Amid flaring tensions between the Kremlin and the West in recent months, might Vladimir Putin have stayed cool under fire with a bottle or two of Harrogate Spring Water?
Quite probably given that it is reportedly his favourite bottled water – and an ever more popular product in Mother Russia.
Last year its parent, Harrogate Water Brands (HWB), grew sales to Russia by 40%. Through a partnership with distribution firm SVAM, its bottles have spread throughout the vast nation. Locations like Moscow Airport, Costa Coffee outlets, the Sheraton hotel and 50 O’key stores – one of the country’s largest retail chains – all stock the age-old drink.
And the Russian sales surge has continued this year too, says managing director James Cain. Cain has it on good authority that Putin is a big fan of the Yorkshire export, as well as photographic evidence.
And with the steely resolve of the Russian leader, he bats away BQ’s suggestion that such openly British brands might be vulnerable in Russia if UK-backed sanctions are increased.
“No way,” he says over the clatter of a bustling Harrogate tearoom. “Our channels are pretty clear and we’ve got a really good relationship with SVAM.”
Harrogate Water Brands’ success in Russia is built on the foundations of history. Members of the Russian Royal Family were frequent visitors to Harrogate to ‘take the waters’ up until the early 1900s. The link was re-established through the SVAM tie-up and has flourished in the years since.
Beyond Russia, though, more potentially lucrative markets will open up this year on the back of a deal with Middle East and Asian hypermarket giant, LuLu International.
Cain has just returned from a trip to Abu Dhabi where he has been finalising the details of the agreement that will take HWB into the Gulf States, India and Egypt later this year.
The deal includes exclusive rights to the UAE, Kuwait, Oman and Saudi Arabia – markets which are dominated by desalinated seawater rather than natural spring water. Cain is something of an accidental exporter, however.
“Export never really sat comfortably with me because of what we do and the environmental positioning. We’ve got a big enough market to go at in the UK and it’s a market in growth.
“Overseas markets were never on my radar because they didn’t need to be. But the more I see and the more UKTI are telling us to trade our way out of recession through export, the more I see the benefit. If it creates employment and growth then it’s got to be good.”
The company’s entry into the Middle East and India came after “a rich gentleman on a train” sampled its product. And the firm is bombarded by other such opportunities daily.
“We’re getting phone calls every day from different markets and we just have to choose the right partner. Everybody wants exclusivity but we’ve got to assess whether it’s right. If someone calls from China, for example, that’s a country with a population of 1.2 billion and it doesn’t feel right to be giving your brand to one company in isolation.
“We’re just blinded by opportunity at the moment and we’ve really got to consider how we go about it. There’s enough to go at in the UK and I’d love to own the UK market.”
To do that in its home market the Harrogate brand would need to leapfrog the four labels above it on the best-sellers list.
“We’ve just laid down more capacity now allowing us to improve on that,” says Cain, referring to a £6m investment at its Yorkshire HQ. The outlay was spent on a “groundbreaking” German machine which arrived earlier this year on no less than 34 trucks.
It will dramatically increase output and its installation was accompanied by a 22,000 sq ft extension of the plant and the addition of a second bore hole. In one wizzy motion the machine blows, labels and fills bottles. Before its delivery, the firm and its 40 staff had previously been operating at full capacity, servicing only existing customers.
“For the last two years my sales guys have had to sit on their hands and not take new business but we can now hit the ground running and start chasing business. Unlike previously, when the phone’s been ringing, we can now pick it up and say, ‘let’s talk’. That’s really important.”
A recent rebrand which plays on the product’s heritage has also strengthened its UK foothold, as has the naming in May of Harrogate Spring Water as the official water of England Cricket. The deal with the England and Wales Cricket Board will see its bottles appear at games beamed around the world.
The company has also signed a deal with Yorkshire County Cricket Club to become its official bottled water partner.
Another weapon in its armoury as it targets UK growth is its independence, which Cain says sets it apart from certain other brands on UK shelves. While some brands are owned by multinationals – like Nestlé’s ownership of Buxton Water – HWB is a standalone firm. “It means we can make decisions quickly.”
Cain’s background within the retail giant Wal-Mart has also set the company in good stead as it continues its assault on British territory. He wanted to be a pilot growing up, but such dreams were eventually grounded and instead, a degree in business studies and computer science led him to Asda’s graduate programme.
Here he learnt valuable lessons about taking products to market, which have undoubtedly shaped the success of HWB.
“I was in logistics, which was a pretty new word at the time. Then after the Wal-Mart takeover, I also became PA to the chief executive for three years, which was incredible. It allowed me to see how big business operates and travel globally. The values and culture of Wal-Mart are just enviable and trying to take that and put it in a small business has helped me an awful lot. We were doing things like reverse logistics in ‘96 that have only just become commonplace now. There were a lot of practices I’ve been able to put into our business that have been fantastic.”
During a career gap year from 2006 –encouraged as part of the Wal-Mart way – he did some travelling and gained a helicopter licence. He also answered his father’s call to take an objective look at his business. This resulted in the “tough decision” to never go back to the supermarket trade. His father, now chairman, had a bottling/packaging business which won the contract to bottle Harrogate Spring Water following a council decision to allow production to re-start. The water business officially began in 2002.
Cain says: “What I realised was, unbeknown to me at the time, just how good the training had been at Asda. I call it the Karate Kid syndrome, like in the movie when he paints the fence and doesn’t understand it until it comes in use later. So all of a sudden I had a tool kit that was really going to help in a small business. What had really become second nature was perhaps not really existent in my father’s business so I was able to create savings and really create a direction for the business.”
He applied Wal-Mart’s world-leading approach to logistics, productivity and operational
efficiency to the business and ensured it was “buying right and economically”.
There were choppy waters too, particularly in 2007 when crisis gripped the industry. “We went through a media storm where bottled water wasn’t the flavour of the month and we came in for a lot of criticism for our environmental credentials. People were asking ‘why drink bottled water when tap water is fine? I used to drive home in an evening and think we were doing something terrible. But we’re not; we’re actually doing a really great job of packaging a product which is as nature intended. Our water is 500 years old; we happen to capture it in the most efficient way, put it in a bottle and allow consumers to have choice on the supermarket shelf or on a train station platform where you might not be able to access tap water. We are providing perhaps the most environmentally sound, ethically correct proposition.”
The drying up of credit in 2008 hit the soft drinks industry hard. But the recession wasn’t all bad.
“We did, ironically, benefit [from the financial crash]. Around 25% of the UK’s bottled water is imported and imports were under question at that time, with fuel costs and currency conversion rates putting pressure on them.” HWB was able to take advantage of being approximately equidistant from Edinburgh and London. Cain’s mastery of the logistics game also helped.
“We could get anywhere as quickly as anybody and it allowed us to play to our strength which was servicing the UK market. That has always been our focus. Exports are important, but they came to us through fortune and they found us rather than us looking for them.”
Steps were also taken during the recession to streamline the business, which was done without job losses and with little or no external financial support. “If we’d not made those changes we wouldn’t be here now,” says Cain. “Our brand back then was 40% of the size it is today and we’ve powered on from there.”
In 2010 Cain made the transition from operations to managing director with relative ease. And he did this without the marketing and sales nouse many business leaders have.
“I’m not a sales guy but I have found that people do trust an operator,” he says. “So when I go out there and tell the story people believe what I’m saying is accurate and true.”
At 36 he was also pretty young for an MD and still today looks younger than his 40 years. But having been Asda’s youngest general manager at 26 he was used to gentle ribbing from older people under his command.
Now, as head of a £10m-a-year firm with much to be optimistic about, he is focused
on growth at home and abroad. And externally, this is increasingly being aided by changing trends among consumers.
“A lot of our growth is coming from realignments of shelf space, given the media attention that sugared drinks are getting right now. People are recognising that we’re environmentally sound, ethically strong and we’re winning shelf space. It proves bottled water is here to stay.”
Currently supermarkets aren’t a major part of HWB’s customer base. But Cain has ambitions to change that and build Harrogate Spring Water into a national supermarket brand.
“We’ve created a niche in the food service sector and we’re delighted with it and we continue to see growth from restaurants and catering customers. But I do see an opportunity for us to fly the flag as a national supermarket brand.”
One area of the business that is well represented on supermarket shelves is Thirsty Planet, the other of its two main product lines which donates a share of proceeds to a water charity.
“In the eye of the storm in 2007, when we were all under scrutiny, we created Thirsty Planet and decided that we’d give a direct contribution to a charity. The mechanic was really the irony that people in this country get the choice of bottled or tap water whereas some people in the world don’t get any choice at all. So we went out and looked at various organisations and we chose the charity Pump Aid because they’re hugely efficient. Flatteringly people have copied us since.”
With brand exercises, surging exports, sponsorship deals, two evolving products and major investments all taking place, 2014 looks to be a pivotal year for Cain’s firm. Added to the pressure of carrying the company forward on all fronts, is the recognition that he is also
a custodian of a grand old Harrogate industry.
“The local historian told me we are currently responsible for carrying the baton for the hydrogeology of Harrogate right now. The town was built around its hydrogeology in 1571 and we are continuing to carry that tradition and we’re hugely proud and honoured to be doing it.”
Harrogate water was at one time the British Empire’s exported water of choice and was used to fuel parched soldiers in the furthest flung places of the world. Today, with deals opening across Asia and the Middle East, its global star looks to be rising once more.