INTERVIEW: Star quality

Following a period of internal flux, Constellation Europe has a new CEO and is geared up to instigate change in the market. Charlotte Hey speaks to Troy Christensen and Christopher Carson

But why so much interest? Is it because the company’s financial results to date have not been too good in Europe? Could it be that there’s been plenty going on but not much information being let out? Or could it simply be that more was expected from the market leader?

Given such questions, it was a rare opportunity to be able to sit down with a former CEO, Christopher Carson (now a non-executive chairman) and the latest to step into the top slot, Constellation Europe president Troy Christensen, to discuss what had been going on and what challenges lay ahead.

Christensen is a product of successive mergers and acquisitions by his parent company, joining Constellation from Canandaigua Wine, with a strong financial background. In his new role he has the advantage of having previously been CFO at Constellation Europe, so he is familiar with business and European market conditions. He is quick to admit that absorbing the brands of Vincorp and Western Wines has had its challenges. “It was not just about cultural integration but also the implementation of different systems, as happens with all mergers. It forced us to have a small period of introspection as to how we approach this market. But I can now very definitely say the trade will be seeing us being much more proactive in going forward.

“Our priorities have been to make sure that all of the systems we put in place were stable and durable. We also had to ensure that our people were motivated to be proactive in a challenging retail environment. Communicating the message internally is just as important.”

Christensen’s manner is open. He is prepared to be frank about the issues his company faces. Undoubtedly an American, his style is direct. However, the great thing is that he likes to have a laugh and is not averse to a touch of irony. “Yes, the UK wine market,” he smiles in response to a question on Constellation’s recently well-publicised “soft performance” in the market. “There’s no doubting it has a difficult competitive set, a parsimonious consumer, powerful retailers and then there’s the glut question… challenging but not impossible!

“Australia, for example, has helped to drive a discount mentality in the marketplace. This we have to admit is not favourable to driving value. Our challenge now,” he continues, “is to increase our positioning. Constellation Brands is excellent when it comes to quality [but] what we now have to do is turn our attention to educating the consumer.”

Come full circle
“We are at a trigger point where you will need to see some rational discounting back to the marketplace. It’s not going to happen overnight. The race to the bottom is no longer the game and from a leadership standpoint we have to be seen to be instigating some change in the market when it comes to pricing.”

Unusually, Christopher Carson has remained pretty quiet up to this point. But on the issue of pricing he cannot resist interjecting: “As Troy has pointed out in this period we would like to see pricing move up. It has to move up and we have to be seen to be pushing the retailers to look at alternative forms of promotion, outside BOGOFs and all the rest of it.” He then confesses: “I know that I have been accused of being heavily involved in that but I would say that these things are cyclical. There will always be pricing and competitiveness in this market but it has gone to a point where it is not sustainable. It just has to change.”

A bold statement, but one that will surely resonate with the trade. And Christensen is keen to point out that Constellation is committed to this market. “The UK market is key to our business. Yes, we are commercial. Yes, we have to make money. But we also know that we have to offer a clear point of difference with our brands in terms of quality and value. It can’t just be all about price, price, price. And that is relevant across the category.”

Christensen continues: “This is about dialogue with the retailers and perspective. We spent a lot of time improving the quality of our product to make sure we were over-delivering on the price points we trying to hit. What we have started to see happening as a consequence is that, with retail support, we have been able to implement price increases and see those brands remaining steady in the market place.

“This is an education process as far as the consumer is concerned; it is not one that can be approached with a broad brush,” continues Christensen. “Our period of internal consolidation has allowed us to look at consumers and segment them into better clusters when it comes to brand positioning.”

Carson takes up the thread: “Knowing your consumer is one of the biggest challenges for any brand owner at the moment. Getting them to understand price differences and why one wine costs more than another is just part of that challenge.

“I would not be against the idea of a number of companies getting together to really get that message across to the consumer, of taking the wine out of the aisles and getting it into people’s hands. I know the generics have a role in this but I know that their funds do not stretch to a broader wine message.”

An interesting intellectual point perhaps but Christensen is keen to stress that Constellation is now ready to make a difference in the UK market: “You could argue, and I am sure that we have been accused of this by some, that our business model is a disadvantage – a few too many suits and spreadsheets. But I say that our critics should look more closely at what we have actually done.

“When we acquire and the owner comes back to work on Monday he might have more money in the bank but he’s straight back to work in the same way he was the week before. We do not employ an interventionist policy that reaches from HQ. We don’t send out some corporate edict about how to make wine.

Playing to strengths

“We have great brands, great winemakers and what we want them to do is continue to make wine to the best of their ability. We’re not about dumbing down.”

Christensen freely admits that this is not going to happen overnight: “It’s not a broad brush and we certainly can’t approach everyone in the same way. We have invested heavily in consumer research and will continue to do so. Only by understanding more fully what drives the consumer, by getting the right emotive cues to the right consumer, can we drive value over time.”

“It’s an industry issue,” adds Carson. “We have to lead the consumer by the hand when it comes to wine. We have to explain to them what the differences are and how that affects their drinking experience.”

Would this be helped, perhaps, by more effective category management within retail? Christensen is positive: “From my perspective I would say that category management is going to be important and coming from the States I can only say that it has not only helped to improve our brand’s performance but that of the whole category we were involved in managing.

“In an increasingly competitive retail environment it is within our interests to make sure those categories we are involved in perform to the best of their ability.” Even in the face of decreasing SKUs and consolidation of retailers? “Even more so,” he asserted.

Carson adds: “In my experience, I would say that in the wine sector there isn’t really a very good understanding of category management. Champagne, I would say, is the only category where, in comparison to other branded sectors outside ours, there is real category management going on. These days retailers don’t say no to suppliers who understand quality, appreciate the need for efficiency and have diversity of portfolio. Suppliers who understand quality and how a particular category works. It’s fair to say that retailers are pushing down on the number of suppliers and I would suggest that in that climate, if you are able to offer the retailer those insights and services then you will win.”

Running a company the size of Constellation means your relationships with retailers is pretty important whatever the market conditions. Christensen acknowledges that Constellation has to be more aggressive in pursuing growth across Europe. “We face interesting opportunities in other geographies, perhaps in some that means a new set of challenges, others are similar to  the UK. But we are convinced that our proposition will work.”

At this point he becomes coy as to the next big push in continental European markets: “Currently we are investing in people and relevant distribution partnerships. We have to find the right ways to market and there are still a number of decisions to be made.”

Leading the way
Christensen then switches the subject back to Constellation’s own challenges: “We have to rally our position as industry leaders. Now that we have re-aligned our own position internally we have to be seen to be instrumental in key issues affecting our industry.”

Carson interjects: “The wine industry has not yet understood that wine is alcohol, it seems to me. We need to get to that step first before we can be seen to be near what the beer and spirits industries have been doing. The problem is it costs money and we have to start to invest.”

“It’s great for us to have that involvement via Christopher at a broader trade level,” adds Christensen, “and we are committed to having a louder voice on these issues. Focus our message not only in terms of our products but also our position as an industry leader.”

If he is to be taken on his word Christensen certainly seems determined and committed to doing just that. He is aware of the challenges his company faces but he also gives the impression that by using an open, more engaging and focused approach, Constellation could be in the position to achieve what is expected of them.

© db May 2007