It’s been fascinating to see how over the last couple of months how different business leaders across the drinks and hospitality sectors have responded to the Covid-19 crisis that has hit them all both as individuals and heads of the companies they manage. Troy Christensen, chief executive of Enotria&Coe, brought a fresh perspective to the situation when The Buyer interviewed him earlier this month. On the one hand he faced up to the nightmare scenario that has meant 90% of its usual revenues have been put in the deep freeze, due to the on-trade being closed, in typically bullish manner. But he also demonstrated how, as a company and as a sector, the drinks distribution network can recover, by how quickly it has turned its focus to growing the digital side of its business, through its own retail arm, Great Western Wines, and by linking up with the vast number of B2B turned B2C platforms that have emerged over the last three months.
Enotria&Coe’s Troy Christensen opens up on the many challenges he and the business have faced during the Covid-19 pandemic.
Click here to watch the full interview between The Buyer’s Richard Siddle and Troy Christensen.
It’s no surprise to find Troy Christensen sitting behind his desk at the head office of Enotria&Coe when we connect via Zoom for our interview last week. Running the business from home is simply not the way he does business. He wants to be where he can make the most difference, even if “that means helping to make the tea” for the skeleton staff that have been able to carry on working through the Covid-19 crisis.
As soon as the news came through that the entire on-trade had to shut its doors as the country went into lockdown, Christensen had no choice but to place 85% of the company’s staff on furlough (3 minutes 47 seconds).
“It’s been a challenge. We have about 90% of our contributions in the on-trade so it was difficult when the government started to shut things down,” he explains.
But the parts of the business that have been able to keep going through the crisis, have been doing more than just heavy lifting for the rest of the company – they have potentially shown a new way forward for when things start to return – retail and, most of all, digital. First of all there was the immediate boom in sales from its retail side of the business, Great Western Wine, which saw an up to 400% increase in sales in the first few weeks of the lockdown (5 minutes 50 seconds).
Click in link below for the short extract on how Christensen first responded to the crisis.
Then there was the big increase in volume coming from its independent merchant customers which, frustratingly, was so much, its parcel carrier “choked” on the level of demand. Which meant going out to find a new distribution partner at the height of the crisis.
It was, though, able, to respond by “turning on its drivers” through its own fleet of drivers in key parts of the country. It actually meant, he says, it could give its independent wine merchant customers “a better service” as well as being able to deliver to consumers many of the orders placed through Great Western.
One of the other first main challenges at the outset of the lockdown was what to do with date driven products – noticeably beer. Enotria&Coe was able to step in and help move a lot of beers through its network to such an extent that in the first two months of the pandemic five of its top 10 SKUs were beers.
Move to digital
Where it has been able to partner with the number of companies that have moved their business models to B2C (business to consumer) during the pandemic is where there could well be a long term change in direction not just for Enotria&Coe, but all major drinks distributors (8 minutes 20 seconds).
Across the country we have seen a whole range of businesses from meat and fish suppliers to fresh produce, who would normally be supplying corporate or hospitality customers, switch to going direct to consumer. Where it could E&C has stepped in to offer these new platforms the chance to also sell a wide range of beers, wines and spirits, and by working with an alcohol licence partner, it has been able to get them licenses for doing so too.
Christensen says the reason it has been able to move so fast with these new B2C businesses is that it had already, prior, to the pandemic, identified this as a sector for substantial growth. This had involved switching part of its warehouse facilities into more of a bottle pick set up that would work for B2C order.
The situation over the last three months has turned that opportunity into a fast changing reality.
Click below to see how Christensen sees digital becoming an even more important part of its business.
Clearly the opportunity is now there for E&C to act more, as Christensen says, like a ‘fulfilment centre” and work with more B2C partners down the line as the move to direct to consumer can only accelerate in the months and years to come.
He also sees DTC becoming a bigger opportunity for the major spirits and beer brands and what role E&C can play in helping major players make a success of such a big change in the way they work (40 minutes 20 seconds). The margins available for big brands to go DTC when they are being squeezed in both on and off-trades now makes this inevitable, says Christensen.
“If Diageo and the big beer boys can find a way to get some DTC around the brand that is consistent and effective – I think they’ll go for it.”
The massive rise in Heineken selling its Blade draught system to consumers at home during lockdown demonstrates that, he says.
To do digital well will mean a big mindset shift within traditional drinks retailers and a different way of working, he adds, with a bigger focus on digital marketing and fulfilment.
Picking and packing needs to be on far more personal level, with the care and attention needed for every gift wrapped box it handles – down to the personalised message that these orders usually contain (10 minutes). All of which is a big change for a business that is set up to handle mass orders with the lowest cost efficiencies possible.
As staff do return they will need to pick up on the nuances of dealing with DTC orders and customers in what is already a very competitive sector, he says.
With the vast majority of his team on furlough he admits it is a “challenge” for many of them as they are so used to working in such a social business. There are also the natural uncertainties about their futures, and the frustrations that they can’t work and help at this time. Then you have the staff that are working who are “working harder than ever” (13 minutes).
To better understand what help its staff needs at this time, E&C has been working with the Happiness Index to give every member of the team the chance to share their feelings and assess what support is needed where (14 minutes 20 seconds).
Which is why he is particularly pleased to see the flexi-furlough arrangements come in from July 1 which will allow him to bring back more staff in the areas where they are most needed (15 minutes).
This will also become clear in the coming days and weeks as more of the on-trade is able to re-open again and it will have a clearer idea of the level of demand and what help they most need.
How will the on-trade re-open?
Here Christensen explains in more detail how he sees the on-trade coming back and the demands on drinks suppliers.
Christensen sees a very mixed picture across the on-trade in the coming weeks between those who are going to be open the minute they can on July 4 – with operators such as Oakmann Inns showing the way for others to potentially follow – and those who are going to far more circumspect (16 minutes).
He feels the city centres, particularly in London, are going to be a lot slower about opening up, and that we are more likely to see the regions, and the countryside opening up first, where there is more space.
It won’t be until more people return to offices in central London that we will see a big upswing in demand, and there are more likely to be soft launches and operators dipping their toe back into the market, he says.
“So many people in London are going to work from home for the rest of the year…people whose outlet provide lunch food or drinks after work are really going to struggle in the next six months,” he says (16 minutes 40 seconds).
In particular he would like to see the government have “far more confidence in the competence” of on-trade operators to provide safe environments for consumers to be able to go out and still and enjoy a good experience.
Consumers, in turn, will want to see safe distancing measures being followed, but he is confident that will happen.
He would also like to see the same “momentum” given towards re-assuring the public it’s safe to go out again as there was in ensuring everyone stayed at home during the peak of lockdown.
Christensen also expects to see bigger demand for tighter, more focused drinks lists and food menus, where operators will be focusing on delivering classic meals, accompanied by the most recognised and “trusted brands” and “key listings” which from the wine side will mean the major varietals such as Sauvignon Blanc and Malbec and less room for experimentation.
Which ever way the on-trade comes back there is no doubt there are going to be a lot of casualties in the coming months and Christensen agrees with industry estimates that could be as high as 30% of outlets (28 minutes 45 seconds). But that does not necessarily mean doom and gloom for the sector as a whole, as a proportion of that will be the worst performing “tail” of a lot of the casual dining chains and bigger operators.
On the upside Christensen sees the next few months as being a good opportunity for the casual dining sector to see a much needed uplift in the outlets they can open. They usually have more space, with limited menus and can cherry pick the best sites to re-open – which have also been doing well with delivery – and then build from there (29 minutes 45 seconds).
“The on-trade has got a long way to go before it gets healthy.”
On-trade moving to online and delivery
The challenge back to drinks distributors, he adds, is how can they play a bigger role in helping their on-trade customers with better access to data and consumer insights, via Google analytics and other tools, that a wider role within digital and off-trade will potentially bring (31 minutes).
The big shift in consumer spend online over the last three months is opening up a treasure trove of information for those capable of accessing and using it and then feeding back those learnings through to the on-trade, he adds.
He also sees the on-trade building on the strong delivery and online models that some have been able to develop during lockdown and that digital becomes a bigger part of their trading mix in the future. Once you have an online platform built the margins are there to capitalise on, he adds
Contracted supply base
Christensen says there is no doubt there are going to be drinks companies that are going to struggle in the coming months due to the double whammy of how long the shutdown has been, and the likely economic recession that is going to follow (33 minutes 35 seconds).
The dynamics of the drinks industry over the last decade has also seen so many more drinks suppliers, both small and large, switch far more of their distribution and business over to the on-trade due to the fact the off-trade had become so unprofitable to work in, he explains. That in itself means more businesses, like itself, have been even more dependent on the on-trade than in the past.
“A lot of people are questioning the model,” he says. “There is no-one expecting to sit tight for six months until is all comes back and there is some sort of miracle cure – so things will have to happen and they will happen quickly. (35 minutes 40 seconds).
Working with producers
There has also been a need during this time to keep in close contact with producers around the world, and the fact they have such long standing relationships with most of them has really helped, explains Christensen (23 minutes 50 seconds). This is also not just a UK problem, and they are having to juggle their resources in all their key distribution markets.
They have also been able to work together hosting tastings with key producers, like Ken Forrester, and offer tasting kits to consumers and the trade which has helped to keep that contact and help the producers feel involved (24 minutes 30 seconds).
Christensen is also hopeful it can work closer with the on-trade and provide some of that home entertainment and experience for their customers by hosting wine tastings and dinners at home with a winemaker for those not wanting to go out to a restaurant (27 minutes 30 seconds).
Christensen says it has really been a case of doing the most with what has been possible to do over the last three months, when you have such a limited skeleton staff at work. “There is no silver bullet,” he adds for how a chief executive should respond at an unprecedented time like this.
It also throws up many questions as to how you might operate in the future, particularly as most companies have been able to operate with staff working from home rather than operating a huge, costly central office.
A year from now
Finally Christensen looks ahead to what the situation might be like in 12 months time. So much of which, he says, will rely on what happens with the economy and just how big the downfall is over the coming months.
But it will require both the best in micro management kills keeping on top of credit, inventory, pricing, sales and operation, but also the ability to look at the macro and bigger picture as well and how you can grow, adapt and change as a business.
“It’s certainly going to be a challenge,” he concludes.