Insights from Sir Graeme Avery

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Sir Graeme Avery - Entrepreneur & philanthropist, New Zealand

“I don’t work by business theory. I don’t believe in it”

Sir Graeme Avery has had a long and successful career as an entrepreneur. He set up the Adis International medical publishing group, having identified a gap in the medical journals market, and made it into a world-leading scientific publisher. That business was sold in 1996, and Sir Graeme moved into wine, which had always been a passion and now became a business. He is President of Sileni Estates, New Zealand, which has grown from 2,000 cases in 1998 to 750,000 cases now, and is about to make the transition to its second generation. He is also a prominent and respected philanthropist. We talked to him about being an entrepreneur, going digital, and understanding millennials. Here’s what he had to say.

 

How have you grown two such successful businesses, and in two such diverse sectors?

You get growth through two mechanisms: growing the markets you have, and finding new markets. You can grow your existing markets by expanding your channels, or developing new products. In the wine business, channel is key: you have to understand how retail works in specific markets, and that varies widely. For example, in the UK it’s relatively easy, as there’s a small number of big nation-wide supermarkets, but in the US it’s all regional. New products are vital as well, but it’s not easy to innovate in wine. The other way to grow is by finding new markets. I’ve always enjoyed that. 

Right now, the future looks uncertain, but it’s also full of opportunities if you think differently. As I said, innovation is tough in wine, and you’re limited as to what you can do. The obvious one is packaging: a different size, a different-shaped bottle. But we can’t get different-shaped bottles in New Zealand at a competitive price. We managed to develop a 187 ml PET bottle with a clip-on cup, but it was impossible to produce it in New Zealand so we did a JV with a business in France. In general, I believe innovation is in a company’s DNA, I’m not sure you can bring it in from outside.

Sir Graeme Avery

Sir Graeme Avery

What about digital – how is that playing out in wine? 

Clearly digital communication is a no-brainer, but it’s all about the ‘how’. In my view, e-commerce in wine is a myth for an off-trade brand. To be effective, you’ve got to have something communicated in the local language that works in the culture of that country. Even in the US, where we’ve spent a bit of money on social media, I’m not sure it adds any value. Some of our competitors have spent a fortune and it didn’t work. Everyone is struggling with social media. We know we need a digital strategy and we’re working on it, but we’re not there yet. In the meantime we’re ensuring we have a good website and working with retail partners who are making a success of online, like Woolworths in Australia. But everyone in our business says the same: you have to balance online and offline because in the end, humans have to relate to humans. 

That’s why the retail wine shop of the future will be about social engagement. Every shop has got to be a Starbucks – and wine is no different. People will go there to engage with friends, have a small tapas plate of food and learn about wine their way – and then order online. Wine is not about the features of wine anymore; it’s about a value buy offer and an excitement around the brand. To do that well, we have to understand what millennials want. 

 

And what do millennials want? 

We have a French intern working on a big project on that right now. She’s looking at how they make their buying decisions and what that means for our business. As consumers, they like discovering things. They want to be different than their parents and they’re not brand loyal. You have to take things to them; they won’t come to you. But we have to engage with them because when Generation Z comes through in four years, 50-60% of all wine will be consumed by people under 40. That’s never happened before and we don’t understand it properly yet. 

As for employing millennials, we need to employ more people from that age group – but they’re a challenge – as employees. They have an immediate sense of entitlement, they don’t like coming to a physical workplace, and they don’t want to be accountable to anything other than themselves and their peer group.  However, they think differently and that is what the future is all about. 

 

What would you have done differently with Sileni Estates, knowing what you know now? 

We should have gone into Marlborough Sauvignon Blanc right from the start – we’d be at one to one and a half million cases now, if we had. We started with Semillon from Hawkes Bay and started developing export markets in the UK, US, and Australia. By 2000 it became obvious we had to have Sauvignon Blanc too, so we did. And by 2004 we were doing really well and had won several trophies in London. We also lost a few distribution opportunities because we didn’t have Sauvignon. Anyone running a business makes a lot of little mistakes – that’s how you learn - but that was a big one. 

I don’t work by business theory. I don’t believe in it. All business theory does is follow successful businesses. But in this sector, there are roadmaps - as someone coming into it new, there was no-one to really talk to about it. I don’t mean making it. I mean the business of wine - selling it and making a profit. That’s the hard part. 

 

What’s different about running a family business? 

All family businesses are tightly held and tightly run and they’re best that way. I think if I had my time again I would bring in a wider range of people to consult with on an informal basis. But that’s not to say that you don’t need the disciplines of governance – you do. As for getting in outside professionals, I’ve never worked with an outside CEO - I just couldn’t countenance that. A professional CEO would be just there for the big money, to be brutally frank. I’m lucky that my son Nigel is going to take over as CEO, because I would find it very hard to hand over to someone from outside. Family firms like ours will only survive if the next generation has a very different view on the future and is prepared to make the necessary changes. 

But in the long term, I don’t see Sileni staying in the family – not in 250 years. But we’re not at the right scale to do a listing yet. The only other choices are private equity or a trade sale in the medium term. The exit strategy is the hardest thing. 

 

So if you were going to be remembered in 250 years, what would you want it to be for? 

I suppose any legacy is in your achievements. Whether it’s in business, helping the country grow or in philanthropic giving, helping talented sportspeople be the best they can be. I’ve devoted a lot of my time to philanthropic causes, especially AUT Millennium in Auckland, which is all about encouraging healthier lifestyles for New Zealanders, and providing them with high performance world-class sports training facilities. I’ve helped raise a total of NZ$85 million for this facility. 800,000 people used it last year, and there are 250 elite athletes based there. People who help others don’t expect anything. I’ve never wanted naming rights of anything. But I’m determined to make an impact – to leave something positive behind.

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