CEO interview: Troy Christensen

In the latest of our CEO interviews, Cesium Group – in association with the drinks business – speaks to drinks distributor Enotria&Coe’s CEO Troy Christensen.

Troy Christensen

Paul: Great news on the recent acquisition of Coe Vintners and the move to a composite offering. What does this mean for Enotria going forward?

Troy: Over the past year and a half that I’ve been with Enotria, we’ve been working to grow the business, while still maintaining our premium position in the market. We invested in a new warehouse which doubled our capacity, upgraded our systems and processes and then sought to find a business to acquire that had similar position and ethos as Enotria. Coe was a great fit because it had a similar focus on customer service, a great portfolio of premium products and had positioned itself as a category leader through its channel activation. Both businesses really believe that premium wine and spirits are instrumental in driving the best consumers to our customers and that we can help our customers optimise their beverage alcohol portfolio through consumer engagement, which ultimately is going to make them much more successful. It was clear, from the beginning of the integration process, that both businesses were very much aligned when it came to culture, methodology and structure – even with the different portfolio focus for each business via wine and spirits. We’ve spent the last six months preparing for the launch of our new composite business, with the goal of not only being able to provide the same great level of the service each company excelled at individually, but collectively maximise each portfolio for the benefit of our customers.

Paul: That makes sense with already having the route-to-market in place and now incorporating the additional SKUs. I noticed in the press Enotria have brought on board a number of Masters of Wines recently. Jon Pepper and Junior Dirceu being key examples, is this part of a broader strategy towards a premiumisation of your portfolio?

Troy: It is, but it’s also about understanding our portfolio and how it fits by channel. Historically, Enotria’s had a very passionate sales force who had a great empathy towards wine. They loved selling the wines they loved, but at times, missed the channel specific customer and consumer requirements. Jon Pepper is an MW and he also has a strong marketing background and he has helped us to develop a unique and bespoke channel segmentation model that matches the right service and products to the right customers. For example, in the food-led channel alone we have identified three distinct segments: fine dining, premium-casual dining and mainstream casual dining. There’s a clear understanding that each of these channels have specific account and consumer challenges, and business requirements from both wine and spirits.

Jon’s been working on defining how each product in our portfolio fits into the individual channels, and ensuring we have the broadest range of country of origin, price-points and varietals – and also ensuring that each wine has a ‘reason for being’. Junior, meanwhile, is a bit of the Yin to Jon’s Yang. He is a passionate and creative wine professional, but one who has spent time in sales, so he is very commercial. I have never seen someone so effective at captivating and holding an audiences attention – he is great at encouraging people to explore in the wide world of wine. Junior excels at finding unique, interesting and emerging products, whilst always being very aware that they must have commercial relevance in order to be introduced into the portfolio at Enotria & Coe. In summary, Jon’s role is the overall portfolio strategy and execution, and Junior pushes the boundaries with new, creative selections that gives us some ‘spice’ – some extra interesting items within the portfolio.

I would say that our aspiration is to help drive sustainable trends within the categories. The industry likes to talk about the new and interesting things in wine, but gatekeeper interest frequently does not translate into a successful category and product trend. For example, an item gets some press exposure and is put on a wine list, but then it doesn’t get sold through and the industry is already moving onto the next new thing without creating a sustainable product. Despite the industry interest, we have not made the consumer aware or engaged enough to drive the product or category. This same paradigm also happens with spirits, but they do a better job investing in brands and creating interest and categories. I believe that brands are better built in the on-trade, but not necessarily organically. It takes strong focus, execution and coordination between supplier, distributor and outlet. If we can work together to get the right product in front of the consumer, and engage them, we can build the trends and the brands that support everyone in the industry. If we can work together to help build the category, engage the consumer and sell on something other than just price, this will benefit everyone – the customers, the consumers and the suppliers. This is our aspiration, to be the category ambassadors for premium spirits and wines.

Paul: It makes a huge amount of sense to start with the segmentation and then overlay category thinking so that you’re hitting the right occasions with the right message and the right skills. I picked up in the press that, at the inaugural Wines and Spirits Education Trust Diploma event, you had been quoted in the press that the UK wine trade ‘is destroying value through volume’. I don’t think anybody would argue with you. What do you feel the industry can do to reverse this tide of commoditisation through deep discounting?

TC: I believe the off trade is going through a cycle – to use a stock market analogy – it is in the correction phase. We are at China’s stock market levels right now! There has been recent growth, and consequently, an over-proliferation of products without the right messaging and consumer engagement. As the category matured, the strategy was to disintermediate the agencies and go direct to wine suppliers and also leverage the big branded players. The big brands now have a great position in the market, as they should, because they invest and help provide a signpost to consumers in a confusing category. At the same time, there were many agents and other intermediaries who were working to incubate the next brands, develop trends, work towards innovation and worked with the global suppliers across the off- and on-trade, to bring things to market that interest the consumer.

Yet, in the effort to cut category costs, this disintermediation has removed the whole incubation process for new products and ideas. This has increased the complexity on retail, increasing the headcount and thus the costs. The category reduction is in response to reducing this complexity and costs, but consumer engagement and the pipeline of new products has suffered.

Most retailers’ shelves have the big brands and then private label, with very little in-between. Most have also migrated from High-Low to EDLP, which is good, but it leaves minimum differentiation at this point. Also, this hasn’t really addressed the source of the disruption which is the Discounters who have come in with good prices, but also interesting ranges. Aldi and Lidl aren’t advertising price position for wine and spirits, but quality and interesting products. So, now that we have cycled through this “reset” or “correction”, I think the off trade will look to create point of difference among each other and hopefully the category is poised for the next cycle of growth and innovation. This is important, because it isn’t just about selling wine in retail, we all know that the wine drinker is one of the best consumers to have in your store – their basket is 150% more valuable than those without wine.

The on trade has been an interesting contrast to the off trade, it has been growing and premiumising. Operators are investing and expanding. There’s been a lot of innovation – operators are trading up and many are using beverage alcohol to help define their brand image through products, cocktails, and wine-list. While the off-trade has been reducing their range dramatically, a pub in Manchester just listed their 600^th gin. Enotria & Coe supply about 200 different gins. This craft explosion is happening in beer and spirits which suggests that there is an opportunity for engagement and the range reduction seen in the off trade may be counterproductive. However, there cannot be a range without a purpose. There needs to be a ‘reason for being’, a point of difference and there needs to be some activation or consumer engagement. Gin was dead a few years ago, yet look at it now! This is being driven through localism, interesting new products, consumer engagement with the perfect serve, bartender education and this trend is actually being exported out of the UK to the rest of the world.

So, we are seeing the on trade use beverage alcohol to engage consumers, help define its brand image, attract the premium consumer through premium wine and cocktails and all of this is being done with great activation. And it isn’t just alcohol, consumers are even trading up mixers and paying more for premium tonic and non-alcoholic drinks. I do think many of these trends can effectively play in the off trade and I expect to see real category rejuvenation in the near future.

Paul: It appears that the discount retailers seem to be stealing a bit of a march in capturing some of this mid to premium segment within wine, and that they have done a pretty good job of educating shoppers and consumers on terroirs, on authenticity, on grape varietals. What do you feel we can learn from this around shopper insight and consumer trends?

Troy: One of the things I discussed at the WSET event, was how in the US there has been a huge growth in Prosecco – up to 4% by value and 41% by volume – so it is growing value over volume. In the UK on trade, Prosecco and sparkling is growing value over volume, but in the off-trade quite the opposite. Prosecco’s up to 67% by volume and only 60% by value, this means we’re discounting the product. This is a great product that is engaging the consumer and yet we are finding a way in the UK to use price as the key feature to drive growth. This is a microcosm of how some of the off trade is presenting itself, and I think the on trade shows there is another path.

The discount retailers, by their nature, have a low-price reputation. But, if you see how they are presenting themselves, it is through quality and an interesting range. For example, we sold through the discounters a substantial amount of Ice Wine last Christmas. At £25 per 500cl bottle it is not cheap, by any stretch of the imagination, and yet it flew off the shelf. This clearly isn’t just a consumer buying on price, it shows they are doing a good job engaging their consumers with interesting products at good value prices and are selling the wider message.

The other major retailers have responded through price reductions, but that isn’t really fighting the discounters based on their articulated position and therefore, not provided a true category differentiation. I think after the recent category resets, in the near future you’ll start seeing many retailers use beverage alcohol to help create a point of difference for their businesses and their brand, and working towards a wider set of differentiation other than price.

Paul: Interesting juxtaposition, in that you mention the discounted message being quality being relevant to you and I think Ice wine being very favourable which is quite a niche skew in itself?

Troy: Going back to my prior point, this consumer is the best one to have in your store. The person consuming this ice wine is going to also purchase some cheese and other interesting foods – likely with a higher margin. This is where the product can provide a great opportunity for impulse display and cross promotion opportunities. The basket of this consumer, with the ice wine, is much higher than one without. This ideal consumer assuredly will have enjoyed the wine and cheese and then makes it back next week for the next food and wine adventure. This isn’t just a one-time sale on price, but consumer engagement at an emotional level, that’s very powerful.

Paul: Which brings us nicely to the next point around an explorer mind-set. And that explorer mind-set often making more premium choices rather than being commodity-driven in their purchases. What is your view on how the industry can better educate consumers into this explorer mind-set?

Troy: Everyone would admit the whole category, the market, has relied too heavily on promotional activity detracting from core messaging and driving consumers to focus on price. This is the fault of the suppliers and retailers. We drove the consumers to buy on promotion, and they did! Everyone was looking for the greatest deal, so I think this shift towards EDLP is positive and gets consumers back into a rational view of pricing for the category. But, this isn’t a panacea, there will be some short-term volume reduction which should be countered by incremental consumer engagement.

To get through this pain, there is an opportunity to find products and position to engage consumers, instead of going back to only price. Using the Discounters again as an example, we provided a good quality Barolo and Chianti Classico at a good price. They were some good value SKUs and, once again, these products were snapped up quickly by people looking to get a great wine at a bargain. You can see this happen in the States, where the largest wine seller, COSTCO, has an extremely premium range all at very competitive prices. So instead of just putting the value products on gondola end, it would be great to see some interesting products supported by good display activity to drive incremental interest. I think wine is such a great product, it is a tragedy to see the category reduce shelf space in the UK. We need to find ways to claw this space back, it can be done with impulse features and cross promotion activity with food. Anybody not leveraging the category to drive food sales is missing out on a great opportunity.

This story isn’t just a wine story, we are seeing the same kind of behaviour with craft beer and spirits. Many of the craft distilleries provide a local flavour and facilitate conversation around the home or dinner table. This reinforces the positive feelings and emotional engagement, which is so important to really get that consumer loyalty where the on-trade is currently succeeding The off-trade needs to come back to doing those kinds of things in order to drive improved performance that the category can bring to the overall business.

Paul: Thank you, very valuable points. On to a probable bone of contention. To what extent do you feel that FX rates dictate listing decisions for distributors, for retailers?

Troy: The UK is a wonderful place to be if you’re a wine consumer because the shelf space has wines from all over the world. In most other countries there is a bias towards the local product. The FX does have an impact but usually at the mainstream or value wines. Even in places like America, and that mix of bulk into the brands, it is all about where the cheapest product is based on vintage and currency. It’s going to be purchased in large quantities over the course of the year. And you see that shelf space migrate, grow or shrink, depending on who had a good vintage and FX position. But, above the mainstream there is less of an impact on FX. If someone loves Italian and French wine, they won’t stop drinking it if the Euro strengthens, but they may switch at mainstream and value.

Paul: What would you say are key varietals and regions that are delivering growth for Enotria&Coe, if we look at the wine elements of the business?

Troy: Prosecco has been an animal recently, I’m very worried we’re going to kill it as a category and this is a product that’s engaged consumers and that people are interested in. If we turn it only on the price and there is not a brand which is driving the category… Some people are helping drive the category towards consumer engagement, the on trade is turning to Prosecco on tap. It isn’t legally “Prosecco” in that case, but seeing the quantity at many UK style bars, where attractive millennials are ordering carafes of Prosecco, it’s a great sign.

We are trying to take this trend and premiumise it further. Our supplier partner Ferrari has Italy’s best sparkling wine and can provide a great next step for the adventurous Prosecco consumer. Also there is a great deal of Malbec growth in the on trade, but I just haven’t seen this trend hit the off-trade at the same pace. It is a great taste profile and great price, so I think it will have a much larger spot on shelves in the near future – despite animosity over the “Hand of God”.

Paul: Pretty broad question – what do you think the future looks like in the wine category, aside from the Malbec and the Prosecco that we touched on earlier? What are the trends and predictions you foresee in the coming months and years?  

Troy: One of the interesting trends in retail is the success of the independent specialists. Many have added a wine by the glass, cocktails and small food platters to enjoy while seeking out the next exciting wine. People can come to the store, taste, explore, enjoy and really engage with the products. This is tremendous consumer engagement and builds incredible loyalty to the store and engagement in the category. Despite the UK consumer historically preferring heritage brands, these outlets have some pretty funky labels and interesting wines. So I think with the Millennials looking beyond the large brands and generic own labels, the Indies have created quite a space for themselves.

Paul: Thank you, and what’s next for Enotria&Coe? What can we expect to see from Enotria&Coe in the years to come?

Troy: It’s an exciting time. We’ve just launched the official integration of the business with a Showcase demonstrating that premium wine and spirits are ideal bedfellows in helping to engage consumers. We are working to provide best-in-class supply chain solutions and customer service, which is unique with this type of complex portfolio. Instead of culling ranges, we are investing to build the capability for us to supply the unique, different and rare; so more complexity which is counterintuitive for a distributor.

There is a lot of shuffling of the deck chairs going on in the industry, and we see ourselves as a business hoping to grow and build the category in a positive fashion for our customers, suppliers and consumers. I don’t believe consolidation for the sake of it is good, there needs to be a point of difference, not just scale and price. Hopefully now that we have gotten over the integration and system challenges, we can focus on finding new ways to bring exciting and interesting things to our customers and consumers. I am looking forward to an exciting ride!

About Cesium Group
Cesium Group is a boutique headhunting and HR consultancy working across the beers, wines and spirits categories, both globally, and in the UK. We take the best elements of process and structure from the big international search firms and HR consultancies, but redefine them in a more agile, authentic and immersive way. The result? Better than best practice that positively impact the bottom line of our clients.