Chris Heath became CEO of Stock Spirits in 2009

Chris Heath became CEO of Stock Spirits in 2009

Late last month, just-drinks editor Olly Wehring met up with Chris Heath, the head of Stock Spirits. The two reflected on what has been a lively time for the UK company that operates predominantly in Central and Eastern Europe.

Chris Heath has been busy. The CEO of Stock Spirits has overseen the spinning off of the unit by its owner, Oaktree Capital, with an IPO launched late last year. Then, Stock stepped out of Oaktree's shadow completely last month, when the private equity group sold out entirely. Meanwhile, he's secured distribution tie-ups in Czech with Diageo and in Poland with Beam Inc (now Beam Suntory Inc).

He must be exhausted. 

“I'm doing very well, thanks,” he says, albeit with a slight sigh in his voice, when we meet in London. “Quite a lot has changed since we last met (in late-2010).”

We jump straight in: “The IPO couldn't have gone any better,” Heath notes. “We had great support from the banks and a lot of interest from investors.”

As Heath admitted to me almost four years ago, Oaktree's exit from Stock has always been on the cards. Indeed, it looked for a moment, back in 2011, that the group had found a potential buyer in Diageo.

“In 2011,” Heath explains, “we had a twin-track process of a trade sale and an IPO. With the former, we saw a great deal of interest but Oaktree couldn't agree with the potential buyer on price. We have continued to grow the business: We've just had our sixth consecutive year of record EBITDA, so, looking back, they were probably right (not to sell). In 2011, the IPO market was basically closing down. When we did float last year, we were at the other end when it was just about to open up again.”

As is so often the case, the transaction has been seen as a win-win. “The IPO gave Oaktree the opportunity to get some money off the table – that's how their business model works,” says Heath. “Some of our investors said there wasn't enough liquidity in the stock, so Oaktree ended up selling the lot. It works for us: We're completely in control of our destiny.”

Stock Spirits' CEO, Chris Heath

And yet, a sale wasn't considered this time around. “Having seen the sales process not complete successfully (in 2011), we decided this time that we didn't want to confuse things,” he says.

The process undertaken was “quite intensive”, says Heath. “You have to put a lot of hours in to make sure everything is as it should be. That's been very demanding.” His advice for those considering taking a similar route is: “Choose your advisers very carefully: Make sure you're happy with them. The process that we went through in 2011 was much more painful than last year's. You need a big team of people who know what they're doing to go through an IPO. Without the support of good advisers, the process would have been a lot worse.

“You've also got to understand what it is that investors might be interested in investing in,” he continues. “Try to differentiate yourself from the rest of the investment opportunities out there. You also need to articulate all that to someone who isn't familiar with your industry in a short period of time – you don't get very long with them.”

Now that Stock is standing on its own two feet, one would understand if Heath has a case of the butterflies. “I wouldn't say I'm nervous,” he counters. “I would say I'm excited, more than anything. In terms of the opportunities for us, people who we were speaking to about potential acquisitions a few years ago are back on the 'phone to us. We've initiated a number of discussions since then. So, we can get back to focussing on our strategy now.”

It would appear, then, that Stock is looking to make a purchase or two in the coming months. “Our growth strategy is quite different to everybody else's,” continues Heath.

“We want to buy brands locally that consumers already have a very positive association with. At the moment, a lot of domestic producers are not utilising the brand heritage as much as they should. That's an opportunity for us to get hold of the brands, take the current portfolio, improve the quality of the liquid, improve the quality of the packaging and then stretch it into other flavours, which is a particular expertise of ours.”

Operating predominantly in Czech and Poland, Stock is dealing with consumers that have a long and deep relationship with domestic spirits. “Our store is a little bit different,” says Heath. “We're in a part of the World that is largely dominated by domestic players than the larger international spirits companies. There's no-one else really playing in that sweet-spot. We're in the middle, taking domestic brands, improving them and then stretching the equity.”

One example of this, according to Heath, is the recent launch in Poland of a dark cherry-flavoured extension of the Zoladkowa Gorzka vodka brand. “Cherry is a very traditional flavour in Poland,” he explains, “while Zoladkowa Gorzka is as well-known in Poland as Guinness is in the UK. So, we've combined a traditional brand with a traditional flavour. We expect both old and new consumers will try it. A key part of the story for us is not to throw something brand new at consumers that they don't recognise. This gets linked back to the heritage of the brand.”

Part two of this interview, in which Heath discusses Stock's current performance, its international operations and whether his work is now done, can be found here.

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