Johnson turns the page on a new chapter at Evans & Tate

“I see they’ve cleaned the blood off the walls already,” jokes Evans & Tate Ltd company secretary Michael Silbert.

The scene is the wine company’s boardroom at its Wembley head-quarters, where Mr Silbert, a lawyer, has stepped in briefly to ask CEO Martin Johnson to sign some papers.

The discussion with WA Business News comes immediately after a board meeting held there.

Light-hearted though it may be, the comment underscores the unhappy moments that must have confronted the board of Evans & Tate in recent times.

In the past six months the board has had to sign-off on a range of tough decisions, such as selling two big wineries, renegotiating with contract growers and closing its agency business in the UK.

Staff levels have dropped from 350 to around 220 as a consequence.

It has also had to deal two breaches of financial covenants for its $20 million in convertible notes, legal efforts to put the company into liquidation, and the constant headlines that seem to go with bad news.

Such times cannot have been easy, especially given that deposed executive chairman Franklin Tate, who holds 30 per cent of the company, remains on the board and is known to be vehemently opposed to the way the winemaker’s bankers put their consultants in place to oversee the business last year.

The result of that move has been the unpicking of the significant Australian wine empire built by Mr Tate on the core of the operations his parents established in the Swan Valley a generation earlier.

Mr Johnson, however, shows no signs of having endured a tough meeting before this interview.

In fact, the American executive appears almost nonchalant with regard to the task he has been engrossed in for the past eight months.

Perhaps that is because he believes he has reached a point from which Evans & Tate can now start to claw back the value lost in a tumultuous period.

He calls it a turning point.

“I think that is about now [turning point]; you will not see it in the results yet, but it is happening,” Mr Johnson said.

A better way to describe where Mr Johnson places the winemaker is that he is closing the first chapter in his role as CEO, a point where he believes the company is now strategically repositioned and ready for the next chapter – addressing Evans & Tate’s debt.

The newcomer remains coy about how he plans to do this, acknowledging it is no simple task given the positions of some of the players involved.

He will only say that he has a number of options, and hopes to be able to close this next chapter at the company’s annual meeting in November.

“It is time to start focusing on the balance sheet,” Mr Johnson said.

“We’ll be working very hard between now and the shareholders’ meeting.

“Clearly this has to work for all our stakeholders.”

Apart from the bank and convertible note holders, that includes Mr Tate, whom Mr Johnson had met about a decade before taking on the Perth-based CEO role, and with whom he acknowledges there have been several awkward moments in the past six months.

It will be a complicated task. Unlike the brand, there is not necessarily a reservoir of goodwill among all the various stakeholders.

In some ways, Mr Johnson seems to be an unlikely choice for the job of rescuing Evans & Tate from this predicament.

While his wine marketing pedigree is unquestionable, having held senior executive positions at Californian wine giants Kendall-Jackson Wine Estates and Robert Mondavi, his background in other parts of business administration is not as strong.

Immediately before joining Evans & Tate he was CEO at family-owned Peju Province Winery, but that role was relatively short-lived.

Mr Johnson admits a complicated scenario such as that at Evans & Tate is something new to him. When it comes to the financial side of the business he acknowledges his heavy reliance on CFO Andrew MacLachlan, whose background includes a role in the turnaround of Optus.

However, Mr Johnson is convinced that marketing, the key skill he brings, is what the company needs – notably a refocus on the premium wine made in Margaret River.

“I was attracted to a great brand, and on the world stage Evans & Tate is a great brand, which needed help,” Mr Johnson said.

“I felt I was well suited to provide what this company needed.

“I thought it would be fulfilling”

Mr Johnson admits he was on the fence when he came to visit Perth and Margaret River late last year.

It was the Margaret River region and the company’s assets, and people there, that convinced him that Evans & Tate could be returned to corporate health.

“The opportunity was largely academic but what emotionally got me here was visiting the place,” Mr Johnson said.

“This is an undiscovered treasure.

“Margaret River is very compelling from a winemaking perspective.”

He said the wine from Evans & Tate’s South West operations remained leading edge and gave him confidence that the core business remained intact to provide a base to restore the company’s fortunes.

The key plank in his strategy is the return to a focus on premium wines, where Evans & Tate largely was before the foray into the eastern states with the acquisition of Cranswick Premium Wines Ltd in early 2003.

“It is back to the future,” Mr Johnson said.

“We are going back to what this business was based on.

“It got side-tracked; it was romanced into this other side of the business and lost its focus on premium wine, that is where consumers are heading.”

Just how bad things were at Evans & Tate when the bank moved in may never be known, unless a court case results, or someone writes a book.

One thing, however, is clear. No matter how much the Evans & Tate name has been battered about in the corridors of financial power, the underlying business created by the Tate family in WA has remained resilient.

The business is still turning over about $80 million a year and, after significant write-downs during 2005-06, the board has suggested it will return to profitability this financial year.

“If you took the [original] Evans & Tate part out of the company and made it have its own P&L, its actually performing very well,” Mr Johnson said.

Even the Cranswick purchase is not all cast in a poor light.

The relatively down-market brands Evans & Tate acquired with that merger remain a key component of Mr Johnson’s new approach to tackling the major UK market.

While the company’s new focus is premium, through its new agency HwCg, brands such as Barramundi are still required to even get a look in with the supermarket chains that dominate the UK’s retail wine market.

“We need Barramundi to get into the big players,” Mr Johnson said.

“Barramundi gives us traction, but our real objective is to sell high-end wines there.”

“If there is one bright spot in the whole Cranswick picture it is that it gives us a position in the UK.

“We are in the game; that gives you a running start to getting your premium wines in there.”

Another legacy of the original Evans & Tate business is the emotional attachment it holds for everyone involved, both old and new. It is worth noting that there is no ‘they’ in Mr Johnson’s language when talking about the company’s past, it is always an inclusive ‘we’.

“It is viral; you get this virus and most people around here seem to have it,” he said.

“It is more than a job, family is a cliché but it gets under your skin and it is infectious.”