The just-drinks interview – Troy Christensen
Given how many times the position of chief executive of Constellation Europe has changed hands recently, and the problems the company has faced in the crucial UK market, the more cynical observers might wonder if Troy Christensen had been handed something of a poisoned chalice. But speaking to Olly Wehring for this month's just-drinks interview, Constellation's new European CEO appears ready for the challenge.
The turnover of personalities in the position of head of Constellation Europe has certainly raised the eyebrows of late. Current CEO Troy Christensen assumed the position in March of this year, taking over from Jon Moramarco, who led the unit for only 14 months. Indeed, with three changes at the top in the last four years, one could be excused for wondering how long Christensen will be there before the merry-go-round kicks off again.
"I'm hoping that I can do everything to make sure that next year you'll be speaking to me," Christensen jokes. "Clearly there has been a lot of change within Constellation Europe; there's been a lot of nasty things written on just-drinks about our performance in Europe and otherwise."
By the company's own admission, however, Europe has proved troubling of late, with the UK proving particularly difficult. Indeed, Constellation's chairman and CEO, Richard Sands, said in June that "lower results from our UK business" had hindered growth in the first quarter, leading to a 64% fall in profits for the period.
Christensen is aware of the troubles of the past, but is also keen to emphasise his hopes for a brighter future in the region. "Now that I'm here," he says, "my agenda is that there has been a challenge in the marketplace - clearly the discounting in the UK has impacted everyone. A lot of people would point the finger at Constellation as the culprit, rightly so, I think. But I do think we're in a position where the category has expanded because of the discounting. Now, we are in a difficult position that we have to figure out how to take that new category and build some value into it."
So, with the discount wine category clearly here to stay, Christensen is realistic enough to know that, while looking to increase value for the unit, Constellation cannot afford to pull out of the cheaper segment altogether.
"In the past, I think the viewpoint always started with price points and promotion schedules," he concedes. "What we need to really focus on now is branded quality, and we believe that consumers will pay for the quality, but we need to educate a little bit as well.
"Conversely, if our competitors in that category stay at three for GBP10, we're not going to get a lot of traction and that would be an investment not wisely spent. But that would be an example of where we're trying to demonstrate to the marketplace a way to put some more rational price ladders in to show consumers that the more you spend, the better quality you get. So, it's going to be about quality, brands and about slugging it out in this marketplace."
Staying in the UK, earlier this year, Constellation sold half of its Matthew Clark wholesale business to Punch Taverns, creating a joint venture which handles on-trade distribution for the company in the UK.
But Constellation has said it does not regard Matthew Clark as a core business. So why bother keeping hold of 50%, instead of getting rid of it completely? "Matthew Clark is probably not core - we're a wine company," Christensen concurs. "But at the same time how do you control your route to market, speak to the consumers and make sure that your brands and that business are being done in the way you desire? To me, the perspective is that it's a strategic asset of our business."
Christensen also believes the move is a healthy template for the rest of the Europe region. "Across mainland Europe, where we've been behind the ball in getting distribution to a lot of key markets, we need to do so through some compelling investments. We're going to have to do the same thing we do with Matthew Clark to make sure our brands are getting a fair shake in the business."
So, with a firm idea of how to handle distribution, Constellation is now looking at other ways of increasing its return from the brands it owns. One approach Christensen is keen to utilise, is the role of personalities within the industry. "I do agree that we've been a little bit too suits and spreadsheets in this marketplace," he says. "We haven't brought the Robert Mondavis and Kim Crawfords into the story, and that's what we need to do. If we don't do that, then we only concentrate on price and no-one's going to win.
"We don't just want to go to some appellation and throw wine in a bottle with a fancy concept label and use our distribution muscle to throw it at a price point," he continues. "We're more interested in finding some of the personalities and something with provenance that has a story to tell. That's a much better avenue for getting value back into the marketplace. I'm not going to tell you who now, but we're looking at a number of origins. Hopefully, within the next three to six months, we will have a couple of new products that speak to this idea of building a story."
Although wine is Constellation's prime activity, the company also has substantial interests in the UK cider market, with the Blackthorn and Gaymers brands. However, Christensen is aware that Constellation has yet to take full advantage of the current boom in the UK cider market prompted by the extraordinary success of the Irish brand Magners.
"I think the cider category for us hasn't seen the same upswing that Magners or Scottish & Newcastle have," he says. "It's tough, but it's certainly moving up even though those two guys are taking the lion's share of it. Cider's an important business for us. The impact of the Australian wine glut on our business meant that cider probably didn't fall in the top priority list and we missed an opportunity. But the market's getting interesting again - there are opportunities to bring the product into other markets through Europe. Our cider business hasn't been as healthy as we'd like, probably due to a lack of focus thanks to the challenges we've had on the wine side.
"We're committed to (the cider category) and we're glad to see the category grow again. Now we have to find a way to get in there and claim a more significant share." Expect to see increased profile for Blackthorn and Gaymers going forward, then.
Christensen also sees other growth prospects for the company outside its core wine business. For instance, the company handles distribution of Grupo Modelo's beer brand Corona in the US and acquired Svedka vodka earlier this year, so could the company branch into other drinks categories in Europe? "We've got some pretty good products as a company, so I think there are some opportunities for us to focus beyond wine to get some other value in our business as well," he says cryptically. Further information wasn't forthcoming, however.
So, with six months already under his belt, Christensen remains confident on two fronts. Firstly, that he'll keep hold of the hot seat at Constellation Europe a little longer than his predecessors, and secondly, that the unit can move up to play above and beyond the discount sector. Both sound like challenges, but challenges that Christensen seems eager to embrace.
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