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Starman

06 June 2003 By db staff writer

“standfirst”>Newly installed at Constellation Wines, Christopher Carson feels he can help the wine industry take a lead on tackling price promotion lunacy. Chris Orr plots his trajectory

CHRIS CARSON bounds around the room. He’s in a pretty ebullient mood, and so he should be. He’s just been confirmed as European CEO and president of the newly merged Constellation Wines. Considering it is forecasting wine sales of around £2.9bn this year, making it the largest wine company in the world, that easily puts him among a handful of people in the wine trade who can truly be described as wielding proper power. In the UK alone he now handles seven of the top 20 brands.

And this year Constellation Wines reckons it will sell something like 13m cases of wine or more, giving it more than 11% of the total UK wine market. Carson also has under his wing the Matthew Clark network and a host of relatively underdeveloped brands from the US that could help knock the likes of Gallo and Blossom Hill off their respective perches. Powerful – yes that’s the word.

Having rapid fired a series of opinions on what’s currently wrong with the UK wine trade –"FMCG –they must be joking. They do know the ‘F word’ stands for fast don’t they?" or "Anyone who says we’ve got to get out of promoting wines on price completely, isn’t in their right mind"– he finally sits down and looks intently at the notepad before him, grins from one side of his mouth to the other and chirps, "Fire away."

Well for starters, what’s the deal with Constellation – who wins, who loses, who stays, who goes? He keeps smiling, but it’s obvious that he’s bored with answering this question. "Well, the funny thing is that people always concentrate on the human resource side of a merger when it comes to savings – which tends to miss the big picture.

I mean, sure there will be some savings in that respect. But that’s not the reason you merge two company’s into a billion dollar entity. It’s not about chopping heads. Our major cost savings will be through our buying power. Being able to combine volume in terms of bottles, corks, dry goods etc. Bloody hell, even the most mundane things can suddenly give you a saving of half a million pounds if you increase your buying power."

He sits back and reflects for a moment. "Actually, those savings will be pretty significant. But to reduce a merger like this down to mere cost savings is ridiculous really, even if they are as significant as we think they will be.

The fact is, BRL Hardy wanted to be a global wine business. What the experiment with the Pacific Wine Partnership venture did was to confirm what we had already realised. We’d tried to make it in the US for several years, but it simply wasn’t working. To be a global business, we had to make it in the States and to make it there we needed the distribution network.

"And it’s also about creating opportunities, and the opportunities for Constellation as a business are immense. We set ourselves growth targets of 20% before the merger went ahead. Now with everything more or less done and dusted, I can see us beating even that. Last year in the US we saw sales grow by around 60% – that’s phenomenal.

I mean, the Pacific Patnership really has given us a good insight into the potential that’s out there for us." Carson’s enthusiam for the US market is understandable. The entry point for many Australian wines is higher than in Europe and while the distribution network is complicated, there doesn’t appear, at least in the US$5-10 bracket, to be the same price promotion lunacy that affects the UK. And it’s with the latter issue where we may see the real muscle of the new organisation flex.

Carson himself has wasted no time telling people in recent months that discounting has got out of hand, and it’s the next topic that he gets to. He admits wholeheartedly that the UK is a discount and bargain led culture.

"There’s not much anyone can really do about that," he comments. But that doesn’t mean he thinks it’s the future for the wine sector. "The industry should be charged with finding a different way of promoting wines to the consumer, other than just price promotion. The attraction of promotion is that you get instant volume. But if you get instant volume at silly margins, where does that get you?"

Isn’t that slightly hypocritical given the widespread promotions carried out by BRL Hardy before it became Constellation Wines? "Not at all. I can play the game. To aggressively price promote, you need to have very tight operating costs, you need to have critical mass and you need to have low production costs, otherwise it doesn’t make sense.

In Australia, Hardy’s has some of the lowest production costs around. That’s why we could be so competitive when it came to promotions. But we don’t have the desire to go to the levels of promotion that other companies have done."

Indeed, it’s widely seen that when Southcorp entered the price promotion playground, it left with a bloody nose, mainly thanks to Carson’s "competitive" instincts. But isn’t he being a little bit disingenuous when he calls for the industry to turn its back on price promoting? "Course not.

I am simply saying that as an industry we need to address the issue. I mean it’s got bloody silly really. The wine industry seems to be obsessed with losing money at peak times of the year. That’s just plain crazy. I think we should start to think about what other things we can do to help broaden the church as wine goes, and that doesn’t necessarily mean price promotion."

Getting new customers into wine is, claims Carson, just about the biggest challenge currently facing the wine industry, particularly in the UK. Consumption, he says, in the US and UK is up, but it’s not necessarily in terms of the number of people drinking wine, but rather the amount that current devotees consume.

In the UK the challenge is two-fold – get wine out to a wider audience, and make them pay for it. Last year, BRL Hardy handed out a total of 750,000 tasting glasses to consumers in the UK alone. "It works, believe me," says Carson. And similar activities are planned for this year as part of the strategy to go straight to the consumer and get them on board directly.

But does all this talk of moving awayfrom price promotions and upping the ante on average consumer spend indicate that Carson’s new position is giving him aspirations to take on the supermarkets. "Look, it’s pretty simple really. Long-term it’s not good for the wine trade and, believe it or not, it’s not good for the supermarkets either.

I’m not trying to take on anyone – but what’s the point of being where I am today if I can’t try and help the industry take a lead on something that is so vital, so important. I could say, ‘I’m alright Jack, thank you,’ but that’s not my style.

"Besides, we need to continue to deliver quality to the consumer – in fact we need to over-deliver. And you can’t do that if you’re constantly eroding margin, can you?"

With 37 wineries and more than 97 winemakers queueing up to supply wines and take orders off him, Carson clearly knows about the balancing act between volume, value and margin. That may be one reason why under the new structure at Constellation he’s hived off premium wines into a department of its own, separate from the hoi polloi of the major volume traffic through the company’s doors.

"Frankly if there was a weakness at Hardys and Grants," says Carson, not looking for a minute like he is actually entertaining the thought that there could have been a weakness, "it was not carving out enough of a niche within the premium sector. We’ve created a separate marketing and sales team for this area because we think it’s time our premium wines really got wider exposure.

That’s not to say it won’t pull in or work alongside the other various departments, but it needs a focus of its own. It needs some TLC is one way of putting it." The separation out of the premium wine sector is, of course, part of the bigger reorganisation post-merger. While there has been movement both into and out of the respective companies involved, and not all of it mutually agreeable, Carson is pretty confident that, overall, it’s been a positive move for the business.

"We had a very open and inclusive consultative process," he explains, catching himself slighly when he realises that he’s come out with what amounts to marketing speak –something of a pet hate. "Which basically means everyone got their say. In fact, more than that. On the sales side, for example, the restructuring follows a lot of the feedback we got from the sales managers.

The process had to give people in the company a structure that they could buy into, and I believe we’ve achieved that. We’ve given people ownership of that structure. We’ve used what is a strategic requirement of the merger to effectively benefit the business and to give everybody a much better understanding of what we’re about."

From the top down, Carson is responsible directly to Stephen Millar, CEO of Constellation Wines, as does Richard Peters at Matthew Clark. Below Carson, John Mills, formerly MD of Grants of St James, is UK managing director, with a team of 86 sales and marketing people on the off-trade side and 27 in the on-trade department.

Marina Gayan has been handed the premium portfolio to direct and she reports directly to Carson. Without sounding too grand, however, it’s the relationship between Carson and the rest of the world that is the most interesting part of the restructuring.

There are five principal "brand" owners, so to speak, each with their respective CEO answering to Stephen Millar. Agustin Huneuus heads up Franciscan Estates, Joe Moromarco runs Canandaigua Wine Co, Jose Fernandez at Pacific Wine Partners, David Woods at Hardy Wine Co Australia and Brian Vieceli at Nobilo Wine Co in New Zealand.

Carson is happy to admit that the role he occupies is almost that of a brand manager, even if it does say President and CEO on the business card. "Our job is to feed back to the States and Australia etc on the customer, and help them pull together the right package for the right market in Europe – that means everything from labelling to what goes in the bottle. So essentially, I manage the brands in Europe and effectively we operate as a distribution outlet for the porfolio of the Constellation wine business.

"Of course, I do manage the business as well, which I guess you could say was a full time job," he says with a wry smile. His joviality, however, hides a fierce determination, one that’s brought from working as a chef at The Savoy in the mid 1960s, through stints at Edouard Robinson, Reckitt and Coleman and then Enotria, to his current position. "Bloody minded, often bloody scary but bloody good at his job," was a description proferred by one supermarket buyer, who, for obvious reasons, felt it more diplomatic to remain unnamed.

But then Carson has pretty tough standards to live up to. Last year’s results for the BRL Hardy group meant it saw its tenth consecutive year of increased sales and profit. EBIT (Earnings Before Interest and Tax) was up 16.4% to a record US$144.6m, with net profit up 16.8% to US$84.3m. The upshot of such good results in what, supposedly, if the pundits are to be believed, are such tough times is that before its merger with Constellation, BRL Hardy saw full year net profits rise at a compound annual rate of 25% since it was listed on the ASX listing in 1992.

A good portion of that profit will have come from the UK, and it’s unlikely that shareholders will expect anything less with Carson in charge of the new structure. Not that it phases him in the least. "I do sometimes wonder," he says rolling his eyes upwards, "whether some people in the trade realise that we are actually here to make a profit." What there’s no doubt about, however, is that Carson certainly does.

Chris Carson CV

1965-1966 The Savoy

Early 1970s-1979 Reckitt & Coleman

1979-1983 Italvini / European Vintners

1983-1990 Enotria

1990 to date BRL Hardy Europe (now Constellation Wines)

Constellation Wines – Vital Statistics

60m 9l cases worldwide

37 wineries

5000ha under vine

98 winemakers

Major Brands