Building blocks: Richard Jones of SH Jones and Reh Kendermann in profile
Over the past couple of years Banbury-based independent wine merchant and regional wholesaler SH Jones has shocked the trade by buying two established online retailers and the wholesale arm of agency Stevens Garnier.
Chairman Richard Jones had been a non-executive director in the business for many years, until his father Michael – who had run the family business until he was well into his 70s – had a stroke around five years ago. Sadly he never fully recovered and died last year.
“When you get to that stage in your career there is a sort of innate conservatism,” says Jones. “The business was doing fine but the world of selling wine has changed in many respects. High street retailing as we know it is becoming far more challenging because of the cost of running shops, and people buy in a different way.”
When he took the helm Jones set out the future priorities for the business – and made online a crucial target area.
In January 2013 he bought online retailer Hawkshead Wines, followed by the much bigger Slurp business in June of that year.
Slurp had hit financial difficulties, which is why its former owners were looking for a buyer, but Jones said the long-term perspective of a family business meant he could see future profits beyond the business’s troubles.
“Combining a bricks and mortar business with online is a perfect situation,” he says. “We can drive a lot of costs out of the business. We have a warehouse, stock pickers and all those expensive things that, from our point of view, meant using our resources more efficiently.
“Like all businesses we needed to make a profit or have extremely deep pockets. We had the ability to look very long term about our business – we are not looking at the next six months to a year, we are looking at 10 years hence. We can patiently grow our business in an organic, sustainable way.”
Jones decided that acquisitions were the best way to get the online expertise the business needed as swiftly as possible. And with money in the bank, both from the successful SH Jones business and from his own pockets, he was able to finance the purchases without outside investment.
Hawkshead founder Greg Shaw, who had been planning to sell the business to SJ Jones and become a consultant, got on with him so well that he is now general manager of the whole company, giving it a firm grounding in online issues. “Shops are still interesting to us, but the amount of business shops are doing sadly is reducing, and we have seen the demise of some very substantial chains over the past 10 years,” Jones says.
His next move, in February this year, was to buy Stevens Garnier’s wholesale arm and the shop downstairs from the agency’s offices in Oxford.
As an Oxford-based wholesaler Stevens Garnier was a rival to SH Jones’s business, but the deal has allowed the two companies to work much more closely together, with SH Jones taking on some of Stevens Garnier’s agency wines in an informal agreement.
Jones says: “We were looking to build on our wholesale arm so to us it was absolutely ideal. It was in the heart of our trading area and gave us additional turnover and, by building on our existing overheads, meant they were further stretched and working harder for us.”
The shop, which was on a street with little passing trade on the outskirts of Oxford and had been run as part of Stevens Garnier’s office and warehouse, did not work out and was shut in October, leaving SH Jones with four shops: two in Banbury, one in Bicester and one in Leamington Spa.
He is currently looking at two more potential acquisitions, but could not say any more about the potential deals. But he notes that SH Jones has already reached a critical mass where, for example, it is able to import full containers of entry-level wines, giving it substantial cost savings.
Jones says the newly combined PLB and Bibendum will be “a powerful distribution group” and that it made sense for the two companies to merge.
He expects to see more consolidation in the marketplace as supermarket margins continue to be squeezed, putting more pressure on distribution companies.
“It gives us the opportunity to acquire new businesses because people are looking to change their businesses. Change is always uncomfortable for people, but in terms of the way an industry progresses it is an essential part. The fittest survive, and you need to have the best possible commercial model if you are to move on.”
He notes that a similar set of pressures in Germany some 25 years ago saw Black Tower owner Reh Kendermann buy up three or four companies to grow to one of the biggest wineries in the country.
Jones’s other hat is managing director of Reh Kendermann UK, which he regards as his main one. His SH Jones role is non- executive chairman leaving day-to-day affairs to Shaw and his team.
Here he says he uses “all the same skills as you would need for any other FMCG-type brand”.
“The reason Black Tower is so successful is that, as a company, we have had this absolute focus on trying to become the most successful German wine brand in the world,” says Jones.
“We’ve recently undertaken some Kantar research and we have an enviable consumer profile in terms of age – the average consumer of Black Tower is considerably younger than most of the major volume consumer brands.
“That means our marketing activity and campaigns have recruited new consumers, and that has been the major difference between us and most other German wine brands.
“Over the past 20 years we have engaged younger consumers and keep feeding in new wine drinkers. The style of Black Tower is ideal for less experienced wine drinkers – the taste profile is easier drinking, fruity wines. Consumers get to a certain age – around 23, 24 – where they start forming households and drinking more at home.
“Black Tower has become one of the wines they would move to drinking as their first new glass of wine.”
The range has also had considerable success with its 5.5% abv variant, B by Black Tower, which is growing at 41% according to Nielsen. But Jones says shipment figures show even higher growth rates, as Nielsen is not picking up all its sales in convenience stores and discounters.
That success is in stark contrast to a number of other 5.5% abv brands, many launched to take advantage of a tax break at that strength, which have struggled to maintain sales. Volumes of all 5.5% abv wines fell 12% in 2013, according to Nielsen.
A quarter of Black Tower sales are made up of range extensions B by Black Tower, Bubbly White and Bubbly Pink, all of which launched in the past five years.
“The reason we have been very successful with Black Tower is that B by Black Tower is 100% truthful to the parent brand,” says Jones. “People who enjoy easy-drinking, fruity Black Tower get a similar product and hence no disappointment. In many respects they get an enhanced experience because they can drink twice the quantity without necessarily having the calories.
“In the early days 5.5% abv derivatives were so far away from what the parent brand was delivering that there was a massive amount of disappointment – the consumer found it tasted nothing like the brand they had bought in the past at full strength.
“B by Black Tower now represents 20% of Black Tower sales. The way it is going we could see that percentage share growing significantly. Even in the context of the core brand it is still growing very positively.
“It teaches one so many things about the zeitgeist of the lower end of the wine market. Value is massively important, but also as an industry we need to be looking at providing lower-alcohol, healthier products and this is the perfect example.”
So how does Jones balance his two roles? And do they ever clash?
“It works very well because in trade terms there are no clashes,” he says. “In time terms, in my involvement with the family business I call myself a non- executive chairman. I have an extremely competent management team which runs the business for me, and that allows me to focus on Reh Kendermann where I am very much more involved in the detail.
“What I have learned is you are better doing a few things very well than trying to be all things to all men as a business. Reh Kendermann is incredibly focused on creating the most successful German wine brand in the world and has actually achieved that. We are moving forward in the right direction.”