It’s sunny again in rural Perthshire so the cool reception area of Highland Spring Group provides welcome relief from the mid-August temperature of 21°C. Les Montgomery is in understandably high spirits having played host to the Ryder Cup earlier that day, the golf enthusiast admitting that the prestigious tournament can’t come quickly enough.
Upstairs in his office, the Falkirk-born chief executive of the UK’s leading bottled water supplier says: “It seems real now. We’re the official water supplier to the 2014 Ryder Cup and that iconic trophy was right here just a few hours ago. I held it. Next year is going to be amazing for the Highland Spring brand.”
Gleneagles and its Jack Nicklaus-created PGA Centenary Course, where the cream of European and American golf will battle it out for the Ryder Cup on Scottish soil for the first time in more than 40 years, is just a few miles up the road from Highland Spring’s Blackford-based headquarters so this sponsorship is a perfect fit for the company. Come next September, the brand will become familiar to over 250,000 spectators from 75 countries – and a daily global TV audience in the region of half a billion.
High-profile sports sponsorships, of course, are nothing new for the £86.5m-turnover company. Until 2011, the brand sponsored Wimbledon and Olympic champion Andy Murray and it has a longstanding deal with Sir Chris Hoy, Britain’s most decorated Olympian. In the past, the company has sponsored Formula 1’s David Coulthard and Stephen Hendry, the seven-times world snooker champion. And as a lifelong Falkirk FC fan, Montgomery has managed to sneak in some low-level sponsorship at his club’s stadium.
“Sports sponsorship is very much part of our history because we have always sought out appropriate connections with sport and individuals,” says Montgomery. “At the moment, our key focus is golf, cycling and tennis. While we no longer sponsor Andy Murray, we still work with Judy and Jamie Murray and are official water supplier to the GB Davis Cup team, plus we sponsor LTA Mini Tennis and support British tennis at grass-roots level.”
As far as golf is concerned, there are numerous tie-ups including The Scottish Open. But it is the Ryder Cup that will dominate Highland Spring’s sponsorship focus in 2014. Coming on the back of a hugely successful summer for the brand – Highland Spring’s sales volume in July was up 33% on the same four-week period last year – the opportunities for 2014 are significant, suggests Montgomery.
“There’s definitely a feel-good factor about the business this year,” he says. “The weather has given us a boost but I think last year’s Olympics made us all proud as a nation with so many Scots winning medals – that feeling has stayed with us and Andy Murray’s victory at Wimbledon was the icing on the cake. It’s been good for business but also given consumers something to smile about at a time when they don’t have so much money to spend.”
Add to the equation the fact that Highland Spring is now the UK’s No 1 bottled water brand and there’s even more cause for celebration. It is the first time a British brand has been the biggest in the category, selling 200 million litres in 2012 to take the top spot from Evian in the bottled water market by volume. The news was confirmed by industry expert Zenith International in its 2013 UK Bottled Water Report, heralding a major milestone for Highland Spring and signalling the end of 30 years’ domination by imported multinational brands.
For Les Montgomery, however, the outlook wasn’t always so positive. When he was appointed chief executive in 2008, taking over from the highly respected Joe Beeston who died after a long battle with cancer, it was a “difficult and emotional” time for him and the company. “Joe had been ill and I was being groomed for the job. I lost a friend and at the same time the world went into economic turmoil, so selling a product that was not seen as essential was really tough when we had been experiencing 20-odd years of growth,” he says.
“We had a couple years where our market was dipping, the weather was bad and consumers were being driven towards lower-value products. There was even product coming into the UK market from Turkey so we felt like we were being attacked from all angles.”
Montgomery, married with two children, joined Highland Spring in 1985 when it was a business with a turnover of £3.2m. Previously with a small accountancy firm, he held a number of finance roles with Highland Spring before becoming finance director. The company, founded in 1979, had already been making a big impression on the market and producing a lot of volume, he explains. But when Joe Beeston arrived, the
“It became all about the brand,” he says. “Joe’s vision was to grow the Highland Spring brand and become a business of scale. So in 2008, my vision for the business was to take what Joe had achieved to the next stage. We had a £50m turnover and I had £100m in my sights. I wanted us to be No 1.“I think as a management team we had all lost a wee bit of focus and, in a way, had a fear of what was coming next,” Montgomery continues.“In 2008, we’d gone backwards. People here, including myself, were feeling down after Joe’s death, turnover remained flat and profits went down. I had time to reflect over Christmas and when I returned to work I came back with a different attitude. We immediately set targets and focused on creating a more sustainable business model. I was excited but apprehensive at the same time.”
With his deep-rooted aspiration to grow turnover to £100m by 2013, Montgomery started eyeing acquisition opportunities. The first – Moray-based Speyside Glenlivet – came quickly, in March 2009. “We made a decision to go for it within 24 hours,” he recalls. “It was really exciting and we all knew it was the start of major change for the company.”
The bottled water arm of the Dublin-based Greencore Group – for £17.5 m – followed shortly afterwards, in March 2010.
“These acquisitions gave us more credibility within the industry and with Greencore we gained plants at Lennoxtown in East Dunbartonshire and Blaen Twyni, near Swansea,” he says.
“It also put almost £16m extra turnover on our business overnight.” As well as additional production capacity, the company saw its employee count jump from 280 to over 400. “We underestimated the impact of trying to integrate and manage the new, bigger business,” admits Montgomery. “It was a huge learning curve for us because no-one in our management team had experience of something like this. Back in 2001, we acquired The Gleneagles Spring Water Company here in Blackford but Greencore was a completely different ball game.”
The recent acquisitions have also led to management changes with an HR director now in place, plus new operations and finance directors. Simon Oldham, an experienced sales professional in the FMCG sector, has brought valuable commercial expertise in roles with Whyte & Mackay and Procter & Gamble to the table. “We’re in a strong position,” says Montgomery. “We’re a privately owned business with the support and backing of an independent shareholder, but we still need to be self-sufficient and go to traditional funding providers when we need to invest. Lloyds, our bank, has been tremendously supportive.”
Securing the UK No 1 position has been the company’s ambition since it was founded in 1979. Owned by the Dubai-based Al Tajir family, Highland Spring has often been criticised by sceptics who question the company’s Scottish authenticity. “Of course we are Scottish – we’ve been contributing to the Scottish economy for almost 35 years and we’re an important local employer,” he points out.
“But it’s important to send out the message that we’re also a British company. We’re the UK’s No 1 bottled water brand and are proud of that. Our roots will always be in Perthshire and we continue to reflect that through our packaging. But we’re not insular – we can’t afford to be. So what if our owners aren’t Scottish but own land here – is it really that important? We’re concentrating on growing the business and exploring further acquisition opportunities with the support of the Al Tajir family.”
Innovation and new product development (NPD) is also on Montgomery’s radar. Hydr8, sold via the cash-and-carry and foodservice sectors, was the first new brand to be launched following the creation of the Highland Spring Group in 2010. Hydr8 Flavours came next, capitalising on consumers’ thirst for sugar-free, flavoured water. Montgomery even hints at possible diversification into categories beyond water but won’t be drawn on the details at this stage.
With a current production capacity of over 700 million litres of water per year and an available resource in excess of 2.2 billion litres a year, Highland Spring is well placed to continue on its present upwards curve. With five plants and 12 production lines, the group produces more than one in every five litres of the unflavoured bottled water consumed in the UK. “That’s quite an achievement for us,” states Montgomery, pointing out that volume in July alone is on a par with the volume produced by the entire UK market in 1979. “It shows just how far the sector has come in a relatively short time.”
With the UK market now fairly mature, however, is export a big growth opportunity? “We export to around 30 markets and have good distribution in the Middle East and the Caribbean,” he says. “We’ve recently moved into China and Russia, and have a good shop window for the brand via our links with Costa and Starbucks. There’s scope for growth but water is expensive to ship and we don’t envisage export being more than 5% of
our business. That’s not to say that our export business isn’t important and our plan is to grow overseas volume to 16 million litres.”
Back on home turf, Highland Spring is at a stage in its evolution whereby it is not overly reliant on any one customer. “We have a good relationship with the retail multiples, very balanced,” says Montgomery. “Discussions are sophisticated these days and if the deal on the table is not right for us we have the confidence to walk away in the knowledge that we may be taking a risk. Relationships are always important but we will never do anything that compromises the quality of our brand.”
Montgomery recently celebrated a significant birthday. “You know, it wasn’t the ordeal I thought it was going to be and I’m actually quite relaxed about hitting 50 – I’m more surprised that I’ve been here at Highland Spring for 28 years,” he says, savouring the view of the Perthshire countryside from his office window but wishing the factory didn’t block the view of the source of Highland Spring – the Ochil Hills – on the other side.
Montgomery may not be able to secure a view of that land, certified organic by The Soil Association, from his office, but he can be guaranteed some good exposure of the Highland Spring brand at the Ryder Cup next year. And, no doubt, an enviable view of that eagerly awaited golfing action will also go a long way to helping his company achieve that £100m turnover target.