"The wine business is changing" - Interview, Accolade Wines CEO Paul Schaafsma - Part I

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In this month's just-drinks interview, managing editor Olly Wehring meets up with Paul Schaafsma, a wine industry veteran of almost 20 years, who moved up last year to become CEO of Accolade Wines.

Accolade Wines is owned by Australian private equity group CHAMP

Accolade Wines is owned by Australian private equity group CHAMP

I've been looking forward very much to interviewing Paul Schaafsma. I'd met him several times since he joined Accolade from Australian Vintage in August, 2012, and he's always proved colourful company. The Australian national is not one to sugar-coat his views, shall we say. Indeed, he's called a spade a spade for much of his near-20 years in the wine industry.

And now he's finally got his dream job: Since October, he's been CEO of Accolade, moving up from GM of the group's largest market, the UK & Ireland. You can tell he's pleased as punch to have landed the role. Despite a punishing week that has so far seen him fly in to London from Sydney two days ago, and will have him head off to Tokyo tomorrow morning, he's a smiling, relaxed presence as he invites me into his office in the newly-acquired complex in the leafy commuterdom of Weybridge in Surrey, just outside of London.

"It's changed a lot," he says of his new position. "I'm now looking after the total company and we do New World wine from everywhere and we sell it across the globe. I'm now involved in Australia in a commercial and operational capacity. We've also got a business in Asia that is developing and growing. We've got Anakena in Chile, Kumala in South Africa, Geyser Peak in the US. I'm now working with the general managers in all those countries. We give commercial autonomy to them, but we need to know what support they need and the issues that they have.

"It's a broader remit than I've had, looking at all the markets and all the production, trying to balance the two and make it all work."

I'm keen to know what Schaafsma inherited from John Ratcliffe, who had held the reins for barely two years. "John did a fantastic job at making the acquisitions for the business," says Schaafsma. "Grant Burge [in February last year], Mud House [in April, 2014] and Anakena [September, 2015] were all terrific acquisitions. They really set us up to be the leading New World wine supplier. The guys from [Accolade's parent company] CHAMP were also very supportive in the investments they made. The combination of the two of them working well has given me a platform to take the business forward. We've had great commercial success here in the UK, we've made some very strong commercial relationships and strategic partnerships. We're now the largest supplier to every supermarket in the UK. There's a recipe there that we want to overlay in other parts of the world, for example, in Australia, Western Europe, the US. That skill-set will benefit the business.

"My job is to broaden the success of the business over the next three to five years. We've had a positive, successful business, but the growth we want in certain areas needs to be accelerated."

Paul Schaafsma joined Accolade Wines from Australian Vintage in 2012, becoming CEO in September last year

The change of CEO signals to me that Accolade's adventures in M&A are now at an end. "Probably," agrees Schaafsma. "We're about 90% to 95% there in terms of what we need. We were committed to having full New World coverage. We could do with an Argentinean Malbec bolt-on, but we can do that through Anakena, we don't need to buy a winery to do that. So, we're not actively searching any new regions."

Accolade has long craved "one-stop shop" status for New World wine offerings, so much so that when the group sealed the purchase of Viña Anakena last year, the announcement boasted how Accolade now "had a presence in all key New World regions - Australia, New Zealand, South Africa, North America and South America".

Why the big deal? "The wine business is changing," Schaafsma explains. "Our customers are looking for efficiencies, rationalisation and consolidation. The supermarkets are actively reducing their supplier base and rationalising their ranges to try to find efficiencies. If I can get our branded product, our private-label product and their own-label product out of one bottling facility, and if I can do that with offerings from Australia, New Zealand, South Africa, the US and Chile and provide 15% to 20% of their range, it's going to bring about efficiencies that are helpful.

"Our customers would like to find a solution from one provider rather than have to deal with different producers in different countries. Otherwise, you'd need to increase your buying team and put on more resources. Aldi has one-and-a-half buyers [in the UK] and they can still develop a range. If we can provide a solution to our customers that allows them a simpler buying process, then that's got to be a good thing."

Much as Accolade appears to be reacting to the demands of its customers, that doesn't stretch to the Old World. "It's very fragmented," notes Schaafsma. "To go and source wine and create a brand in Old World markets is more of a challenge. We'll stick to what we know well and where we know how to source. Our mantra is to focus on the New World - we've got a lot more work to do in terms of where we want to be and in terms of market share. So, it's not on our agenda at the moment."

Following the extension of his purview beyond the UK & Ireland, Schaafsma is now well-placed to give us an understanding of Accolade's global presence. "The UK & Ireland is Accolade's biggest market," he notes. "We've got around 14% market share here, and over 50% of the wine we sell is in the UK & Ireland. That bodes well for cash-generation, but not so well for future growth. We're the largest player in a very mature market here," Schaafsma admits. "We've got to be realistic about what growth we can achieve."

Elsewhere, and in size order, Accolade sells its wares in Australia, Europe, Asia and the US. "We've done well in Australia in the last 12 to 18 months in growth terms. The acquisition of Grant Burge has been terrific for us in the AUD15 (US$11) to AUD25 segment, and that's where the growth is in Australia. We also have good relationships with [supermarkets] Woolworths and Coles. In the past, our business has relied on bag-in-box, which is in decline. We've noticed that, and so we've worked to increase our glass sales. It's looking very positive for us in Australia now."

Turning to Asia, and Accolade has been busy in the region. "Our Asia business has gone through some pretty dramatic changes in the last two years. We've worked to get clarity on the markets, to get our distribution right and to change some of our business to a direct model. There is a good opportunity to work directly with retailers in Asia, as we have done with Tesco to provide own-label wine to their 3,000 stores. It's not always going to work, but it can be done."

Markets that Schaafsma identifies as growth drivers include South Korea, Malaysia and Indonesia. "China is also a great opportunity," he notes, "but people need to understand the market and what the middle classes are actually buying. The 300m litres of imported wine represents an opportunity for a company like Accolade, so I'm going to be working hard on developing our relationships there."

Finally, in the US, Schaafsma spots a sizeable hurdle. "It's such a major wine market but, from an Australian perspective it's not the greatest place to sell at the moment. Some brands there have taken the market downwards for Australia. But, there are opportunities for other countries. We're seeing positive growth for New Zealand, for example, and the average price point is still quite high. If we can create relevance for our New Zealand portfolio there, that's a good opportunity. We want to really ramp up the effort on Mud House, for example."

Part two of this interview, in which Schaafsma discusses the power of the brand and the secrets of successful marketing, can be found here.

Sectors: Wine

Companies: Accolade Wines

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