!["When you ship bottles more things can go wrong," Richard Lloyd says, explaining why Accolade ships wine in plastic ...](/content/dam/images/g/s/s/5/l/l/image.related.afrArticleLead.620x350.gsr1pi.png/1479450359599.jpg)
Britain's largest industrial park, just outside the town of Bristol, is not the first place that comes to mind when you think of the Australian wine industry.
Yet among the vast research centres and endless warehouses belonging to the likes of Rolls-Royce and BAE Systems is an enormous bottling, packaging and distribution facility owned by Accolade Wines – the biggest wine company in Australia and the UK by volume sold – which is arguably as important to the business as any vineyard.
Accolade Park is a "magical place", says Richard Lloyd, the company's general manager of European operations and supply chain.
"What we are doing in here reflects industry 4.0, or the fourth industrial revolution going on now, where robotics and information technology play a huge role. My best analogy at the moment is the transformation of manufacturing technology is a bit like the move from a standard cellphone to a smartphone."
![CHAMP Private Equity CEO John Haddock, who controls 80 per cent of Accolade Wines. The fund will attempt to float ...](/content/dam/images/g/q/q/5/z/8/image.imgtype.afrArticleInline.620x0.png/1479429165466.jpg)
Magical is an adjective only someone with a passion for the packaging of consumer goods and the super-efficient "lean" manufacturing process developed by Japanese carmaker Toyota could come up with to describe what goes on inside the 80,000 square metre shed. However, there is no doubting Lloyd's sincerity, which is just as well, because the facility will be at the heart of CHAMP Private Equity's multibillion-dollar attempts to float Accolade Wines next year.
Competitive advantage
Lloyd says CHAMP is keen to promote Accolade Park because he believes the facility gives the business advantages none of its other competitors have.
The most obvious is scale. Even before Lloyd begins his tour, it becomes obvious from driving around the perimeter of a building big enough to hold four MCGs that this is a huge operation. With six packaging lines about to produce 1200 bottles of wine every minute, Accolade Park is easily the largest dedicated wine warehouse and distribution centre in Europe.
The importance of the facility is even greater when you consider 92 per cent of the wine Accolade sells in the UK and more than half of its wine sold in continental Europe is bottled here rather than its country of origin. The wine arrives in shipping containers – each holding one plastic bladder big enough to fill 33,000 bottles – before it is carefully transferred to stainless steel vats inside the facility. It is then tested, stored and, in some cases, blended before being poured by massive German machines into bottles or boxes.
![Ninety-two per cent of the wine Accolade sells in Britain is bottled at Accolade Park in Bristol.](/content/dam/images/g/s/s/5/l/u/image.imgtype.afrArticleInline.620x0.png/1479429165375.jpg)
The fact that most of Accolade's brands – which include Hardys and Banrock Station in Australia, Mud House and Nobilo in New Zealand, and Echo Falls from the US – are bottled in Bristol can be confronting for purists worried about the commoditisation of viniculture, including some of the winemakers.
But Lloyd claims the benefits far outweigh the costs.
"When you ship bottles more things can go wrong," he says. "We have no secondary fermentation or product recalls because we are able to control the process better. And we spend a lot of time making sure we have got it right once it arrives.
"Accolade employs a winemaker on site whose team conduct 54,000 wine tastings each year."
!["When you ship bottles more things can go wrong," Richard Lloyd says, explaining why Accolade ships wine in plastic ...](/content/dam/images/g/s/s/5/l/l/image.imgtype.afrArticleInline.620x0.png/1479429165290.jpg)
He adds that any scepticism from the winemakers faded once they were able to drink the final product.
Of course, it is also a more efficient way of doing things. A shipping container can hold only 14,000 bottles – less than half the amount of wine in the plastic bladders.
Evolution of robots
Lloyd's enthusiasm for efficiency extends to all aspects of the facility. One of the most noticeable results is the use of automation in the form of massive machines that put the metal screwcaps on the bottles or place the bottles in cardboard cases ready to be sold in supermarkets and bottle shops.
To demonstrate how fast automation is evolving in manufacturing, Lloyd points out one of the first robots brought into Accolade Park, working away in a fenced off part of the packaging area. Purchased about five years ago for "hundreds of thousands of pounds", it is a large arm that places boxes of wine on different sizes of pallets.
"At the time we thought [this robot] was amazing but it took us two months to install it and a huge amount of expenditure," he says. "Now when we look at it today we realise robotics has moved on another step."
To underline his point he indicates a much smaller robot placing flat cardboard shapes into a machine that turns them into boxes. This robot, he explains, cost about £50,000 ($84,000) and took one morning to set up. He describes it as a "collaborative robot" because it does not need to be placed behind a fence and can be "trained" by workers without advanced degrees in engineering.
"Some of these robots are now becoming more cost accessible than before," he says. "We are looking at the role these collaborative robots can play in doing some low-level task that will ultimately free our people to do more valuable activities."
While the robots do end up taking the jobs of people, Lloyd says staff cuts have been avoided because an increase in capacity at Accolade Park – CHAMP invested in a third bottling line two years ago – has meant there is more work to go around.
All this technology means Accolade Park is the only facility that is able to package every wine format from 187ml bottles to 10-litre casks. With "bag in box" wine now accounting for more than a third of wine sold in French supermarkets – a traditionally conservative market – the ability to get your product into a variety of formats is becoming more critical.
Most important market
Flexibility also extends to the labels where Accolade has enjoyed some success with the Hardys sponsorship of the Ashes Test matches between Australia and England. After Stuart Broad effectively ended last year's series as a contest by taking 8-15 on the first day of the fourth Test at Trent Bridge, Hardys rushed a special case within days featuring the England quick on the label. All 750,000 cases sold out in a month.
The UK wine industry, which is arguably Accolade's most important market, is notoriously competitive with the large supermarket chains pushing suppliers hard on price. This makes the efficiency gains from Accolade Park all the more important given it is selling many of its bottle around the £5 mark.
When CHAMP acquired its 80 per cent stake in Accolade Wines for almost $300 million in 2011 from US alcoholic beverages giant Constellation Brands, much of the serious investment in the UK facility had already been done. Constellation, which still holds a 20 per cent stake in the business, had spent the previous four years and tens of millions of pounds turning the muddy field into Europe's largest wine warehouse and distribution centre.
Constellation's timing has not been great over the years. The New York-based company bought the business in 2003 for a whopping $1.9 billion when it was known as BRL Hardy only to watch the value of Australian wine producers tumble amid a grape glut and a shift by consumers to cheap "two-buck chuck" wine. Foster's disastrous $3.2 billion acquisition of Southcorp, the Australian winemaker behind Penfolds and Rosemount, in 2005 is widely regarded as the era's worst deal but Constellation's purchase of BRL is not far behind.
CHAMP's good timing
But Constellation's financial pain may prove to be a boon for CHAMP as it eyes a public listing early next year. Its decision to buy Accolade at close to the bottom of the cycle means it has effectively outsourced much of the investment to its American partners.
CHAMP recouped about $200 million last year from the sale of its 50 per cent share in the UK's biggest drinks distributor to pubs, Matthew Clark, for a sixfold return. At the time then chief executive Matthew Clark said Accolade Wines was on target to deliver earnings of close to $100 million in 2015-16.
In the past couple of years Accolade Wines has made bolt-on acquisitions of "new world" wines to add to its portfolio such as Chile's Viña Anakena and Grant Burge from the Barossa Valley. The Australian Financial Review revealed earlier this month that CHAMP was in talks to buy beverage giant Lion's Australian wine portfolio, which includes Croser, Petaluma and Knappstein.
A "capital light" approach adopted by Accolade, where the operating company avoids owning large-scale vineyard assets, appears to be a better strategy when it comes to generating returns for investors. And the solid performance of the ASX-listed Treasury Wines, the old Southcorp business, will given CHAMP confidence there will be interest in the IPO.
But when it comes time to market the company to fund managers and retail investors, it will be the performance of Accolade Park rather than the vineyards themselves that influences demand.