Reaping a good harvest

CMA Kevin Blucke has taken one of Canada’s largest organic vineyards and given it a big management overhaul. And after just two years as president, he’s getting results. His secret? The right people in the right place — and the strategic insight to support them 

By Robert Colman

The British Columbia wine industry has come into its own in the last few years. Wines from the Okanagan Valley, and elsewhere in the province, have been garnering awards internationally, and North American heavyweights like New York-based Constellation Brands Inc. have taken a shine to the investment possibilities in the region —- a fact made quite clear with their recent purchase of Ontario-based Vincor, which is the biggest player in the region.

At the same time, existing vintners such as Andres Wines Ltd. have been expanding, and smaller local players are refining their management style to take advantage of a burgeoning market.

Summerhill Pyramid Winery in Kelowna, B.C., is one company that’s getting more recognition internationally. Canada’s largest certified organic vineyard, in 2004 it won the lieutenant-governor’s medal for its Ehrenfelser, and its sparkling wines won a trio of gold medals in 2005, including sparkling wine of the year for its Cipes Aurora.

But perhaps more importantly for its long-term survival, two years ago proprietor Stephen Cipes introduced a new management team to refocus the company’s operations and improve its public profile. To head that team he tapped Kevin Blucke, CMA, from Langley, B.C. Initially, Blucke came in as CFO, but that changed quickly. By January 2005 he was named president.

Strategic partners

“Cipes is a business man from New York and was unhappy with the financials he was seeing from the winery, including the lack of reporting,” Blucke explains.

Cipes headhunted Blucke out of his position as CFO of Dryco Building Supplies Inc.

“I was really happy where I was, but in May 2004, I decided to come up to Kelowna to see about this opportunity. I really liked what I saw — this is a great place to raise a family. And Summerhill looked like a place where I could make a real difference.”

Prior to Blucke’s appointment, Summerhill had been running at a loss for 15 years, surviving only with the help of Cipes’ assets in New York. Blucke sees the change in management as a trend — passionate owners seeing the value of better management processes.

“There was a lot of cleaning up to do,” says Blucke. “I started in June 2004, and one of the first things I did was to change banks. I didn’t like the cold relationship we had with the big bank we were working with, so I decided to change over to a local credit union, Interior Savings. The relationship we created from the beginning with Interior Savings was much more positive. I have a banker who I can bounce ideas off of. It’s much more of a strategic partnership than what we’d previously had.”

Cost control basics

Blucke also quickly made some significant changes with cost controls — taking these right down to the smallest detail so that he could see precisely what it cost to produce a bottle of wine.

“Without knowing this, how can you be expected to run a business?” he exclaims. “From that basic beginning, I was able to implement a lot of cost controls that have given us a quick return on investment.”

Blucke started from the cellar and gradually moved his way up from there in his search for cost efficiencies. For instance, since its inception, the winery had been hand labeling its bottles and hand-waxing and sealing the corks. Blucke immediately bought an automatic labeler and an automatic waxer.

“We saw the payback on these investments in 5 months,” he notes. “It’s easy to identify such cost savings. The staff is down from nine people to five people in the cellar, and that number is producing 1.5 times the product. It’s cost effective and efficient.”

Blucke also points to the consistency he gained. “All these production details were hit or miss. The change in the process demonstrated to the public in a simple way that we were getting serious. We had a consistent-looking product. All the labels were in exactly the same spot. It’s a small thing, but people notice that.” 

Improving the menu

Rarely does a winery survive on its liquor store sales alone. Particularly in a place as beautiful as the Okanagan Valley, vineyards do their best to draw tourist dollars as well. Summerhill is no exception to the rule. It had been running a restaurant on its outside patio for a long time, to bring in visitors and give them a reason to linger for a while. But again, it wasn’t making a return.

“In the restaurant business, the cost of labour should be around 30-35% and the cost of food should run you about 30-35%,” explains Blucke. “We, on the other hand, had costs around 45% for labour and 50% for food — there was nothing left for utilities, never mind profit.”

Initially, to stabilize costs, Summerhill brought in catering company Forster’s to run the restaurant. During their tenure, Summerhill was able to bring down its costs to a reasonable level. But still, Blucke wasn’t satisfied that the quality of food was matching that of the wine. So, in October 2005, he hired a new executive chef, Grant de Montreuil, to take over the management of the restaurant. “We’re now seeing an improved presentation of the food, lower costs and better matching of the food with our wines. Being able to bring wine critics into the restaurant and properly pair wines with food for them is very important.”

Promotion, retention, recruitment

For Blucke, one of the most important ways one can develop a business is to get the right people into the right jobs —- to build the ideal team. To do so, he emphasizes team building.

“This starts by putting together policies and procedures you can live by,” he says. “We have to establish cultural practices and be very clear about who we are. Because wineries are often run as hobbies rather than true businesses, this isn’t as common as it probably should be among the smaller players in the industry.”

Another important part of team building for Blucke is promoting from within and constantly encouraging more training.

“A fellow who started here in the cellar at the age of 17 is now, at the age of 25, a full-fledged sommelier,” he says. “You have to promote and train your champions. Our sommelier, David Stansfield, spends much of his time in Vancouver throughout the year, except in July, August and September, when we get anywhere from 1,000-3,000 people visiting per day.”

Blucke has also brought in some expertise he knew he could trust. “When I arrived, there were six people in the accounting department and a lot of confusion,” Blucke recalls. “Now there are three of us handling twice the work — and we’ve been having fun.”

A third important team member for Blucke’s improvement plans are the sales representatives across the country. Previously, the company had one small representative in Alberta, and a few sprinkled around southern B.C. Summerhill has now hooked up with Renaissance Wine Merchants based in Calgary, and another representative in Ontario.

“Now, with one phone call, we can get our wine out there and really push what should be in the market at any particular time. It really enhances our access to the market. Again, we’ve found ourselves true strategic partners in this space.”

In addition, Blucke has engaged StonePoint, another   distributor, to marshal the winery’s development south of the border.

“If we’d tried to expand into the U.S. market any earlier, we never would have succeeded, but now that we have better cost controls in place and tested, we feel we can make the move intelligently,” says Blucke.

With all of these changes, Summerhill is seeing returns — it brought in sales of $4.8 million in 2004, $6 million in 2005, and is on target for $7.5 million this year. And as much as he’s proud of his accomplishments and those of his team, Blucke gives a lot of credit to Stephen Cipes.

“He has been such a good teacher,” says Blucke. “He has been able to explain the business to me as we have worked together, and has very effectively articulated his vision for the company. At the same time, he has accepted his limitations. All of this has made it much easier for me to step into my role.”

Robert Colman is editor-in-chief of CMA Management.

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