A leaner, fitter Ehrmanns

It wasn’t one fell swoop, but a series of events over a short period of time that saw Ehrmanns lose its biggest and best-known brands – and be bailed out by Global Vintners in July 2009 so it could trade without bank debt.

Langguth’s Blue Nun, which Ehrmanns had been instrumental in building since the 1990s, moved to Bottle Green in May 2009. Then, in August, the Company of Wine People dropped Ehrmanns to distribute Arniston Bay through Blossom Hill supplier Percy Fox.

Today, Ehrmanns is a little over half the size it was then. Turnover has dropped from around £22 million before the buyout to £13.2 million in its first financial year, to June 2010. Staff numbers have been trimmed from 28 to 19 and the management team has been slashed from six to just two – managing director Hugo Campbell and chairman Peter Dauthieu, who co-founded Ehrmanns in 1983.

Downsizing has left the company debt-free, with a supportive sleeping partner, a young and dynamic team, and a clear strategy that sees it well placed to build the business.

“We have been through quite a few ups and downs over the past three to four years and we have come out of it quite lean, mean and focused on what we want to do,” Campbell says. “Our first year ended in June and we posted a modest profit, which is quite exciting and was beyond our budget predictions. We are currently budgeting for year-two growth of around 25%.

“The important thing for me is the people. I have kept good people with me and we  have taken on new suppliers.” Campbell’s team includes sales director Kim Wilson, buying director Joy Edmondson and financial controller Lenka Kiss.

Campbell believes the best way to learn the business is by working across all its different aspects.

“Seventy per cent of us are customer-?facing. I think that in the past the business was very compartmentalised and departmentalised. One of the things I have changed in the structure is to get people to be more responsible and have more authority in what they are doing. To manage that they need to have an understanding of buying and an understanding of selling. Kim looks after New Zealand and also Tesco. We have someone else who looks after Chile and Morrisons.

“It is a structure that was used a lot in the past – they were called commercial managers in those days. When I first joined I looked after Tesco and Sainsbury’s and was buying products as well. It is part of the culture of what we are doing and we missed that at times over the past 10 years.”?The changes have seen Ehrmanns shift the focus of both its offer and its target audience. “We would like to call ourselves specialists in the ethical category – Fairtrade, organics and, increasingly, sustainability,” says Campbell.

Ehrmanns has been importing wines from South African Fairtrade winery Stellar Organics since 2003. It has recently bought another winery and will become the biggest Fairtrade supplier in South Africa, says Campbell: “With Fairtrade we were there at the beginning in 2003 and see ourselves very much at the forefront of that movement. We have big plans for 2011.

“The thing about Fairtrade in the recession is that it doesn’t seem to be as affected as other ethical brands. Organic is seen to be having some detrimental volume change but Fairtrade isn’t. I think people believe in what that brand represents and value it. It is very much up to us as distributors to try and pursue that,” he adds.

Sustainability is another important part of Ehrmanns’ ethos, and ties in with its recent team-up with Giesen from New Zealand, a country where the wine trade as a whole is working towards being greener.

Ehrmanns bottles some 30% of its range in the UK, mainly wines from New Zealand, Chile and Italy. Campbell believes the argument that UK bottling is sustainable because it cuts carbon footprints is valid, although it bottles its wines locally in South Africa, where jobs in bottling lines are greatly needed.

“We currently work with Greencroft, which is going to be the first wind-powered bottler in the UK. We see that there will be more and more UK bottling. I think it is predicted to be 50% in the next three to four years, which is quite staggering. It is economic as well as being sustainable,” says Campbell.

The company has also shifted its target customer from being predominantly supermarkets to seeking out independents, targeting e-commerce with partners such as swig.co.uk and slurp.co.uk, as well as Tesco.com and Direct Wines. It is also investigating dipping its toe in the London on-trade. It will be looking mainly at independent gastro-dining destinations and will be hiring someone to target that sector.

The move follows the launch a few years ago of Ehrmanns’ Independent Selection to target the independent off-trade.

“We’re trying to widen our approach to the marketplace,” explains Campbell. “Now just over 50% of our gross profit is outside the major multiples, although they have 65% of the volume. This is a major shift for us – 10 years ago the multiples had 80%-85% of our gross profit. The rationale behind this is to ultimately be able to sell wines of higher value, and also represent the interests of our producer partners better. It is offering a true service to the marketplace across different channels.”?Ehrmanns has made a long-term investment in independents, which Campbell says are much more labour and cost-intensive to work with than multiples.

“Building up trust is probably most important to them. In the past they would have seen us as being major multiple off-trade suppliers and not giving them the attention or exclusivity that channel requires.

“Generally we are supplying wines that are marketed and branded differently to those in the multiples. To me it is one of the most exciting areas, along with e-commerce.”