case studies

Trebles all round!

How unambiguous intent drove a 30x return on investment.

Founded on the docks of the River Clyde in Glasgow Scotland in 1844, Whyte & Mackay is one of the largest independent Scotch whisky and alcoholic beverage producers. The branded business comprises of the eponymous Whyte & Mackay Scotch Whisky, Isle of Jura and Dalmore Scotch whiskies, Glayva liqueur and Vladivar vodka amongst others.

Vasari’s first involvement with the company came at the time of a management buyout in October 2001, when the company’s name was changed to Kyndal. Vasari had been responsible for providing £20m of mezzanine finance to the ailing business. By 2003, Kyndal was not meeting financial targets, suffering major price and profit erosion on own label and bulk, plus its brands were strategically weak and poorly positioned, resulting in low share and margins.

The ensuing departure of the previous CEO saw the appointment of Vivian Imerman as Chairman and Chief Executive. He quickly deployed his Vasari team to perform relevant diagnostics and to create a clear strategic approach to the examination of all areas of the business. At the time, loyal, long standing staff suspicions were of corporate raiding , though in time it was generally understood that things were not in good shape and decisive action was needed to reverse the company’s decline. Having established equity control, politics were put to one side as the Vasari team went about the necessary business forensics.

Obvious solutions – tough decisions.

The plan was agreed, put in place and acted on, bringing with it some tough decisions. An inefficient distillery, complex, outdated bottling operations, weak distribution of tired brands suffering distinct price erosion, and an over levered balance sheet, were all clearly identified.

Operational reform was put right at the top of the recovery plans mandate. Cut backs were inevitable and overall productivity had to improve drastically and in relative terms, quickly. A glaring anomaly was that the company was operating two archaic bottling halls, when one modernised plant would not only meet current demand, but also enable the necessary increase in future productivity. This logistical weakness had been in evidence for many years, but the inevitable solution was an uncomfortable one, that by their own volition, previous management had simply put-off. Vivian and team, quick to identify the problem, had to be equally swift in the decision to shut down the Leith bottling plant. In tandem, the second plant in Grangemouth underwent a total £20m redevelopment program to meet the technological demands of the 21st century.

Distribution met with simultaneous reform, successfully exiting agreements in favour of building a 50 strong internal distribution team. In turn the patchwork of sub-scale international distribution partners were replaced with high grade operators.

The brand value of ‘Heritage’.

Though initially focused on meeting the demands of modern day production, the Vasari team were equally keen to extoll any strategic marketing virtues that lay in the company’s heritage. The positioning and ‘look and feel’ of the core brands had been, in Vivian’s view, underplayed by neglecting the company’s rich history. In a dramatic display of confidence, Whyte & Mackay was re-launched with a new look inspired by its proud, urban, Glaswegian origins. The twin rampant lions were again center stage. The original Whyte & Mackay blend was renamed ‘Special’, just as it had been in the beginning and aged blends, with an extra year of maturation, were added to the brand’s award winning line up. Range overhauls were also completed for the iconic Isle of Jura and Dalmore single malts. The re-found design aesthetics and added product quality benefits, were quickly recognised by both staff and customers as a great step forward to re-establishing the brands, and claiming back a rightful position as one of the foremost premier Scotch whisky producers.

Turning Point

By the time debts had been restructured and refinanced, the energised, 21st century Whyte & Mackay, through meticulous planning and the dedication of both the Vasari team and the management and staff, emerged to market, investor and customer applause. The radical transformation had seen a rise in EBITDA from c.£20m in 2002, to c.£60m just five years later in 2007.

With a job well done, by 2007 it was time for Vasari to explore other ventures and the decision was taken to sell.

Over the short period Vasari had control of the business, sales had almost doubled and earnings had tripled.

An exit price of $1.2 billion was agreed and Whyte & Mackay was sold, providing Vasari with an impressive c.30x return investment.

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