AGM Speech 2019 - Sarah Evans

Ladies and gentleman, good afternoon and a very warm welcome to the 145th AGM of The Wine Society.

As always a warm welcome to our regulars and I'm also thrilled to see lots of new faces in the room tonight – an especially warm welcome to you. This is your chance to hear from us, the Committee, and to ask us questions.

Before I get started, as usual, a couple of formalities: Firstly a few introductions: the people beside me here on the stage are the members of the Committee together with Pierre Mansour our head of buying, Valentine Steadman our Company Secretary and Steve Finlan, our CEO.

We're also joined by members of the Buying team – most of whom you will know – and, here at the front of the room is David Beer from our new auditors PwC.

We are not expecting a fire test this evening. If the alarm sounds please make your way to the nearest exit. There are plenty of staff around to show you the way and to lend a hand if you need it.

OK: I think that I should first start with a few words about Steve as this is the first time that you will have seen him.

We had a great response to our search for a new CEO with lots of interest from a range of impressive individuals of very varied backgrounds. Steve was the unanimous choice of the Committee after a series of interviews and final presentation. His CV is impressive with senior commercial roles at M&S and, more recently, at Clarks shoes. We all saw some similarities in the business of Clarks and The Society; a great product but at risk of being seen as rather old fashioned and the need to refresh and to embrace the modern and the digital world.

As one of my Committee colleagues said in the final presentation last July: 'I was smiling when he came into the room and I was still smiling at the end'. Six months into his tenure, we are still smiling and I hope you will be too.

I thought that I might invite Steve to come up here to introduce himself but this stage is so narrow that one or other of us risks falling off the back if we try to wriggle past each other up here. Rather than that, I've left a bit more time than usual for questions today and will make sure that he answers a chunk of them.

Let me move on to look at the financial performance for the year.

A lot seemed to happen during the year but our financial performance reflects a 'steady' year. 'Reassuringly steady' I think were the words that I used in the Annual Review. Overall trends in the UK are of a slow decrease in alcohol consumption and we have seen some of that too. However, as we've seen in the last two or three years, you are buying a bit less – particularly of lower priced wines – and spending a bit more per bottle. This, together with a flat active membership, means that our overall revenue slowly increased. Total revenue this year was £106m which included regular sales, which were modestly up on last year, and en primeur which showed a strong performance compared with last year, reflecting the good 2015 vintage which was recorded in our accounts this year and the introduction of some new en primeur regions.

Administrative expenses were up 3.7% compared with last year, but last year's accounts benefitted from a £1.5m credit relating to the closure of the pension scheme. Like for like, Administrative expenses were actually 5% lower than last year as the focus on costs continues.

A brief word here about active membership which I've said was flat. In fact we had a good number of new members but also a higher rate of lapsing than we expected so overall numbers were flat. We're looking at why there was a higher rate of lapsing but nothing that we've seen so far is a cause for alarm. But we aren't being complacent and are examining it as we don't want lots of churn in the membership. In the meantime we have started a formal re-activation programme and are seeing an encouraging growth in active membership.

In most respects, our accounts are unremarkable. In fact the first thing that you may notice about them this year, is that after many years of talking about it and wanting to do it, we have finally printed only summary financial statements in the Annual Review. We think that these provide sufficient information for most members to see how we are performing but avoids the very long, detailed, technical notes which now accompany the profit and loss account and balance sheet. You seem to be happy with this approach and we've only had a request from a handful of members for a full set of the financial statements.

Disappointingly we had a couple of suggestions that the summary financial statements meant we were trying to hide something. Absolutely not! We are just using space in the Annual Review wisely. The full accounts are on the website or can be sent to you on request.

The other figure in the accounts worthy of comment is stock.

In common with many other companies, in the months before the year end we built up some stocks of our best-selling wines in case of disruption after Brexit on 29th March. Of course that proved premature – or perhaps it was unnecessary – so we are now selling those stocks in the normal course of trading. There is no plan to build stocks back up again for a potential exit in October.

Before we leave the accounts, I'll talk about the appointment of auditors this year. The auditor reports to you, the shareholders, on whether the accounts show a 'true and fair' view of the performance of the business during the year and the assets and liabilities at the end of the year. In the course of their work, the auditor also looks at the internal control framework within the business and identifies what they deem to be any significant weakness.

For the last 15 or so years, Grant Thornton has been our auditor but for good governance we should review this from time to time. This year we asked eight firms, a mix of large and small, local and national firms, if they would be interested in tendering for our audit. Of those, seven submitted detailed written proposals and from these we invited three firms to meet with us in a 'beauty parade.'

We rated each of these firms against a list of criteria including the understanding of our business, independence, ideas and innovation and of course cost.

The unanimous conclusion of the interview panel was that we should appoint PwC as auditor, with the work to be carried out by a team from the St Albans office. The formal appointment is subject to your retrospective approval at this meeting but as allowed in the Rules, the firm carried out this year's audit. Belinda, our head of finance, and her team were very pleased with the work that was done, the way the teams worked together and the new challenges that PwC put to us. We really felt that we benefitted from fresh eyes looking at our business and processes.

Moving away from the accounts but staying with the Annual Review, our decision to take the Buyers' reports out and put them online didn't go down well with a few members. Sorry! But moving them online made sense for two key reasons: firstly they can be updated as needed and kept fresh throughout the year. Secondly, an online report gives much more flexibility and the Buyers aren't constrained by word counts which they are on a printed page. However, for those members who don't have access to our website, we can of course send you a copy. Just give member services a call.

Instead we included news and stories about what it is to be a mutual and how important this is to every aspect of The Society. To many of you in this room this is old hat, but to lots of our newer members and to potential future members it is unfamiliar. It's a good story to tell.

We're seeing something of a sea change in the UK with more and more focus from consumers on things that are authentic and which they can trust. I don't know about you but I can't think of an organisation that delivers these more strongly than The Society. It's a good time to re-tell our story.

Last year, under the interim leadership of Liz Cerroti and with Pierre Mansour heading up marketing, we have been looking at our purpose, values, tone of voice and visual identity. The focus, and what brings it all together, is our mission which is 'to champion the joy of good wine'.

To deliver this, first we need to get the basics right – every time. We need to be proud of what we are – proud and vocal. We need to raise or profile – 'get the Wine Society Out There!' You will have seen some of these already – more on social media, fun ideas such as the Golden Bottle, the Wine of the Week and a new tasting programme. We've expanded our email programme and are experimenting with our tone of voice. We won't always get it right and we'll listen to you when we get it wrong please bear with us. However we look and sound, our core values will always be the same.

Our first challenge for Steve, once he had got to know the organisation a bit was to develop a new strategy for The Society. It's fair to say that he has grabbed that challenge with gusto.

While the underlying principles of how we operate and how we serve members is sound, we need to make very significant investment in the business to ensure that The Society is sustainable for the next 150 years. Specifically, we need to invest in our IT systems and in our warehouses.

Our IT systems have served us well but have been built up over time; added to, reconfigured, changed again, a little tweak here, a little add on there.

Every week, we receive complaints about our website. You rightly compare us with other organisations and are frustrated with some of the odd things that our website does, and some of the things that it can't do. These are all symptoms of a system that has become very difficult even for our own team to use.

We therefore need to replace our website and IT system. The whole thing. It will take three to five years and will be costly, but if we don't do it The Society will struggle. Ultimately, it could fail.

The upside though is exciting, and we will all look forward to greater efficiency, greater flexibility, faster speeds, more personalisation and a sounder business enabled by a new system.

Alongside this we need to build Warehouse 5. This will bring speed, agility and efficiency and allow for expansion while removing the need for us to put wine into external storage, so bringing cost savings as well. Two very significant projects therefore to keep us busy over the next few years.

The other area where change is needed is in the recruitment of new members. New members to replace the members that we lose each year but also to grow the membership, so that we can grow our revenues to support the investments that we'll be making. Member-get-member has served us very well indeed for many years but it has also meant that we have a low profile: a best kept secret.

The Committee is meeting later this month to agree the new strategy and targets for growth will be part of that. Just to give you an idea of rate of growth, over the last eight years, sales have grown by 60%. The new rate of growth being proposed is a bit faster than that: 60% in five years rather than in eight years.

Delivery is certainly going to feature in our strategy. At the end of last year, we adopted new software to help us manage our delivery fleet more efficiently. We are currently trialling this across a number of postcode areas and the results are encouraging; we are able to make far more deliveries in our own vans which brings the cost per case down dramatically. We'll put savings that we make into expanding our own van fleet. We think more deliveries through our own fleet provides a real point of differentiation, largely due to the amazing service that you tell us you get from our drivers.

But, and there is a but, dynamic routing means that we can't tell you, at the point of order, the time window when your wine will arrive. We tell you the time slot once we know what else is going on the van – usually the day before delivery. I know this might feel like a backwards step for some of you, but it is pretty much industry standard and even organisations with deeper pockets than ours, do exactly the same thing – John Lewis, Ikea, Harrods, for example. In fact it is really only grocers, with chilled and frozen products who give you a specific time slot.

Before closing, there are three people who I would like to single out for special mention. The first of these is Katherine Douglas who retires from the Committee tonight. Katherine joined the Committee as a young member in her mid-thirties and throughout her tenure has made an outstanding contribution. Her work as head teacher, working with children, staff and governors gave her a particular insight into how organisations work, where education fits in and how to encourage engagement. Importantly, coming from a different background to many of the other Committee members, Katherine brought diversity and a different way of thinking, thereby enriching our discussions. Katherine has now qualified as a schools inspector and her new responsibilities often clash with Committee meetings so with regret she finds she must stand down. Our loss is education's gain. Katherine, thank you so much.

The other two people to mention are Pierre Mansour and, of course, Liz Cerroti. Since July last year Pierre has headed both the marketing and buying teams. With Pierre at the head, the two departments have worked much more closely together, finding ways to collaborate and share ideas and bringing wine firmly to the front of our thinking, making us once again a product-led, rather that perhaps a marketing-led, organisation. I believe that Steve has plans to keep the two closely aligned as he thinks about the future shape of the Society.

Liz Cerroti took on the role of interim CEO in February last year, thinking that it would be for a shortish period of time. But it took rather longer than this and so for a full 12 months Liz did her own day job and the role of CEO. A role that she fulfilled brilliantly; delivering the budget and several big projects, keeping The Society on track and leading the staff. It's not easy to step up as the boss, especially when you know that you will go back to your own role at the end, but Liz took it all in her stride. Her knowledge of the business helped hugely and she ensured that The Society was in a very good place when Steve joined.

Liz and Pierre, we couldn't have done the last 12 months without you. Thank you.

Having said that I would leave more time for questions, I've nearly failed to do that, so let me stop, sit down and hand over to you.


Seek approval for the accounts

Item 2

Appointment of auditors

Our Rules require that our auditor must be appointed by resolution in the General meeting.

I outlined earlier this evening the process that we went through to select a new auditor and I ask now your approval of that appointment.

Please could I have your approval for the appointment of PwC as auditor to The Society?

Item 3

Committee remuneration

Item 3 is for the members at the AGM to consider the remuneration of the Committee. Those of you who have been to previous AGMs will know that this is something that you, the members, set. It usually seems to help if we suggest an amount to you, though of course you're not bound by this.

The paper on your seats sets out the current position and what we are suggesting for the Officers and elected members of the Committee for the year ended 31 January 2020. We are suggesting an increase of 2.5% which is broadly in line with inflation last year and in line with this year's staff pay award. For elected members, the new rate equates to about £7,700 per member for the year if they attended all the meetings; pro-rated down if they are not able to attend all meetings.

Co-opted Members (other than the Chief Executive), are paid at the same rate per meeting as Elected Members.

The new fee for Chairman and Deputy Chairman are set out on the paper in front of you.

Please could I have your approval for this proposal?

Item 4:


Katherine's retirement from the Committee creates a vacancy for an elected member. The Committee has asked Eleanor de Kanter to stand for election and I am delighted that she has agreed.

Eleanor joined the Committee as a co-optee just after the AGM last year – and in fact I hope you will retrospectively approve her co-option in a few minutes!

Eleanor specialises in the use of digital media and digital strategies and runs her own consultancy advising companies. As a young member who lives in a town and works during the day, she also is representative of many of our members and potential members and able to remind us of the issues that The Society has in reaching out to a younger demographic.

The other member retiring by rotation this year is Alan Black whom many of you will know. Alan is delighted to stand for re-election and we are pleased to have him.

In the event that no one else has put themselves forward for election and, in accordance with Rule 25.1 I can declare that Eleanor and Alan are elected.

Item 5: Co-options

The last formal piece of the agenda is to ask you to approve, retrospectively, co-options to the Committee. There are three this year:

Michael Findlay, Thomas Foster and Eleanor de Kanter.

Michael Findlay was first co-opted in January 2017 and his co-option extended again this year. Michael has a strong commercial background and is an experienced non-executive director with recent experience in distribution and the construction industry. Michael is also a member of the finance sub committee.

Thomas Foster spent a number of years at BT where he led a number of digital and change projects. He is now director of acquisitions at the RAC where he leads the way in recruiting new members – experience which is invaluable.

Eleanor I have already mentioned and won't go through again.

Please could I have your approval for those co-options?

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