The wine bottler

Rebecca Gibb MW pays a visit to an unlikely wine powerhouse – the Lanchester Group, based in northeast England.

Lanchester Wines can process 68,000 litres an hour
Lanchester Wines can process 68,000 litres an hour

The town of Stanley in County Durham seems an unlikely location to be discussing wine trends. The former coal-mining town, 16 km south of Newcastle-upon-Tyne, has had a tough time in recent decades -- the closure of the pits and the shuttering of local steelworks and factories. It is not much to look at, but climb out of the town, past the local football club’s grounds and head for the wind turbines spinning obediently. They lead to a huge industrial estate where a sea of men and women in luminous high visibility vests are filling thousands upon thousands of wine bottles every day.

Getting it right the first time

The Greencroft industrial estate may not have the glamour of some of London’s fine wine merchants, but the Lanchester Group, which had more than 460 staff at the last count and a turnover of £75.5m ($99.4m) in the year ending 30 June 2016, is now one of the area’s biggest employers. Instead of going down the pit at the start of a shift, Stanley’s workforce now welcomes tanker loads of wine from all four corners of the earth, bottles the wine and then sends it on its way to many of the UK’s biggest retailers and beyond.  

It’s a far cry from the early days of Lanchester Wines, when Tony Cleary and his wife Veronica set up the business in their living room in the nearby village of Lanchester. The son of a coal miner, Cleary started his career with Whitbread aged 18, before joining Pedro Domecq “when Sherry was big business, [we sold] three milion cases of Celebration Cream in one year”. His last employer before launching Lanchester Wines in 1980 was United Rum, selling spirits including Lamb’s rum, Tia Maria and Canadian Club. He says he was given the prod to jump ship and go out on his own when United Rum “brought a guy in from Trebor Mints who had no idea about the liquor business and I couldn’t be doing with that!”

Success was not instant. From the company’s changing headquarters – the local off-licence, an office above a betting shop and a dilapidated former library, Lanchester Wines imported and sold French table wine, Lambrusco and Liebfraumilch.  The wines were stored in a warehouse leased from British Coal, but as the company started to take off, it needed more space. After a couple of false starts, the company’s current home – Greencroft Estate – came on the market. They needed 80,000 square feet of warehouse; Greencroft was more than 400,000 and it wasn’t in the best condition. Says Cleary: “The old tin roof leaked – it was like a colander. Horrendous. Some of the tenants in the other parts weren’t exactly savoury characters so it was a bit of an issue that we had to solve. But a daft local guy like me came steaming along saying we’d like to buy it.” 

The company filled the units on the £1.3m site and fixed the leaking roof. The rental income paid off their loans, leaving the Clearys with a rather large asset outright. The idea of a bottling plant on the site, which can now process 68,000 litres an hour, equivalent to 90,000 bottles, wasn’t on the cards until a local businessman, who bottled some of Lanchester’s fruit wines went out of business. That cost the Clearys thousands of pounds.

 “[The bottler] was struggling because he bought old machinery,” says Cleary. “He was an engineer and put it together with chewing gum and string and, of course, it was always breaking down – that’s one lesson you quickly learn in business: Buy new kit. We had to throw money into [his business]. I guaranteed it and the bank told me it was silly and sure enough six months later, we had to give the bank thirty grand. It was a good lesson – don’t buy crap old equipment. If you are going to do anything, do it right, first time.”

After that financial blow and with spare space at the Greencroft site, the business decided to take matters into its hands and bottle its own wines, buying equipment that wouldn’t break down. Greencroft Bottling was born in 2003. It now runs three shifts a day from 10pm on a Sunday evening until 10pm on Friday, and in 2017 is expected to package between 70m and 80m litres of wine. 

Of course, this being 2017, bottles aren’t the only thing Greencroft fills with wine. The company has installed a bag-in-box filler as well as a Tetra Pak filler, with contrasting results. “Tetra Pak has been a disaster,” says Cleary. “We can’t get anyone to package in Tetrapak. Abroad it’s used for jug wine, all the basic stuff.”

He says the machine is only in operation one or two days a month. “I wonder if it was a bad decision but maybe it’s just too soon. We’ll have to work out what to do with it – maybe water – because no-one wants wine in Tetra, although Waitrose are doing quite well with it.”

Cleary says there’s nothing wrong with the packaging itself. “If you put a good wine in Tetra you’ll get a good wine out. If you put a good wine in bag in box, you’ll get a good wine out.” The problem is that people make choices with their eyes, and Tetra Pak isn’t appealing enough.  

In contrast, the bag-in-box business has grown steadily since the equipment was installed nearly two years ago. An increasing chunk of the company’s business is aimed at the bag-in-box friendly Scandinavian market, and the growth is so significant that Greencroft was ranked number 83 in 2017 The Sunday Times International Track 200, a measure of which UK companies have the greatest international growth.  But the company has its sights on even further growth, hoping to reach a maximum filling capacity of 20m litres, from its current 2m litres business. 

Changes in the bulk business

While Greencroft bottles wines for clients independently of Lanchester Wines, Lanchester creates its own brands, which are bulk shipped and bottled at Greencroft. It also imports wine in bottle, just as it did in 1980. It’s an interesting time to be in the bulk wine business, which now accounts for 13% of total wine imports to the UK while globally, bulk wine represents close to two in every five litres of wine exported but just 10% of value. However, there’s increasing interest in premium priced bulk wine offerings or ‘boutique bulk wine’, as it is being coined. 

Yet, wine is a natural product and the bulk market has been given a sharp reminder of that with the small 2017 harvests. While Cleary peels a tangerine, Barney Davis, head of commercial operation at Lanchester Wines, explains: “The way the bulk market is going, vintage demand is going to outstrip supply, so you are going to have to be pretty fleet of foot. Everywhere you look is tricky whether it be across Europe – yields are down dramatically, so people who have bought from Europe are going to look to the New World – but Chile have had a couple of nightmare vintages, Argentina the same, Australian red pricing is up 20%.” He notes that when there’s previously been a shortfall from one country, such as South Africa, “we’ve said oh, we can go and get some from Chile – whereas now where do we go? For us it means placing an importance on long-term bulk partners.”

Far away from the London-centric wine trade of the UK as it is, Lanchester Wines has been a little slow when it comes to modern branding and marketing. As a result, there’s a misconception that Lanchester focuses on entry-level New World wine shipped in bulk and sold at rock bottom prices. The 3,000-SKU portfolio does offer many options for house wines and some well-priced own label brands from the New World. However, there’s plenty of choice at the finer end of the wine spectrum, although connoisseurs and collectors might need to head elsewhere for their fine and rare bottles. But then Tony Cleary isn’t a high fallutin’ man with the stuffiness that seems to go hand in hand with fine wine. He’s got a distinctive north-east accent and he’s a businessman who works hard and hasn’t become entangled in the en primeur and rare vintage game. 

The latest acquisitions

Instead, the business has expanded its scope beyond wine, setting up Lanchester Gifts in 2007. The company has made recent acquisitions, including paying seven figures for one of England’s larget hamper companies, Spices of Hythe, and luxury confectioners Bon Bon’s. 

“You can invest in the gift business: there’s money in it,” says Clearly. “We’ve just bought a fancy machine that can print on slate, wooden boxes. You are making money so you can invest in new technology. Why is the wine business not investing? Because it’s not making any money. The spirit business are making plenty of margin. They can spend money on marketing in the spirit business Diageo used to own Blossom Hill but they sold it – I wonder why.” 

Another division of the business is Lanchester Energy, which has seen £8m ($10.5m) invested into green energy to power the Greencroft estate. The wind turbines that stand on the hilltop site and the solar panels that coat the office roof power the entire County Durham business and feed electricity into the National Grid. While clean and green, Cleary is no hippie environmental activist and the bottom line was a huge consideration when it came to installing the turbines and solar. “It saves us money.”

Cleary and his wife are now in their late 60s and – without wanting to ship them off on a cruise just yet – their three children are waiting in the wings to take over the family business. They could have sold the business many times over and Cleary almost complains about the number of offers he has received from private equity firms. So, the succession plan is in the pipeline. “We went to IMD [International Institute for Management Development], in Lausanne for a full week of succession planning and I told them ‘Well our business is a bit different…then I realised I’m going to get shut down here: the first thing we are told is: ‘Owner/visionary doesn’t want to let go of the business.’ I thought bloody hell that’s me. And as the week went on, I realised we are not as different as we think. I think it’s a poisoned chalice – 400 odd staff with a horrendous wage bill – Greencroft alone is £4m ($5.3m) odd a year.”

Cleary’s daughter is in the foyer and stops to chat. She’s wondering what to buy her father for his birthday, which falls inconveniently on Christmas Eve. With the success of Lanchester Gifts, surely she is spoiled for choice. Not so. “He’s really into tractors – loves John Deere.,” she says. That might be one acquisition too far.  



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