant reality or near future.
For most of us the concern is how to continue in a trade we ply for the passion of the products we sell and customers we serve.
What Now?
Re-imagine your CV, make it sing of your experiences, customer relationships, achievements and vision of how you will help your prospective employer to navigate the challenges of the changed Oceans of our trade. This is a communication to a person that has a flood of rubbish ones hitting her desk this Tuesday morning.
This is an age of change, so present yourself, with evidence, as that flexible agent of change.
What is the Market Today
Structurally the UK is a mature market for wines and ales. It will progress into a slow decline having reached its volumetric hiatus for both categories over the past 10 to 15 years. Premiumization of these categories will plateau due to the decline in the London financial market as Brexit and regulation shifts Londons role as the Global City to a more secondary one. Spirits is the one true growth opportunity, but on a much lower base. The spirit trade customer is harder from a high knowledge/low attentiveness, high cost to serve and bias to corporate supply channels.
What is the Situation of our Customer
Most of our On/Off Trade customers have dealt happily with the monoliths of composite supply (all product distribution).
Matthew Clark, as a strategic supplier for beverages to our UK hotel estate, provides the expertise and consistency of service that we can rely on.
Through our business relationship we recognise Matthew Clark as a leading example in providing quality, value and efficiency to our business.
PAUL FARROW, VICE PRESIDENT SUPPLY MANAGEMENT EMEA, HILTON WORLDWIDE (source Matthew Clark website)
If you have lived in one of the industry silo’s i.e. wine sales or brand spirit ambassadorship, you will have a conceptual gap. Our (your) product is always the most important. Even though your portfolio of Romanee Conti & Champoux Vineyard Syrah is 0.001% of any lists sales we write, we think it is the core of the customers needs...trust me it is not. The account probably sells 100 times more Tanqueray or Pilsener Urquell, and will take cheques from those brand owners that actually opened the clients doors or keep them trading over the tough months of January to March.
It will be a new frightening world for Multiple on-trade buyers. Poorer service, higher price & less rebates. To get a zero point distribution deal, at below cost, is frankly a memory of the pre-2018 reality. Add 5 to 10 points on the cost model and hope you are not facing an investor revolt. Also your ability to recruit/retain staff has disappeared over the past 2 years, increase your labour pricing as the Spaniards, Italians and Poles are not coming.
Macro Business Reality
The fall of the loss leading, full service distributor will seriously change the metrics of the On-trade multiple operator. The past 20 years saw low value community drinking venue destroyed as a business model. As a culture we no longer ‘use’ a local pub, replaced by the high street coffee shop or mid level restaurant bar. The reality of these high street chains is they have expanded based on tight cost/supply/system controls. They are essentially City capital funded property investments. Since June 2016, effects of Brexit Forex devaluation and Climate change delivering serious shortages of grapes, has challenged the low cost model of distribution/retailing. Compound this with 2 years of pitiful Political uncertainity and a guarantee of Brex-apocalypse for investors. There is no desire to invest in British on-trade property deals. It will not improve for the UK but perhaps look to Dublin, Luxembourg or the low countries as good English speaking areas to pickup Londons downfall. Evidence Byrons, Jamies, Prezzo...this list shall grow.
Who are Players for the New Reality
We have a very complex market place for drinks supply. To her credit Diana Hunter (former CEO of Conviviality) invisioned a mass distribution player that would be the home of the power beverage brand, yet sophisticated enough to touch fine wine distribution to the on-trade & retail sectors, a powerful retailer, brand agent and multiple route to market. The £1.5 billion gap is a huge opportunity and risk.
There are several organisations who may try to fill the hole left in one leap. Hubris, many a multi-millionaire, undeterred, who feel the time is ripe to become a billionaire.
- Watch for a large distribution firm, backed with a strong regional distribution network, pitching to buy Matthew Clarks customer book and woo some key Suppliers
- Perhaps a play by former Bibendum directors to use their buy out funds to repurchase Bibendum as a trading concern, with their book and base systems. £10 million? Maybe less. Re-recruiting core staff and Working Capital funding being the major stumbling block to being more than a £30-40 million business, and a loss of gloss over the past 2 years to a strong brand.
- Bookers (owned by Tesco) had begun strengthening its on-trade ability 5 years ago, can the damaged goliath be flexible enough to expand its dominance in liquor retail to on-trade distribution?
- National Brewers and Spirit Brand owners. These guys lose a great deal of secondary distribution capacity by the fall of Matthew Clark and Bargain Booze. However they actually have brilliant relationships across all channels and often with direct to outlet capability, fantastic logistic capability and sound financials. These guys will pick up big chunks of the free trade from Conviviality’s demise. Unfortunately for chain on-trade retailers the ability to deliver probably will not be modelled on the same cost mentality as Matthew Clark would have offered.
- Second tier regional brewers have become more important, local distribution networks, core beer brands drunk here, local distribution centers, good stock holdings.
- Regional Wholesale Distributors - the big winners. Great service, defined geographic reach, big portfolios, owned delivery fleets. Hundreds of millions of pounds will flow to this channel, as will ambition and recruitment opportunities.
- Large Wine Merchants. Berkmann Wine Cellars is transitioning out of a direct to only wine merchant to a strong supplier to Nationals and Distributors also. Hallgarten Druitt - Novum has big funding, great brands and an ability to grow strongly. Liberty - never really showed capability outside of fine wine, maybe Sogrape investment will push a more aggressive approach. Enotria-Coes still hurt from the mergers terrible service levels, a private equity model looking or a buyer - great brands and people. Boutinot - Strong northern business and bit players in the south, private equity weakens ability to grow. Alliance Wines Glaswegian, good people and brands always struggled to crack the South
- Wine Agents - Generally these guys have strong cross market distribution. Some have been overly dependent on Matthew Clark for UK national on-trade. Some will be looking at big ticket debt tied up with Conviviality, especially as the ball that sunk Conviviality is their inability to pay supplier debt as well as HMRC. I imagine the Conviviality systems inability to settle customer invoicing and collection is the biggest card in their downfall.
Metzendorff, Fells, Hatch Mansfield Champagnes - LVMH, Laurent Perrier, Lansons et al Wine companies Boisset, United, Cordorniu, Freixenet and dozens others will lose significant cash and on-trade market service.
- Small Wine Merchants - everyone in this sector will pull in some weight. It is critical to maintain margin and manage growth as capital is hard to get. The big issue will be to reject poor payers especially with the likely hood half of the independent on-trade are barely surviving. Remember it is always nice when someone chooses to pay you for your efforts, it is a tough thing to be your own credit control, salesperson, administrator, buyer etc...a wage can be a nice thing.
Retail
- The Rump of Conviviality...Bargain Booze is a franchaise model that delivered stronger EBIT average than the other £1 billion turnover. £300 million retail, basically privately funded, as an opportunity to a smart operator to form the national buying group and distribution...Palmer & Harveys shell may suit and do a Mace or Nisa for booze, Winerites distribution site available in Geldred Road?
- Multiples - it’s all about Convenience. While Tesco frets with ideas of a sub-German discount model. The smart liquor money is convenience. In convenience Co-op is king. Systems and Distribution in place, and trust. Don’t under estimate the ability of the facia buying group to build retail distribution and deinitely loads of deals will be being placed in Barking, Park Royal, Birmingham, Leeds/Manchester and Glasgow with the C&C crews. I the river is blocked the river changes its’ course, liquid has to flow.
Indies - not really, lack funding and desire. Will become more important to fine wine than ever before. Some will pick up capability to play with larger on-trade and brands. Recruit wisely, find investment, grow...
What Job for you?
If you are young and inexperienced
Spirit or Brewery Brand roles deliver a huge training/learning platform to progress your Career. It teaches a discipline and understanding of the bigger issues in the market you do not receive in smaller companies. Allocate 3-5 years training time, move roles internally as much as possible. Be mindful not to be a prick, you should create friendships here that will work for you for the next 40 years.
If you are mid career & have a mortgage/young family
Don’t suppose you have learnt enough yet, be brutal on what your strengths or weaknesses are. Continue to build, make plays at the mid level roles that give you better vision and visibility. Be prepared to move companies or roles to progress your capabilities and always look to what this role is preparing you for. Being the perfect account manager for 20 years is not the objective, or is it. Often quality smaller or regional companies will be looking for some one to cover a higher level role that you technically are not trained for. If you believe in them and have faith you can grow with them seek it out.
You are Senior
Here you are committed and placeable. Pay scales reflect your skill set, ability to structure teams, finance, distribution, logistics. You will receive more as a leader and visionary.
Personally, I worked as a Bibendumite for many good years. To all our colleagues in the trade that are with Conviviality this a heart felt good luck and we sincerely wish you the best in finding a future role in the trade.
Remember if things get tough to pick up the phone and share your troubles with old colleagues and friends, we have all had tough times in this game.
Our benevolent society is here to help if you need a boost, http://www.thebenevolent.org.uk
A plug for a mate recruiting Gary O'Kelly for drinks roles at Vinokelly twitter @GaryOKelly
https://www.just-drinks.com/analysis/the-clouds-surrounding-conviviality-the-coca-cola-cos-booze-move-and-pernod-ricards-spirited-performance-the-just-drinks-analyst_id125505.aspx
https://www.thetimes.co.uk/article/buyers-circle-the-ruins-of-convivialitys-empire-095jcbxbn
