Chairman Sarah Evans
417 members attended this year's AGM at Queen Elizabeth II Conference Hall in London on Monday 13th June 2016. After welcoming everyone and introducing the panel, Chairman Sarah Evans moved on to the first item on the agenda.
Item 1 seeks your approval for the minutes of last year's AGM.
It is unfortunate that this evening's meeting has to start with an apology which is that we failed last year to ask for comments on the draft minutes from those of you who attended that meeting. I am really am sorry. We will revert to this process this year.
The minutes that you should have found on your seats are, I believe, an accurate record of the proceedings of last year's AGM.
Please could I have your approval for those minutes.
Item 2 relates to the Report and Accounts which I hope you will have seen in the Annual Review. As is customary for these meetings, before I ask you to approve these I will spend a few minutes reflecting on the year and then answering any questions that you might have.
Results - satisfactory results in more challenging conditions
We were generally satisfied with the performance of the business in 2015/16 recognising that we are in rather more challenging trading conditions than two or three years ago.
During the 1990s and noughties, there was a fairly consistent rising trend of wine purchasing for consumption at home in the UK. This levelled off and began to soften about five years ago.
The Society had been successful in bucking this trend and our members have been buying just a little bit more each year right up until last year. Now our results too show a levelling off of volume. Members seem to buying a tiny bit less than last year, but spending a little bit more per bottle.
Active membership grew modestly and, together with the small additional spend per active member but slightly lower volume, for much of the year our trading was broadly in line with last year.
A marked surge in purchasing in the run up to Christmas took our overall regular sales to 1.4% ahead of 2014/15.
'total invoiced sales were just under 3% ahead of last year.'
Once we have added other sales such as en primeur sales, tasting receipts and reserve rentals, total invoiced sales were just under 3% ahead of last year.
Because of the complexities of our financial reporting of en primeur sales - with which many of you will by now be familiar - we cannot see those figures directly in the financial statements. Our turnover reported in the Annual Review is just 1.4% ahead of last year.
Changes in financial reporting
This year we have seen a significant change in our financial reporting as we have adopted a new accounting standard - FRS 102. I won't go into the intricacies of it here but, suffice it to say, its adoption makes the understanding of our accounts even harder than it already was.
This year, note 21 to the Financial statements - right at the back of the accounts themselves - shows what impact the adoption of FRS102 had on our reported results. We will continue to ensure that through appropriate disclosures you are able to judge how well the business is doing and get a sense of its financial well being.
While our turnover has seen only a modest increase this year, you will see that our costs have risen rather more. The most significant rise that we have seen is in relation to employment costs. This is in part because our headcount - expressed in terms of full time equivalent staff - increased by nine heads, or 4% during the year.
Additionally, we undertook an important exercise to ensure that our staff were being fairly remunerated for the job they were doing. This involved looking within the organisation at different roles and benchmarking roles and salaries both internally and externally. We also took the opportunity to regularise some contracts where, for example, we had people working with us for many years but on rolled over temporary contracts.
There was a one-off significant cost associated with these changes but we believe that it was entirely appropriate to carry out such an exercise. The impact in future years will not be so marked.
The importance of digital
Much of our increase in headcount has been to support the important work that we are doing to expand and improve our digital offering. As a distance seller we have to ensure that we are appealing to members, that the content and functionality of our website is appropriate and liked by you.
In today's world, there is huge competition in the online space. Lives are so busy, attention spans are so short. If the digital offering doesn't deliver, never mind how good the product is - people will look elsewhere.
So we need to invest in our digital offering. I hope that you have seen some of the developments coming through. Perhaps you have already explored some of the new additions: Travels in Wine and the interactive maps. The writing of this speech was delayed by some hours as I was badly sidetracked when I dipped into the website and found myself diverted by the wonderful narrative and stories of some of the buying trips.
An example of an interactive map of Italy
If you haven't had a look yet, then I urge you to spend some time on the website. If you don't have a computer - borrow one - or get someone to show you on theirs. But do please have a look.
A huge amount of effort has gone into the work done thus far and my thanks must go to the digital marketing team, led by Matthew Kirk and Nicki Glennon, for the results they are achieving.
Thanks too to all those, including the buying team - who are providing the raw material for the site. I look forward very much to more additions as they come on stream.
Let me return to the financial results.
As a mutual, our aim is to run The Society each year so as to generate sufficient profit and cash to put back into the business. This might take the form of offering more or improved services to members or reducing our prices.
Of course, it is difficult to predict members' buying behaviour and we do not always get it right. If members spend more than we predict, we make a sizeable profit; in these years we will often declare a dividend which has the effect of reducing our profits liable to tax and we therefore reduce our tax bill.
In years, such as this year when members spend rather less than we have budgeted, there is a risk that we make a loss. In these years, no dividend is declared.
Our pricing policy
While a Plc might use all manner of methods, such as discounting and advertising, to tempt its customers to buy more, we avoid such tactics. We aim for everyday low pricing and avoid the hype associated with a 'hard sell'. From our analysis of members' buying behaviour and analysis of prices across our key competitors, we know that members are very sensitive to prices and margins.
In July last year we reduced the price of around 400 wines to ensure that we were offering good value to members. With significant movements in the exchange rate over the last 12 months, we are expecting to have to increase a small number of prices in the July List and perhaps some more in the Christmas List.
The Society's Promise
At the same time, amongst other things, we are part-way through a comprehensive exercise to assess and manage our costs more tightly and to ensure that they do not rise more than the rate of inflation. Our intention is to do this without compromising the service delivered to members.
The mutual model
Running a mutual, and aiming to generate a relatively small profit each year, is not without its risks and challenges. The key to the long-term success of The Society is that, notwithstanding the peaks and troughs of individual years, over a period of time, the business generates sufficient profit and cash to enable it to reinvest in the business and on services for members.
The good level of new members joining together with the underlying performance of the business shows that, despite some softening, The Society is in good health.
However, we can never afford to be complacent about the health of the business or the health of the wine market in the UK.
Government guidelines on alcohol consumption
In January this year, the Chief Medical Officer took the industry by complete surprise by announcing new alcohol consumption guidelines. These reduced the upper safe limit for men to 14 units per week, and stated that there is no level of regular drinking that can be considered as completely safe.
There had been no consultation with the industry or its trade body before these guidelines were announced.
Of course, we have been trying to analyse what impact such guidelines might have on our current and future members and determine what our own guidance to members should be. The first of these was almost impossible to do, what we should say to members was rather easier.
What we can do
Our view has long been that we should provide members with the information that they need to make an informed decision. So in line with much of the industry, we publish units information on the back labels of our own label wines and, with the exception of en primeur wines, all wine notes set out the alcohol percentage of the particular wine.
And so we thought we would just have to wait and see what the impact on member purchasing might be.
It has now been reported that these new guidelines were drawn up by a committee dominated by anti-alcohol lobbyists and members of the current incarnation of the Temperance Society. The committee had no representation from the drinks industry and it appears that much good-quality evidence of the benefits of moderate drinking was ignored. The conclusions reached do not appear to be supported by the evidence gathered.
I am hoping that the drinks industry in the UK, led by the WSTA, will take issue with the process by which these new guidelines were dreamt up and, at the very least, demand a properly researched, objective project to be undertaken. It would be all too easy, if the current mood music continues, for alcohol to be stigmatised in the same way as tobacco; leading to a shrinkage of business and large scale redundancies in the sector.
By all means, let us have a proper debate of the health impact of alcohol based on well-researched evidence, but please let us not all be impacted by the strongly held personal views of a small group of hardline non drinkers.
The uncertainty of the EU referendum
The other issue causing uncertainty right across the UK at the moment is what will be the outcome of the referendum vote in just 10 days' time. It is not my job to put forward any view of which way the debate should go or, indeed, to speculate on the outcome.
The Committee has spent time considering what, if any, steps we should take in advance of the decision. As we buy the majority of our wine in foreign currencies, particularly Euros, we would be impacted by any change in exchange rate.
After due consideration and discussion, our view was that there was sufficient agility in the business to cope with changes that might result from the vote. We have a hedging policy which protects us from significant volatility in exchange rates and which is sufficient for a period of time.
In the event that the vote is to exit the EU, there seems to be broad agreement that any changes will take some time - perhaps quite a long time - to come into effect; time which we would use to adapt our business and operating plans to cope with the new world order. Experience during the economic crash of 2007/2008 shows that we can react quite quickly when we need to.
So, whatever the outcome, we feel that we can cope with the changes that might result.
Sad losses to the wine industry
It has been a sad year for the wine industry and for The Society as we have lost some key figures and friends.
Many of you will have seen the terrible news of the untimely death of Etienne Hugel on 9th April this year. A charming, warm, vivacious man and a good friend of The Society. He will be sorely missed.
In March this year the wine world also lost Paul Pontallier, managing director of Château Margaux who was widely acknowledged as transforming the château into one of the world's leading estates.
Paul Pontallier, managing director of Château Margaux
Peter Styne, The Society's Head of Operations
Closer to home we were desperately saddened that Peter Styne, who retired from The Society in September last year (read CEO Robin McMillan's tribute here), died in February of this year.
Peter was appointed as Head of Operations in 1999. Using his experience and force of personality, he transformed our operations and delivery teams, making them a centre of excellence for the business and ensuring that they could support the ever increasing volume of business that we were handling.
He drove a step change in the accuracy and timelines of our own deliveries, bringing in appropriate technology to help us plan routes and estimate when our vans would be passing a member's door.
In 2008, when we built warehouse 4, he orchestrated a complete reconfiguration of the internal workings of the warehouses, introducing automation and a new picking line and improving our productivity by 30%.
While we were desperately sorry to lose Peter, we were delighted to welcome Tim Grist as Head of Operations and a member of the Executive Team.
Changes on the Committee
There continues to be change on the Committee as we continue the process of refreshment that I talked about here last year. You will have seen from the Annual Review that Stephen Bourne stepped down from the Committee in September last year to allow rather more time for his full-time job at Ely Cathedral.
Today, we say farewell to Michael Schuster who joined the Committee in 2000. We have been lucky indeed to benefit from the input from Michael - one of the country's best-known and respected wine experts and educators, but who is independent of any other wine retailer or competitor organisation.
On behalf of the Committee I should like to thank Stephen and Michael for their huge contribution to the Committee over an extended period of time. We look forward to keeping in touch with them in the years to come.
Standing for election today are Tim Wright and Ricard Giner-Sariola and I will address those elections under item 4 of the agenda.
Joining the Committee as a co-opted member
In the Annual Review I reported that we had had a busy year meeting with members who have expressed interest in joining the Committee as a co-optee.
Over the last few months we have held about six meetings of members to identify those who might have the right blend of skills and experience and have sufficient time available to contribute to the Committee.
I would like to thank everyone who has put their name forward and has come along to meet us. We have had some fascinating meetings, excellent interaction and have identified a number of potential co-optees.
New co-optee, Paula Carter
In the immediate future, the Committee has asked Paula Carter to join us as a co-optee. Paula is the Director of Planning and Board Secretary at Channel 4 where she is responsible for all corporate planning as well as the reporting to the Board and external stakeholders. She is also a magistrate, the Chairman of Governors at St Michael's School in Otford and sits on the RFU Disciplinary Committee in London.
Paula will be co-opted with effect from our meeting later this month and we look forward to welcoming her. Her formal co-option will be put to this meeting next year but I wanted to let you all know today.
Later this year we plan to co-opt two members with financial/commercial experience and I look forward to sharing more details about them in due course.
In the meantime, since the Annual Review hit your doormats, I have been approached by about 10 members interested in exploring co-option and we will be holding more meetings with these members in the early autumn.
Ladies and Gentlemen, that is quite enough from me.
A thank you to members for their support
We live in ever changing times and the world of wine retail becomes ever more competitive. The Society holds a clear niche position in the UK. We will continue to evolve the business to ensure that we remain relevant and accessible to you without compromising what is so special about The Society. Thank you for your support over the last 12 months.
Let me now move back to the table to take your questions before seeking your approval for the Report and Accounts and moving on to the rest of the agenda.
Questions and Comments from the floor
The following is a summary of the questions raised by members and answers given on the day. A fuller account will be published in the minutes.
Buying back of wines purchased en primeur - member had taken part in research to do with en primeur offers in which there was a question around the purchasing back of wines from members that had been purchased en primeur.
Sarah Evans replied that we were just trying to ascertain levels of interest amongst the membership for possible new services but there were no plans as such at the moment to look into this further. Robin McMillan said that we would have to be wary as to how wines had been kept if we were to purchase stock back from members. Buying back wines that had been stored in Members' Reserves might be possible. At the moment our rules state that members cannot buy for re-sale, so this too would need to be addressed if members were to buy surplus wine from other members.
Regardless of outcome of 'Brexit', member concerned about the effect on wine industry of TTIP (Transatlantic Trade & Investment) - SE explained that as alluded to in her speech, the Committee was not actively exploring strategies to deal with this and has little influence over it but that she was confident that the degree of flexibility in the business would allow us to react and act on the outcome.
Cost to The Society of returned bottles - a member questioned what the cost to The Society was of members returning out of condition or faulty bottles and whether suppliers contributed to this at all. SE responded that not all bottles were returned to us and yes, where appropriate, suppliers recompensed us for the cost of product recalls. Head of Buying, Tim Sykes that returned bottles accounted for less than 0.01% of total bottles sold.
Montreuil and our position in the EU - a member wanted to know, irrespective of the outcome of EU referendum, to what degree the business in Montreuil is dependent upon currency fluctuation. SE replied that our French outlet is highly dependent on currency fluctuation and exchange rates, and as our contract with our French counterparts comes up for renewal soon, we will be undergoing a full review of the French operation.
Montreuil survey - member had filled in a survey on purchasing from Montreuil and wanted to know whether the results would be published. SE responded that there were not plans to do so, but this is something that would be looked in to.
Half-bottle range - member commented that he enjoyed our range of half bottles and hoped that we would consider increasing the range.
Tasting & Events - there was a comment about the lack of Wine Society tastings south of the Thames and what process there was for consulting members about venues. SE responded that lots of practical considerations have to go into choice of venue but would ask the Tastings team to look into.
Government guidelines on alcohol - member made comment that he is a past president of the Medical Society and wanted to inform us that they still have wine at all their meetings and that he wanted to reinforce Sarah Evans' comments that the recently published guidelines were of a dubious nature and totally underplayed the benefits of moderate drinking.
Early share numbers - a member asked whether we were able to find out which, if any, of the early issued shares in The Society are still in use and which are extinct. Thought it would make for an interesting article. SE said she would ask someone to look into this.
Overseas wine tours - member wanted to know whether we had considered running wine trips abroad. RM responded that we have to consider the benefit to the wider membership and that it is highly time-consuming to run such events and not in the interest of The Society as a whole. SE pointed out that the London-based Dining Club did run tours to wine regions and that was only open to Wine Society members. (more information on our website here.)
Broadening the reach of our AGMs - member felt that while it is right and proper that our AGMs are held in London, members who live too far away to attend ought to be able to have some input. Had we considered 'live streaming' the AGM so that others could access? SE responded that this had been given some consideration but that there were implications for the Rules regarding the AGM, explicitly that at present it is stated that only those members present are able to vote.
Screwcaps and ageing wine - a member asked for advice on ageing wines stoppered with screwcaps. TS replied that the closure does make a difference when it comes to ageing wine though there was still a lot of research that still needed to be done in this area. Screwcaps have proven to be the most reliable of seals for the prevention of oxidation and are the most inert, however cork, with its slight permeability and in ideal conditions, is still deemed to be best for maturing wines but carries the, now lesser, risk of taint. Other options, such as DIAM are proving to be an effective option giving producers a choice over the degree of permeability. (read more on this here.)
Sarah Evans thanked members for the questions and comments before moving on to the next part of the meeting.
[The Report and Accounts were approved.]
Item 3 is for the members at the AGM to consider the remuneration of the Committee. The Rules say that the Committee members, other than the Chief Executive, shall be paid fees from time to time decided by The Society in General Meeting.
In recent years we have introduced a new system which means that the amount agreed here by the members is only distributed in proportion to the meetings attended by members of the Committee.
Therefore, if during the year only 80% of meetings were attended, only 80% of the fees which you approved would be distributed to members of the Committee. We will follow the same process this year.
Ladies and Gentlemen, we are not proposing any increase to the honoraria this year. The sheet on your seats shows the suggested position for the Officers and the Elected members of the Committee for the year ending 31st January 2017. With inflation so low, it is suggested that the Honoraria remain the same as for last year so that:
- Chairman: £35,600 per annum.
- Deputy Chairman: £17,780 per annum.
- The other Elected Members: £45,000 per annum in aggregate subject to a reduction if meetings are not attended as I have already described.
Co-opted Members (other than the Chief Executive), are to be paid at the same rate per meeting as calculated for the Elected Members.
Please could I have your approval for this proposal.
Item 4: Election
As required by our Rules, each year two elected members of the Committee stand down.
This year, Stephen Bourne stood down during the year and the Committee appointed Ricard Giner-Sariola as an elected member until this AGM. Tonight, in accordance with the Rules he stands down from the Committee and can offer himself for re-election.
Ricard joined the Committee as a co-optee in 2013. He is director of content and marketing at a leading global education company and this expertise has been very helpful as we have pursued our own digital strategy. Originally from Catalonia, Ricard is also something of an expert on the wines of Spain.
Tonight, as well, Michael Schuster is retiring from the Committee. The Committee has asked Tim Wright to stand for election and I am pleased that he has accepted. Tim was co-opted to the Committee in 2014. He was formerly Group HR director and then Chief of Staff at the London Stock Exchange group. He now runs his own HR consultancy, is a non-executive director of two arts based charities and a trustee of an occupational pension scheme.
Image of Tim Wright here
In the event no other member has put themselves forward for election and, therefore, in accordance with Rule 25.1 I declare that Ricard and Tim are duly elected.
I am delighted to welcome them as elected members of the Committee and look forward to working with them.
Item 5: Co-options
Rule 27.3 requires that every co-option to the Committee must be approved at the next AGM following the co-option. As last year, this year we have three co-optees for you to consider, each of whom brings us something quite unique:
Ricard, Tim Wright and Paul Powell
Ricard and Tim I have, of course, just introduced to you and I'm sure you will agree that I don't need to go through their CVs again.
Paul Powell was introduced to you last year. He joined the Committee in December 2014. First and foremost, Paul's focus is on the art of communication and in his day job he is a television scriptwriter. He is also a director of an independent production company and a non-executive director of the Authors' Licensing and Collecting Society.
Please could I have your approval for those co-options.
Ladies and Gentlemen, that concludes the formal part of the meeting. Thank you for your attendance and your attention.
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