Soldier of fortune

Adrian Bridge joined Taylor, Fladgate and Yeatman by way of the army and investment banking.  He tells Chris Orr how the Port trade needs to modernise to survive

ONCE YOU’VE met Adrian Bridge a couple of times, it’s not entirely unfeasible to think that, at the age of 14, he knew precisely where his career path was destined to go.  You can easily imagine the following scribbled on the inside of one of his textbook flypages as a guestimate of his future career:

"Go to Sandhurst, win sword of honour, represent UK at world’s most obscure winter sport [bobsleighing], serve in the 1st Queens Dragoon  guards, hit heady heights of Aide de Camp for UN peacekeeping force in Cyprus, get bored (momentarily), leave army, join investment bank, knock off an MBA, join another investment bank and become head of NatWest Securities USA.  Work hard for several years, then retire fabulously wealthy to the countryside and shoot from dusk till dawn."

All of which is more or less what happened. Except for the last bit.  Because, if this was to be the Bridge destiny, he went and spoilt it all at the last moment. He joined the wine trade. In fact, not only did he join the wine trade – a business sphere in which it is famously easy to lose a fortune – but he actually joined the Port trade, in which it is unfeasibly easy to lose many fortunes multiplied.

In 1994, Bridge dropped the world of finance and joined the marketing team of Taylor, Fladgate and Yeatman and its cobrand Fonseca.  He appears slightly offended at the suggestion that the move might have been somewhat odd in respect of the rest of his CV, but that probably has as much to do with the personal reasons for moving as it does with business – his newly attached wife was Natasha Robertson, daughter of Alastair Robertson, chairman of Taylor, Fladgate and Yeatman.

Whatever the reason, there must presumably have been a bit of a culture  shock involved? "To be honest," says Bridge, "the transfer from the world of finance to wine was not that difficult.

Wine is now a business and populated by very professional people from production through to retail.  It’s also a very capital intensive business, so the ability to read a balance sheet and structure it accordingly is critical to survival."

Perhaps this is borne out by his current position in the company as managing director. To many it was probably a foregone conclusion but, given Bridge’s CV, plus the fact that he has overseen the purchase of Croft and Delaforce, and the subsequent formation of the  four brands under umbrella corporation, the Taylor Fladgate Partnership, it’s certainly not undeserved.

Indeed, Bridge’s entry to the company, in many ways, can be seen as the forerunner to one of the current trends within major league companies in the wine trade – namely recruitment of top level expertise from outside the industry to give a different, and potentially invigorating perspective.

Certainly Bridge pulls few punches as far as the Port trade and the retail situation in the UK is concerned. With regard to the former, he’s fairly blunt: "The Port trade is heavily regulated, and unnecessarily complicated.

As an industry it needs to formulate a medium- to long-term plan (not live day to day) and the powers that control it must always remember that consumers have a choice. Port does not sell itself and will not sustain consumer interest without effort.

"What we need to do as an industry is look at markets like the UK and say, ‘Okay, it’s a one million case market – how do we make that 1.2m or 1.3m? How do we get to a greater number of consumers?’ As an industry we have to deal with that problem because fundamentally it means looking beyond just the Christmas period and looking at the market as a whole."

More specifically he believes the industry needs to concentrate on its strengths, rather than play the "me too" game.  "There has been a fashion to enter the table wine business in recent years," he says, with some degree of scorn.

"The regulations dictate that even the very best Port vineyards must make table wine because of the beneficio system.  This archaic system works as a social subsidy to subsistence farmers and the future of quality Port. Thus many companies have used the better technology to enter the table wine business.

"The problem is the current regulatory environment is based on Port providing a subsidiary to table wine production through the beneficio system.  This leads to a false analysis and a game of smoke and mirrors.

Honesty and realism about the future is needed if Port is to build further on over 300 years of successful development."  This honesty and realism includes, he claims, a frank assessment of the problems currently facing the UK wine trade.

"You cannot expect one of the most expensive wine producing areas in the world to seriously consider a longterm future based on being providers of cheap alcohol," claims Bridge.  He refers in part, to the consistent pressure on margins that he and other producers suffer at the hands of the big retailers, ie supermarkets, in the UK.

"Ten years ago, the price of the Taylors LBV in the UK market was £10, and it’s the same price now," he explains, clearly exasperated.  "Now, obviously there have been currency gains over the last decade, we’ve had improved technology, increased sales etc – all of which has helped us maintain that price and still deliver margin.  But frankly the reality is that there is no longer anywhere else to go.

We’ve hit a wall. And Port simply doesn’t have the flexibility to bend any further.  "Of course the buying power of multiple retailers is a reality in many markets.  As points of distribution consolidate so we must adapt. You can’t avoid market forces.

However, powerful grocers want to grow categories, not destroy them – they make no money if they don’t sell."  So what’s the answer then? "You want my honest opinion?" asks Bridge.

"I think there are three big players currently in the UK market.  And it will be a battle as to which of them goes. Personally, I think it will take a knockout for someone to leave the ring. For our part, we are committed to providing a quality Port proposition within the UK and we’ll battle it out for as long as we can.

But we’ve all got the same challenges and to be honest there are no more corners that can be cut."  Perhaps in recognition of this, Bridge and the rest of his team have been working hard on developing new markets, in particular in the Far East in countries such as Malaysia, Singapore and China.

"The volumes at the moment aren’t enormous," explains Bridge, "and I am cautious about the likes of China, because virtually everyone gives the impression that there is a boom market out there, which is not necessarily the case.  But each of them has strong potential for growth and we’re prepared to take the same attitude with them as we did with the US." 

In 1988 the company was seeing roughly 130,000 cases pass through the US.  Last year it sold in excess of 407,000 cases.  "I think we’ll see a similar explosion in growth of Port sales in countries like Malaysia and China as we saw in the US," predicts Bridge.

"At the moment, however, it’s a slow burner.  The whole Japanese and Far East market is only worth around 50,000 cases, but then it’s worth remembering that it took over 30 years to crack the US and Canadian markets – and that involved a hell of a lot of legwork and building of contacts.

"Obviously, it is an investment on our part.  Do we know whether it will pay off or not? Well, to be perfectly honest, no.  No one can tell that. But we’ve analysed the market.  There’s an immense interest in fine wine and there’s a lot of appeal at the top end of the price range, where quality Port sits."

Bridge insists that, while the outcome isn’t assured, the outlay investment-wise is negligible compared to the potential gains – an attractive deal for an ex-merchant banker.

In addition to developing these new markets for the Fladgate Partnership, Bridge has also set himself the unenviable task of rebuilding two of the trade’s most neglected brands, Croft and Delaforce.

Both had seen better days before they were purchased from Diageo by Taylor’s for €28.5m, and there was a collective sigh of relief among the trade that maybe the brands would finally be resurrected.

Meanwhile, the deal itself gave a clear indication of Bridge’s almost obsessive drive to over-achieve.  Not only did he manage to buy the two brands for what, even given the parlous state of the two Port houses, was a relatively beneficial price, but, before he could do that, he had to find a buyer for the Sherry side of the Croft brand.

After a few hectic trips to Spain, Bridge persuaded Gonzalez Byass of the potential that owning a market leading brand would offer the company – thereby clinching a deal he had first mooted to the brand owners as early as 1988.

It has, in a way, finally given him a part of the company that is truly 100% his own responsibility.  As he readily admits: "I did wonder what difference I could make when I first joined Taylor and Fonseca, given the fact that Alistair Robertson has led the group so successfully for years."

The answer, it would seem, lies in Croft and Delaforce.  "When I joined in 1994, Croft and Delaforce was a bigger business than Taylor/Fonseca.  Yet when we purchased them in 2001 the Taylor/Fonseca group was twice the size," explains Bridge.

"And consolidation is a theme in the Port industry that will play out over the coming years.  Both Croft and Delaforce are tremendous businesses.  We’ve already re-packaged Croft, re-built its winery and established our quality ethos in every aspect of the business," he continues.

"Clearly, we purchased over 10m litres of stock, so it takes some time for the changes to appear, but they will and such changes will take these famous brands back to a quality leadership position within their focus."

What exactly does he mean by "focus"? "Well, I don’t believe that all Port companies can be all things to all men.  This is one of the reasons why some of the new single quinta brands have lost their way. Focus is important.

Over 80% of Port is a commodity product and is best served by a low-cost producer.  The remaining 20% will be served by those who deliver quality – not just talk about it. Companies stuck in the middle, will have to decide to focus, sell or disappear.  Croft and Delaforce will focus on their strengths, which is Vintage (and fullbodied Ports) for the former and whites and aged tawnies for the latter." 

Croft and Delaforce have offered Bridge the opportunity to flex the financial acumen that he acquired in investment banking and to shine in a world which, traditionally, would have been more interested in his past as an officer in Her Majesty’s glorious army than his ability to spot a decent balance sheet or commercial opportunity.

Which is roughly indicative of the change he, and many others, believe the Port trade not only needs to undergo, but is currently being forced into – sometimes kicking and screaming.