The Buyer continues its series looking at wine suppliers and importers that are finding their own added value way to introduce new wines and producers to different channels of the wine market by asking Guy Smith and Stuart Bowman-Hood to put their heads above the parapet to explain how their producer first approach works at Frederick’s Wine Company in securing key, long term, contracts with major retailers, and on-trade operators.
“A producer needs to have a red line in any negotiation. We can help them with that to ensure they are making money.” It’s an approach that is encouraging more producers to turn to the Frederick’s Wine Company’s business model.
The more you understand how the wine industry works it is often not the biggest names with the largest stands at ProWein and Vinexpo who are the most influential and plugged in to what is going on. It is the individuals and the businesses that work between the lines of the trade, quietly connecting the right producers with the retail and on-trade customers best placed to bring their wines to market. The operators who are the heart and soul of the wine supply chain, yet rarely feature in any Top 50 or Top 100 lists.
Like Guy Smith and Stuart Bowman-Hood who between them have a long and impressive range of businesses they have worked at – from Pernod Ricard, United Distillers, Freixenet, to CVNE, Bibendum and Brand Phoenix – but who together now work with some of the biggest names in retail and hospitality through the Frederick’s Wine Company they set up in 2018 to combine their experiences and offer something new to both sides of the wine industry – the producers and the customers.
It is essentially their match making skills that give Smith and Bowman-Hood an edge in the ultra competitive world of being a wine supplier. Their contacts around the world, particularly in the bulk wine sector, means they are on top of which producer in which region has wine at the right price, style and quality for a particular customer’s needs. Like a London taxi driver they have the knowledge to know where to look, to seek out the nooks and crannies that other suppliers don’t even know exist to find the right producer.
If you really want to know what is happening on the global wine market, then Smith and Bowman-Hood are two of the most connected and informed operators in the field. Yet they usually keep themselves to themselves. Happy to operate largely in the background.
But look at their list of customers and you will see they are working with the majority of UK supermarkets, major bottlers, such as Greencroft,and a host of wine distributors and merchants including Direct Wines, Ehrmanns, Ellis Wines, Berkmann, Chalié Richards, Delibo Wine Agencies and the Vindependents amongst others.
Their producer partners stretch include Chateau Fonscolombe in Provence, Caves Languedoc Roussillon and Domaine de la Presidente in the Rhone, in Spain Jesus Madrazo in the Ribera del Duero and Rioja Alavesa, Antigua Bodega in Argentina and Winegrapes in Australia.
Their point of difference comes, claims Smith, in that they have both worked directly for major producers so understand fully what it is a producer is looking for and needs from any negotiation with a customer.
It’s why its policy is to only work with one primary producer per country or per region, so that their collective interests are “very much aligned” and they can work together to build brands and wines that they know certain customers will want.
“Most UK distributors,” he argues, “are more aligned with their customer’s needs rather than the producer’s.” It means they are more likely to “jump fence” and go with work with another player if that means getting the business. “A big distributor might have three Chilean or three Argentine producers who they will play off each other with a customer to get the best rate,” he claims.
The Frederick’s business model is based on long term relationships, trust and loyalty, stresses Smith. “Our approach comes from our background in the industry,” he explains, who says working for a major player such as Freixenet makes you understand the pressures they are under in managing their viticulture, and supply and demand across their export markets.
It also comes from his own family’s experiences working as farmers and producers of English sparkling wine and cider for the last 10 years in south Somerset under the Smith & Evans name. “I came up with the model when I started my own vineyards,” says Smith.
“A lot of producers don’t know how to deal with major customers and the multiples in particular. That’s where we can really help place the volume of wine they have,” he adds. “A producer needs to have a red line in any negotiation. We can help them with that to ensure they are making money. Our business model is based on us both being sustainable for a number of years so we can be candid with the advice we offer. That is our traction with the producers we work with.”
He is also very aware that producers are far more demanding about the suppliers they work with and what it is they are offering that is genuinely different. “You have got to be able to to do something concrete for them.”
It’s also where their combined experience working in the bulk wine markets is particularly useful as there are constant demands from the major multiples and increasingly specialists, such as Majestic, to use the bulk market to fill gaps and create exclusive, targeted brands. Exactly the kind of work Smith was doing whilst at Brand Phoenix and Castel.
It’s their experience of working primarily, with what Bowman-Hood calls “premium bulk” that can offer customers wines they may not always see. “We are trying to move bulk out of just being seen for commodity wines, but can also be for top end Australian, New Zealand and Argentine too – for example,” he says.
“It is a very transparent way of working,” says Bowman-Hood. “The traditional agency model tries to keep the producer away from the customer. We are the complete opposite. We go out of our way to bring them together.”
That way they are effectively working for the producer as their UK sales team where crucially, they don’t take a monthly retainer for their work, but work on a commission basis. This, they believe, brings them much closer to the real needs of the producer and cuts out the usual margins that come from working with a UK distributor with expensive costs to cover.
This also works well with customers, says Smith. They know we are talking and dealing with the owner of the producers of the wines they are selling. “It’s very transparent for them as well,” he says. “They know we have that direct relationship and what the expectations of their buyers are and what they need that producer to do to meet them. They like that.”
“Which means we also have to pick the producers we work with very carefully too,” says Bowman-Hood. “We have to see what their USP is and why a customer is going to want to work with them.”
It means they have had to turn producers away, either because they already have a partner in that area, or they don’t see a big enough collective opportunity, or have the confidence the producer is willing to make the necessary investments to grow its exports, he explains.
Frederick’s has certainly made a lot of its own luck by gaining a foothold in the market thanks to the partnerships it first started with producers such as Groco, the winegrowers co-operative in New Zealand and Antigua Bodega in Argentina just as demand for those two countries really took off. “We were able to find the right people to work with and then from there move to Australia,” says Bowman-Hood.
It’s a model that appears to be working for both sides and ensures the relationship is always looking at what next in order to build sales, revenues and commissions. “It also cuts out the margin and the costs of the middle man,” he adds.
It looks to build in a “long tail off” with a producer if they want to switch supplier, in order to provide a sort of “security blanket for both sides”, says Bowman-Hood.
The next step for the Frederick’s business is to attract more like-minded producers, and to be able to offer a wider range of more premium wines. So that it can push the quality of its top end wines too.
Bowman-Hood points to the work it is doing with Spanish producer, Jesus Madrazo, as an example of the relationships they have with key winemakers, but also the access they have to premium wines. Bowman-Hood says he has known Madrazo for close to 30 years, way back to his days working on the pioneering Contino estate.
“We have always kept in touch and it’s now great to be working with him again,” he says. The Frederick’s model also hopefully offers someone with the pedigree of Jesus Madrazo, who has worked with a number of major UK distributors, a different approach and route to market.
They say the last year has been a “mixed bag” of ups and downs, but the business has been there and orders have been coming through, particularly from the major UK supermarkets for bulk wine opportunities. “That is what has kept us going,” says Smith.
But there have also been a lot of frustrations along the way and projects and deals that have floundered last minute due to the uncertain times we are all living in. “We had some nice distribution for our cider brand, Hunky Punk, and we lost that overnight,” says Smith. “A lot of things have been on hold, or been pushed back to where they were before all this started. Then there is other business which you don’t know is going to come back at all.”
Like all suppliers they are delighted to see the on-trade back open and again, but also concerned about the bigger picture and how many operators will be able to survive long term, particularly once furlough is removed and the relaxed rules around rents, rates are VAT payments are tightened up.
“The big concern is the bad debt that is coming and whether they are opening with sufficient capital behind them when all the financial support is taken away.”
Bowman-Hood says there has also been a lot of work going on behind the scenes helping operators get ready for re-opening with the right wines and whilst some businesses might fail it will also open up new opportunities for companies with the investment to grow. “It’s going to be an exciting time for us too,” he says.
They also have high hopes for their own gin brand they have developed during lockdown from the botanicals found on Smith’s farm which taps right into the demand for good quality, local English and British drinks and adds to its portfolio of sparkling wine and ciders.
All of which are available on the Smith & Evans site, plus the new DTC part of the Frederick’s business which was developed from scratch during lockdown. Providing a strategically important new channel for trade rather than transforming its sales, says Smith.
Think, move, act fast
As self employed entrepreneurs who have moved out of the corporate drinks world they can also empathise with the huge pressures that on-trade operators are under. “When you are self employed you have to justify yourself and what you do every day. You have to be really focused on what you can do well,” says Bowman-Hood.
He certainly does not miss the rigours of the corporate world and having to write business reports that “nobody reads”. At Frederick’s it is just the two of them, they can make decisions quickly and put them into action straight away. Be it around branding, labelling, blends, it does not need big team meetings to work out what to do.
They were both working off their kitchen tables long before Covid-19 and national lockdowns and say they too have switched to new video conferencing tools to make their lives easier working with producers in all time zones.
“It is so much easier for the producer and customer to talk to each other and we can help make that happen. Technology has made that easier,” says Smith.
- If you would like to find out more about Frederick’s and how you might work together go to its website here or contact Stuart Bowman-Hood on email@example.com.