In 2010 Stephen Russell made a decision that would transform the business he runs and set the foundations for its current success. He decided that the drinks wholesaling business, then called William Morton, should become a brand in its own right.
The managing director and part-owner of the drinks wholesaler says: “The business really changed round about 2010/2011. Before then we had been very good at building beer brands.”
The business had pushed the growth of Michelob in Scotland and then had become agents for Budweiser and sold Mexican beer Sol, Rolling Rock, Labatt and then the Mexican beer Corona for about 14 years.
But then the relationship with Corona brewer Cervecería Modelo altered radically. “They had a change of policy. They had politics going on in the business and they changed their UK distribution; they went into bed with Coors. At that point I said: ‘No more building beer brands for other people. We’re the brand.’”
To build scale for the change in strategy, Russell bought drinks merchants Inverarity Vaults which was then trading from Symington in South Ayrshire.
The businesses were combined in July 2011 with the company name Inverarity Morton being formalised in February 2012, with a full corporate rebrand forming part of the £400,000 investment in the business.
That investment also included buying new delivery vehicles and organisational restructuring.
Russell says: “When we were Corona agents all our vehicles were branded Corona. When I bought Inverarity Vaults I didn’t want to lose the Inverarity name so I rebranded the business Inverarity Morton, which is a bit of a mouthful but, nonetheless, that’s what we are.
“We got a PR company in and came up with a design for the vehicles, rebranded all the vehicles and all of a sudden we started getting phone calls saying ‘I see your vehicles everywhere I never used to notice them before’. We became the brand.’’
In October 2012 Inverarity Morton bought specialist spirits wholesaler LA Wholesale adding boutique spirits brands Tapatio Tequila, Sipsmiths London Dry Gin and Santa Teresa Rum, for whom LA was the sole agency in Scotland.
The deal also added LA Wholesale’s affiliate business LA Training, enhancing Inverarity Morton’s standing as a training school. Inverarity Morton’s Wine School is in the top ten Wine & Spirit Education Trust training academies in the world.
A year later the company announced the acquisition of Fife-based Forth Wines, a move that cemented the business’s place as the biggest privately-owned drinks distributor in Scotland. The move also gave the company a greater foothold in the English market, with 20 per cent of Forth’s business having been south of the Border.
“The result of the changes is that the main thrust of the overall business went from selling beer to selling wine. Hopefully that ethos is all the way through the business where everybody knows there is a desire for us to be reputable and the ‘go to’ wine merchant,” Russell says.
“We sell wine, beer, spirits and soft drinks but our key focus is wines and spirits.
“There are lots of independent wine merchants in Scotland but one of the huge advantages we’ve got is the fact that we can supply everything – we’re a kind of one-stop shop but somebody who’s very credible when it comes to wine.”
One of the services that the company offers restaurants is that it will design and print wine lists – aimed at taking the whole burden of that from individual restaurants or small chains.
A key improvement in servicing the trade, Russell says was in establishing a tasting room at the Inverarity Morton premises on the Thornliebank industrial Estate on the southside of Glasgow.
Russell says: “Having been in this trade for a number of years and having been round a lot of professional tastings, always in my head I thought I would love us to have a proper tasting room so we can bring in customers or potential customers and give them a professional tasting in the right environment and we’ve now got that. It is a fabulous facility and it’s used every week.”
Those regular tastings targeted at small, specific groups is in addition to the company’s flagship tasting event which takes place each March in the Assembly Rooms in Edinburgh and which is attended by about 500 people each year and which Russell says is probably the best attended tasting in Scotland. These tastings are key, Russell says, in supplying the large part of the trade that Inverarity Morton services.
He says: “We supply substantially the hotel, restaurant pub and club trade throughout Scotland.
We’ve got about 10 per cent of our business in England. We’ve got some wholesale business in England where they are small regional wholesalers that don’t have the ability and buying power to source some of the wines. We’ve got a lot of agencies that are exclusive to us for the UK, so they can buy from us with the confidence that the wine is not appearing in Matthew Clark or somewhere else.”
“As much as you can read in the paper about Jamie Oliver’s struggling or Carluccio’s struggling, all the people we deal with are all owner-led groups. They are not management companies, they’re owner-led and the owner-led guys are definitely outperforming the national chains. I think that’s because they’re working at the business; they own it and are working at it and they see it.
“When you look at Carluccio’s, he has passed away now, but he had long since sold the business and he was a figurehead so it just became a chain. When you’ve got a chain you’ve got nobody really driving it the way you have when it’s an independent.
“I’m very friendly with the Di Maggio’s guys and I know how much they work at their business. Bill Costley’s places are pristine. You walk into any of his places and the ground will be raked a certain way, his attention to detail is fantastic.”
Over the last seven years Inverarity Morton has shifted mainly to the ‘on’ trade hotels, pubs and restaurants rather than to the off trade – off licences.
Russell says: “In the off trade we’re substantially competing against cash and carry. Cash and carry is a situation where you take your van, you drag your barrow round, you pay for it there and then and you take it back to your premises and stock it and that’s why you get a decent price.
“We were trying to compete with cash and carries but with a rep, giving credit, delivering … it was madness. So I systematically moved away from the off trade. We used to be 60 per cent off trade, I wouldn’t think that off trade now accounts for more than five per cent of the business.”
The business supplies more than 2,500 on-trade outlets in Scotland from its head office in Glasgow. It also operates two regional depots in the south of England, one in the West Country serving the south west of the UK and the other just outside of London.
Wholesale accounts for 90 per cent of the company’s turnover, with the majority of trade being conducted in Scotland. Inverarity One to One is the company’s retail arm with a shop in Glasgow.
Russell goes on: “Delivering these days is a costly business. I don’t want somebody to start getting a hanky out here but minimum wages, fuel costs, all of these costs…
“We offer a great service here, a delivered service and that costs money and I think when you try and look at competing with cash and carries for the off trade and deliver – it just doesn’t work for us.
“We’re not as dictatorial as we ought to be. We’ll still deliver you a bottle if you’re short of a bottle of an expensive whisky or something and we sell a lot of split cases, so we’re very much service-driven.
“We try and be flexible to the nth degree and provide a service that we kind of pride ourselves on. Don’t get me wrong, we won’t always be right, we’ll make mistakes but it’s a question of how you recover from a mistake. We have got a staff that if we need to do the cavalry act, we will do the cavalry act without saying ‘we can’t do that, it’s next Tuesday before you get your next delivery’.’’
Russell explains the focus within the business on selling wine: “I’m slightly biased because I love my wine but equally I realise that when you pull the cork on a bottle of wine the bottle’s done. When you open a bottle of Smirnoff or a bottle of whisky that’s 28 drinks you’ve got to sell out of it.
“So for me, I wanted us to sell more wine. So when we bought Inverarity Vaults we doubled our wine volume and when we bought Forth Wines we doubled it again. So we will sell more wine in Scotland than anybody else.”
Russell cites the example of Brian Maule, who runs the fine dining restaurant Chardon d’Or in Glasgow city centre. “Brian will deal with multiple people but we’ve probably got the biggest share of his wine list. Many independent restaurateurs like to buy from multiple sources and think they’ll get the best deal from doing that. I don’t happen to agree. I think if you’re Gleneagles or Martin Wishart maybe, but I think for 90-95 per cent of the hotel or restaurant trade in Scotland we could supply them 90 to 95 per cent if not 100 per cent of their wine list.
“I could sell you a bottle of wine at £500, I could sell you a bottle of wine at £5.”
On price he says: “We will actually analyse the restaurant’s wine list and their pricing points. So if you have got a restaurant and they’ve got a dozen wines in the £19 to £22 price range – that’s mad. You should be £19 to £29.
“When you’ve got a lot of wines at the same price restaurants are missing an opportunity to sell. When one guy opened a place and offered one red or one white. I said why don’t you, at the very least, have two because if you have two and you make the other one dearer you’ll make more money.
“If you only have one wine at £15 or £19 or whatever it might be, that’s all you’ll ever make out of a bottle of wine, if you have another one that’s £22 you’re going to make more money. You’re not exactly compromising yourself by having two instead of one.
“What we do with other people is look at the range and say ‘you’ve got a gap at the £24 level of £25 level’ and try and suggest to them that if they spread their wines over the different points, the chances are that they would make more money.
“Having three sauvignon blancs and having £1 difference between them … it’s madness. You’ll have the guy that wants to go in and impress. If the maximum price is £19, he can’t impress. Whatever your ceiling is, that’s the maximum anyone can ever pay – so try and allow a little bit of flexibility that will help your profitability.”
Stephen Russell has a unique vantage point to chart the changing tastes in wine. “The Old World has probably come back to some extent. Australia really rocked the wine industry, probably going back at least 20 years, when they produced these big, powerful wines but very quickly people got fed up.
“Now you’ve got a whole tranche of people who hate Chardonnay because of how the Chardonnay was produced, and I feel sad about that because I don’t hate any wine to be honest. But I hate it when people dismiss either all red wine or all Chardonnay because you get such a variety of flavours.
“You’ll get people who say they don’t like Chardonnay but like Chablis but Chablis is made from the Chardonnay grape but it doesn’t taste the way they think it does when they say they don’t like Chardonnay.
“So, Chardonnay was big going back in time. Then Chardonnay switched to Sauvignon Blanc, Pinot Grigio became massive, … probably Terry Wogan gets credited for that – he always used to talk in his Irish Blarney accent about the old Pinot Grigio.
“Currently , the biggest selling wine is Prosecco. I don’t know if that is the UK or just Scotland. Prosecco is slightly sweeter … it’s not as dry as Cava or Champagne. Perhaps the slightly sweeter taste suits the Scottish palate. I can see the number one wine if I go looking at different customers: it’s Prosecco.”
But while our taste in wine may have changed slightly, the major shift in the drinks market is the gin revolution which has seen the drink become ever more popular, with its sales overtaking that of blended whisky.
“If I go back to when I started in this trade, we probably sold a maximum of six gins and I could just about rhyme them off,” Russell says. “We now list over 200 gins. And we’ve got over 100 Tequilas.
“It’s what [Inverarity Morton commercial director] Ian Cumming calls premiumisation. People drink less now but they’re spending more on it. You can buy a bottle of Gordon’s Gin for about 15 quid but people are spend 30 to 40 quid on a bottle of gin just to have something different.
“It’s staggering where gin’s gone and everybody and their granny is opening up a gin distillery, because with whisky you need to wait at least three years but with gin you can turn the tap on.”
“There is premium vodka, rum, tequila but gin has surpassed them all in terms of the massive interest.”
This increase in spirit drinking has come at the expense of wine, he says. “The wine market is down … overall it’s maybe down about five per cent.”
He questions whether this is a generational shift that is permanent. “Cocktails are huge now – the younger generation will drink cocktails.” He suggests the fall in wine sales may also be due to prices being forced up because of the fall in the value of sterling against the euro. He says: “The impact on us purchasing is phenomenal. So when you pass those increases on and the restaurant maintains its margins, the price of wine in restaurants has gone up. So too has all of the imported produce, so the cost of dining out now is more expensive.”
Add to this is an increasing shortage of staff for the hospitality trade because there are fewer EU nationals available, which pushes up wages to attract staff.
Another factor that has affected trade, Russell says, was the introduction in Scotland of tougher drink driving laws. “When that kicked in about three years ago, it did change people’s drinking habits for all time and it changed them for all the responsible people. People are now anxious about sharing a bottle of wine at night and driving in the morning. That did have an effect on business.”
But despite those changes Inverarity Morton still ships a huge volume of drinks. To do so it employs bout 200 staff, although the numbers rise in the run up to the festive season and also during the Edinburgh Festivals in August, which Russell says is “like Christmas all over again”. The company has about 30 field sales staff and a similar number of vehicles to get the product out to its customers.
The stock is kept at Inverarity Morton’s 80,000 sq ft warehouse at its Thornliebank Industrial Estate HQ but “that is nowhere near enough” so they also use a third party bond in Hillington on the south-west of Glasgow because of the sheer volume of stock that the business carries.
Inverarity Morton is 75 per cent owned by Sandy Bulloch and family, whose wealth was estimated by the recent Sunday Times Rich List at £100 million. Russell himself has the remaining 25 per cent stake.
Russell says that Bulloch left him to run Inverarity Morton while focusing on building their other businesses. He says: “Sandy Bulloch was driven to build a distillery and he bought Loch Lomond Distillery for something like £250,000 and immediately put on a £6 or £7 million extension, started building warehouses and building stocks.
“He had previously bought a bottling plant down in Ayrshire – so that side of their business grew and was hugely successful and culminated in the sale two or three years ago when they sold out for a multi million pound figure.”
“They’ve always left this side of the business alone, they’ve never interfered with it. For me it’s been fantastic – I’ve had the support from them when I’ve needed it and I don’t get any interference.
“There’s a huge trust element; the family bought the building, we rent it from the family and we’ve renovated it so there’s enormous trust there which is fantastic. I could never say anything other than it’s been wonderful for me.”