Through acquisitions and organic growth, Inverarity Morton has expanded to become Scotland’s largest independent drinks supplier. Peter Ranscombe talks whisky, wine and beer with managing director Stephen Russell.
With his smart three-piece suit and neatly clipped white beard, Stephen Russell may at first seem a little out of place striding between the towering shelves in drinks merchant Inverarity Morton’s cavernous warehouse in Glasgow. Yet nothing could be further from the truth.
Russell joined the wine, beer and spirits specialist as an assistant accountant fresh from college in 1975 and rose through the ranks to become joint managing director in 1999 and sole boss six years later. During his time in charge, turnover has risen from around £28m to £67m today, with the company morphing from a supplier of bland international lagers like Budweiser, Rolling Rock and Sol into the largest independent drinks supplier in Scotland, with a vast array of exclusive wines, plus a rapidly-growing range of craft beers and premium spirits.
It’s a world away from the business Russell knew in the mid-70s. “I came on board as the assistant accountant – only to discover that there was no accountant and that calling me ‘assistant’ was simply a way of keeping my salary down,” he laughs. “They wanted someone with experience in the licensed trade. My uncle owned a pub called the Pullman Bar in the Gorbals and, when he died tragically in his forties, my mum was the executor of his will.
“I lived in Glasgow and the company was based out in Larkhall. I didn’t mind driving 45 minutes each way every day because I had a three-litre Ford Capri.”
William Morton, the forerunner of the current business, was founded in 1945 and bought by Sandy Bulloch – one of the best-known names in the Scottish drinks industry – in 1959. He sold it in 1974, but bought it back again in 1976 and merged it with three of his other drinks companies: A Bulloch Agencies; Classic Wines; and John Grant Blenders, the business Russell had joined the previous year.
Russell switched to the buying department following the merger. “I had never been trained to know anything about wine,” he confesses with a smile. “The wines our company stocks have changed out of all recognition since those days. In the past seven years, we’ve quadrupled the number of wines we sell.
“We’re now the exclusive Scottish and in some cases British supplier for most of our wines and that’s very important for our customer base. We even design the labels for some of our customers.”
Strolling around the vast warehouse, it’s easy to spot some of the big-name brands, from Champagnes such as Deutz, Laurent-Perrier and Louis Roederer through to Chablis from Albert Bichot, Valpolicella from Tommasi and a host of bottles from Wente in California. It’s the sheer breadth and depth of the range that impresses the most though, with wines from Hungary, Romania and even England.
“We operate in a very competitive market these days,” admits Russell, who is the largest shareholder in the business through his 25% stake, with the other stock spread between Bulloch’s children and grandchildren. “I look back over the past 40 years and, even though I felt things were competitive in the past, it was a much-more relaxed market.
“Now, we’re up against two really big players in Scotland – Tennent’s, which is owned by C&C Group, which also owns Magners cider and is listed on the stock market, and Matthew Clark, which is part of Conviviality, a £1.4bn company. What sets us apart is that we’re independent and we supply a lot of other independent businesses, like Caledonian Heritable, Di Maggio’s Restaurant Group, G1 Group and Montpeliers.
“Being independent means that we can respond quickly to customers’ requests and offer a high level of customer service. I was in the office on Boxing Day and 1 January helping to get our clients what they needed.”
Russell is clearly passionate about wine – especially when it comes to serving it with food. He waxes lyrical about cheese and chocolate, and about which wines he enjoys serving with everything from pasta to steak.
He lists his “desert island wines” as: Château d’Yquem, a sweet wine made in the Sauterne area of Bordeaux in France; Bâtard-Montrachet, one of the “grand cru” top white wines from Burgundy; and Gran Reserva Riojas, Spanish wines that have been aged for at least two years in barrels and three years in the bottle, but often are held for much longer before being released. “But I love all types of wine, from sparkling wine through to sweet red wines,” he adds.
Inverarity Morton’s specialism in wines is reflected in the acquisitions the company has made. After Mexican beer brand Corona withdrew its distribution as part of its tie-up with Molson Coors, Russell wanted the business to build up its own brand instead of being reliant on other larger companies’ labels.
William Morton bought wine merchant Inverarity Vaults in 2011 – re-branding under its current name – and then spirits merchant LA Wholesale in 2012 and Forth Wines the following year. In 2015, Russell consolidated the combined business’s three sites into a single warehouse with offices on the Thornliebank industrial estate in Glasgow.
Russell is especially proud of the new office’s state-of-the-art tasting room, complete with a U-shaped, Corian-topped tasting table and glasses supplied by Riedel. The whole range is stocked, from traditional Champagne flutes through to a new shape designed specifically for serving Coca-Cola.
The company has grown to employ just over 200 members of staff, split between its head office and warehouse in Glasgow and its army of sales representatives on the road throughout Scotland, with a small team also based in the south of England.
Would Russell consider making an acquisition in the North of England to fill-in the gap? “I’d never rule anything out,” he replies in a very even manner. “People buy from other people, not companies, and so that personal relationship is essential.
“If you’re not getting on with someone then walk out the door and leave – you’re never going to do business together. That’s just as true in Newcastle as it is in Glasgow or Edinburgh.”
While wine is at the heart of the business, spirits – and whisky in particular – are extremely important to Inverarity Morton. Sales of single malts by the company have risen by about 20% over the past year to around £4m.
The firm now stocks 360 Scotch malt whiskies and a further 20 high-end malts from India and Japan, which are growing in popularity with its customers. Imported whiskies have also been given a boost by bartenders using them in their cocktails, while brand extensions such as Jack Daniels’ “Fire” and Jim Beam’s “Double Oak” are also proving popular, with the latter enlisting the help of actress Mila Kunis in its adverts to appeal to a younger audience.
Russell points to the innovation going on in the single malt segment, including Auchentoshan’s “Bartenders’ Malt”, which has been created with cocktails in mind, and Glenfiddich’s “Experimental Series”, including “Winter Storm”, the 21-year-old whisky aged in French oak ice wine casks from Canada that featured in issue 30 of BQ Scotland.
Another strong area of growth has been gin. “When I started working at William Morton in the 70s, I could count the number of gins we stocked on one hand,” Russell remembers. “Now, we stock 200 gins and between 150 and 200 tequilas too. One of our clients, Topolabamba – which has Mexican restaurants and bars in Aberdeen, Edinburgh and Glasgow – is stocking 70 tequilas.”
In contrast, Russell thinks distillers need to be more innovative when it comes to their blended whiskies. Sales of blends at Inverarity Morton are down around 20% and, while single malts tend to have better profit margins than standard blends, he says that reinvigorating the category needs to be high on the industry’s agenda.
A wider challenge facing the drinks industry in Scotland is how to cope with the lower drink-drive limit, which was introduced in December 2014. “That cut our sales by 10-15%,” Russell says. “It won’t prevent a person who was going to have 10 pints of beer and then getting behind the wheel from doing so, but it has changed a lot of people’s attitudes towards drinking. Some sensible, moderate drinkers are now scared to have a glass of wine or a pint of beer with their Sunday lunch for fear it will put them over the limit on Monday morning – which is a bit extreme.”
Part of the answer for Inverarity Morton has been encouraging people to “drink less but drink better”. Often called “premiumisation”, the trend for customers to trade-up from cheaper to higher-quality drinks – usually with a better profit margin – is an important factor for wholesalers and retailers throughout the country.
While government policies on drink-drive limits are out of the control of any company, Russell is preparing to sink his teeth into a project that will give him much greater control over his business. “We’ve been using the same computer system since I started working here in the 1970s,” he says.
“We’re installing a new system that will give us a customer relationship management tool, e-commerce and greater stock management. Members of staff working in the warehouse will be able to use headsets, which will free-up their hands for lifting and carrying stock.
“It’s a big project – it will cost around £500,000 and take between nine and 12 months to complete. But it will make a huge difference to the business and will allow us to give an even better service to our customers.”