June 26, 2011 Sparkeling Gem

Volume 7 | Issue 1

A baseball diamond is an emerald upon the landscape and a field of dreams. So is Diamond Estates Wines & Spirits. Co-Founders Andrew Green a

The most perfect diamond in the world doesn’t sit upon a ring setting but is positioned on a baseball field.

Ask Andrew Green and Murray Marshall, cofounders of Diamond Estates Wines & Spirits. They appreciate the poetic symmetry – indeed the perfect geometry – of that emerald gem, the baseball diamond. A shared love brought them together into a business enterprise, and they named their company after their favorite sport (both have been actively engaged in baseball on the amateur level).

When they named their company, they weren’t merely paying homage; they were also underscoring a business strategy executed as perfectly as a squeeze bunt or hit-and-run play.

From the ground up, the company operates like a Major League baseball team. The co-founders built the business through both organic growth (similar to a professional team’s farm system) and acquisitions (sort of like the deals and the trades that baseball teams engineer to help them rise to the top of their division).

Peruse the statistics on the business pages (as you would the standings, batting averages and ERAs on the sports page) and you’ll find that Diamond Estates Wines & Spirits is an industry pennant contender. The Toronto-based company has emerged as one of Canada’s leading agencies when it comes to representing the top domestic and international beverage alcohol brands. Like the New York Yankees, Diamond Estates represents an organization that functions at the top of its game. It boasts superior sales, marketing and distribution skills, and its strategy of combined organic/acquisition growth has increased its market share and profitability.

A privately owned company, Diamond Estates is a consolidator, describes Marshall, who is president and chief executive officer (which means that he’s like a baseball team owner who is also an on-field manager). “When Andrew and I founded the company, our vision was to consolidate two fragmented pieces of the beverage industry in Canada,” says Marshall, a modern-day Connie Mack. “We developed a strategy that involved acquisition of some wineries and the development of a sales, marketing and distribution agency.”

The company is as integrated as it is innovative: It focuses on building brands – its own as well as those produced by its suppliers. It markets it wines to the Liquor Control Board of Ontario (LCBO) and licensed establishments (through direct sales), and it represents imported wines and spirits throughout Canada.

AN EXPANSION TEAM

Green and Marshall established Diamond Estates in 2000 with the acquisition of the Niagara region’s best (albeit small) wineries, and they consolidated that activity with what was then a small sales and distribution company. Wineries became larger, the distribution became broader, and Diamond Estates became a leading independent wines and spirits agency and a winery brand owner and producer – a contender.

Marshall guided the company toward continued growth. His leadership and vision translated into strategic direction. Also chairman of Canada’s Vinters Quality Alliance, Marshall brought to the team more than a quarter of a century of industry experience. Companies he has played for include Joseph Seagram & Sons, Basil D. Hobbs Imported Wines & Spirits, T.G. Bright Company and Colio Estate Wines. His resume is impressive, and his batting average high. Deftly fielding his positions with these companies, he was directly responsible for developing and implementing sales strategies to facilitate brand development and sales for both wines and spirits. Later, as general manager (sales and marketing of export and specialty markets) for Andrés Wines, he created and implemented successful sales strategies for domestic products such as Icewine and table wine for export markets (e.g., the United States and Asia) and specialty markets within Canada, and he oversaw development and expansion of an imported wine, spirits and beer agency to complement Andrés’ domestic portfolio. As executive vice-president of corporate development for Colio Wines, he developed ventures (such as new brands, copacking agreements for products, government grants for capital and vineyard acquisitions) that increased sales, production and cash flow for the winery and its vineyard operations.

IN THE “NATIONAL” LEAGUE

Today, Diamond Estates focuses on building brands in the Canadian market. The operation is national in scope (it has offices that extends across Halifax, Montreal, Toronto, Calgary and Vancouver). For its supplier partners, it provides added value to the brands it represents through innovative solutions and in-market execution of sales and marketing programs. But Diamond Estates will only work with suppliers that it feels it can confidently represent. In turn, the company requires that the partner be prepared to invest in marketing and sales programs. (In other words, it demands that the supplier hustle down to first base.)

With such relationships, Diamond Spirits has helped suppliers bolster their brand names in Canada.

“In just 10 years, we’ve built a reputation as one of the most successful distributors of our partners’ brands,” says Marshall. “We’ve had tremendous success developing compelling business and marketing plans specific to the Canadian marketplace and consumer demographic.”

In the process, Diamond Estates has earned several important awards (like a baseball team garnering a division championship). “For instance, the LCBO, which is the largest single purchaser of beverage alcohol in the world, recently named us as the agent of the year,” reveals Marshall.

In addition, Diamond Estates serves as an import broker and agent for wines and spirits throughout the world. “We deal with some of the largest, independently owned wine companies and spirit companies, which takes us into every region,” says Marshall.

For this company, a “World Series” truly means the entire globe.

Names that Diamond State is associated with include Patrón Tequila and Heaven Hills Distilleries Inc. (the largest independent distillery in the United States), and brands such as Hpnotiq, Caramel Liqueur, Burnett’s (vodka and gin), Crystal Head Vodka, and Iceberg Vodka Corporation, among many others. As far as wines, the company represents international brands such as Andre Lurton, Cheviot Bridge, Cantine Talamonti, Fat Bastard and Vino San Pedro (from Chile). These are only some of the most notable. In all the company has associated itself with more than 100 well-known names.

INTEGRATED ENTERPRISE

A significant piece of the business involves wines, and this is an area where Diamond Estates is fully integrated. “We grow the grapes, make the wine, develop the brands and the brand strategy in Canada and several export markets,” says Marshall. “As a consolidator, during the past 10 years, we have acquired wineries and winery brands in the Ontario marketplace.”

Typically, it seeks out undervalued or underutilized brands and or assets. “Once we’re involved, we enhance brand positioning and consolidate the manufacturing. We have the most technically advanced wine making facilities in North America,” says Marshall.

Acquisitions include Dan Aykroyd Wines, 200 Bees Winery, EastDell Estates, Lakeview Cellars, Birchwood Estates and De Sousa Wine Cellars.

The company’s Niagara Peninsula wineries – Diamond Estates-The Winery (situated on a 30-acre property in Niagaraon-the-Lake) and De Sousa Wine Cellars – produce some of Canada’s finest red, white and rose table wines, sparkling wines, Icewine, and dessert wines.

In May, 2011, Diamond Estates announced that it will begin processing more local grapes at its Niagara-on-the-Lake production facility with the help of a $700,000 provincial grant.

Grant money goes into a new production line for sparkling wine as well as modernization of its existing equipment. Expansion involves a proposed $8.2-million winery building to be constructed in front of the existing 43,000-square-foot production plant. The expansion will have positive impact on the region. Not only will it create jobs, but Diamond Estates will be buying more tons of grapes from local growers.

OVERCOMING A SLUMP

Overall, Diamond Estates’ growth has been impressive, despite the late-2008 economic downturn. “As with anyone else in any industry in the world, our growth rate slowed,” says Marshall. “But if you look back over the 10 years that we have been in business, you’ll see that we have grown from a $1 million company in revenue in all channels to a $29 million company, for the year that ended on March 31, 2011. In the past three years, we’ve averaged about 14 percent annual growth.”

Other trends are driving its strategies. For instance, Marshall reports that many consumers are shifting away from traditional spirits to wines. But many still enjoy their spirits, and they’re becoming a bit more choosey. Market evolution is moving away from what Marshall describes as traditional cocktails and into premium and mid-premium drinks. “Consumers are no longer looking at just packaging and price,” he says. “Now, they’re focused on brand image and the fashion statement that makes.”

He offers Patrón Tequila as an example. “In Canada, it’s becoming a category leader, as it is converting tequila into a fashion-statement premium drink.”

As he describes, tequila is no longer just a shot that Canadians quickly gulp after downing a couple of beers. “If you drink Patrón, you most likely own a premium car, purchase brand-name fashions and eat in the best restaurants,” says Marshall.

SEASON PREVIEW

Look for Diamond Estates to continue growing through its well-tested strategy of organic/acquisition growth. It has an existing supplier base (an already strong lineup) that will be bolstered by the addition of new suppliers to its portfolio (well test-tested rookies and up-and-coming stars).

Marshall assesses his team’s chances: “We’re bullish on advancing premium drinks and the premium wine industry in Canada. We’ve solidly positioned ourselves for continued growth, which involves listening to the consumers about what they’re looking for. That’s one of our strengths. But we realize that external forces come into play, such as the economic downturn, but we’ve demonstrated that we can respond by becoming more agile. Indeed, we’ve been forced to become more agile. And with our better agility, we’re more responsive to market conditions. That’s an area where we’re very confident: our ability to demonstrate agility in a market that all too frequently poses challenges in the way of changes.”

True, that’s part of its muscle. But Diamond Estates should continue to grow through organic opportunities and the mergers and acquisitions that it has always actively pursued. No one does it better. However, the company isn’t complacent. It’s bolstering its lineup by bringing into the organization products that prove compelling to customers. Marshall has seen the future and he says that “products that offer intrinsic value will be the way of the industry.”

There’s no reason to doubt this always prescient company skipper. “This is especially evident in the crafted beer business side, where people will always drink their standard brand but treat themselves to some of the more expensive, regional, handcrafted beers. That’s similar to what is going on with wines, where people will buy their regular Chardonnay or Pinot Grigio but look to also buy an intriguing Cabernet Sauvignon from a specific region, essentially because they feel that it enhances their lifestyle experience. We’ve built a company around identifying such people and such products, and then do the appropriate marketing, effectively and efficiently.”

Diamond Estates Wines & Spirits offers all of that – just as the New York Yankees once bottled a vintage team that included Mickey Mantle, Roger Maris, Whitey Ford, Bobby Richardson, Tony Kubek, Clete Boyer, Elston Howard, Yogi Berra, Ralph Terry and Jim Bouton.

Prediction: Another pennant.

Maybe even a World Series win.

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