Change of subsidiary ownership consolidates Hallgarten's B2B wine focus

By Barnaby Eales

Published: 02 February, 2017

Hallgarten (HDN) wines has announced a structural change of ownership with the company now owned directly by the Pieroth family of Burg Layen in Germany. The wine wholesaler based in Luton, was until December, a subsidiary of the Pieroth's family's holding company WIV Wein International.

"The change allows the family to directly invest or divest," Andrew Bewes MD of Hallgarten said.

As consolidation of the wine industry continues, the structural change of ownership has triggered industry speculation that Hallgarten may be now tempted to make an acquisition or merge with a rival wholesaler or indeed, be sold on.

However, Bewes played down the speculation saying the Hallgarten board had agreed a three-year plan of geographical and channel expansion that would be led by organic growth rather than any acquisition or merger.

The structural change means Hallgarten will uniquely focus on the B2B of wine wholesales, leaving WIV Wein to focus B2C side of direct sales, Bewes said.

"The change reinforces our unique selling point as a wholesaler that uniquely sells wine," Bewes said.

Hallgarten revealed hitherto previously unreleased financial figures for 2016 showing annual turnover increased 4% to rise above £46 million, with gross profit falling by £1 million when compared to figures for 2015.

Bewes said the financial figures for 2016 showed that turnover was stagnant and he explained that that the loss of gross profits had largely come about as the result of the fall in the pound following the Brexit vote in June 2016.

Bewes went on to say that the 20% fall in the value of the Pound since September 2015 has inevitably led to an increase in prices (between 3 and 5% in general, but not across the board) and this will be reflected in Hallgarten's wine list for 2017 which comes out in April this year.

The company has various foreign exchange instruments to cover itself from currency exchange fluctuations between April and September, however Bewes said the fall of the pound had forced Hallgarten to increase prices in October 2016.

He added that the company would be willing to reduce prices should the pound strengthen in the future.

"Gross profit is down by £1 million, but Hallgarten remains a strong business, with no borrowing and our appointment of new staff this year reflects this," Bewes said.

"We are investing in our sales team and continuing to expand on all fronts and we are committed to customers through partnership in training," he said.

For 2015, Hallgarten reported a 17.4% increase in gross margin from a 371% increase in operating profits to £1.77million, brought about by a strong pound and effect of restructure of Hallgarten's logistics business.

He said that the restructure of its logistics business over the past two years, including the outsourcing of transport and distribution, had strengthened the company leaving it with no overheads.

But Bewes warned Brexit could have a negative impact on the on-trade in terms of recruitment of EU nationals. "The biggest issue they [the government] has to sort out is EU labour. There is a transient nature of EU nationals working in the on-trade," he said.

About 70% of Hallgarten's business is supplying hotels and restaurants and the remaining trade is with independent wine merchants.

Bewes said the company is increasingly focusing in on the top 10-15% where there is a natural cultural and portfolio fit. But he added that the company was now facing new challenges in the on-trade as result of economic uncertainty and market consolidation bought on by Conviviality's acquisition of Bibendum-PLB last year, that has led to Hallgarten competing with the joint force of Matthew Clark and Bibendum PLB.

"For the first time, we are seeing restaurants reduce their supply base and we are gearing up to this challenge," Bewes said, adding that there had been fewer openings of new hotels and restaurants this year so far, when compared with 2016.

"We are embracing these changes with a holistic approach focusing on training. We are employing a new trainer this year giving us four trainers," he said.

"We need to make sure that young bar restaurant staff are asking the relevant questions; it is not only about whether they have knowledge of grape varieties. The real challenge is how to make our company relevant to restaurants that are not wine-led."

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