Monday Interview: Water carrier keeps a close eye on weather

Published on Sunday 16 August 2009 21:14

LES Montgomery couldn't have asked for a worse birthday present. The chief executive of Highland Spring keeps a close eye on the weather, some say too close, and today it is raining, pouring in fact.

Splattering the windows and running off the guttering soaking the pavement below. For Montgomery, who turns 46 on the day we meet, rain means a fall in sales. Too many wet summers and the bottom line is seriously affected.

"It's surprising how immediate it is," he sighs looking out at the gloomy Edinburgh sky. "When it's hot and the sun is shining on a Friday the sales figures on the Monday will show a 50 per cent uplift. Usually at this time of year we are reacting to that surge, traditionally this is our busiest period but the last two years have been very wet. The Met talked about a barbecue summer – well where is it?"

Montgomery has stopped subscribing to the daily weather forecast updates that all the senior management receive via e-mail. "I was getting too obsessed," he laughs. "My wife told me to leave it so I now delegate it to somebody else."

It's been 18 months since Montgomery's working world was turned upside down by the sudden loss of his boss, Highland Spring's former chief executive, Joe Beeston. Beeston had held the role for 16 years and was credited with turning the previously little-known brand into the UK's leading producer of bottled water and a globally recognised Scottish icon. Two of his major achievements were displacing Perrier as the leading brand of sparkling water in Britain and ousting Volvic from the No 2 spot (behind Evian) in overall UK sales of mineral water, domestic and foreign.

By the time February came round last year Montgomery had been acting chief executive for six months while Beeston stayed in England to receive treatment for lung cancer.

"I honestly believed he would be OK," says Montgomery. "I thought if Joe was well enough to be treated then he would pull through. Although he was off trying to get better he also had one eye on the business. Joe was like that. I spoke with him on a conference call on the Tuesday and he had been out to lunch. He said he felt unwell and was going to the hospital tomorrow." The next piece of news Montgomery heard was that Beeston had passed away. He was 61. Suddenly Montgomery had to deal with coming to terms with a new role, the loss of a friend and the responsibility of running the business.

"It was a shock. After all, he hadn't been ill that long. It was difficult for everyone but I felt it as I had worked with Joe for many years. He wasn't only my boss, he was also my friend. We spoke on the telephone every day, but at the same time I had the responsibility for 300 people."

Those 300 people work mainly at Highland Spring's headquarters on the edge of Blackford village, a familiar site to travellers on the A9. Formed in 1979 almost as a hobby business, the firm was acquired by the Dubai-based al-Tajir family as an afterthought when they purchased the late Colonel Stirling's estate. But by the early Nineties they had had enough and just months before Beeston's arrival its chairman, Mohamed Mahdi Altajir, had just tried to sell it to Perrier.

Montgomery had joined the business six years previously in the summer of 1985. Back then it was still a small outfit losing money with a turnover of 3.2 million. This year the business will turn over more than 50m, posting a profit of more than 3m. It sits behind Evian as the UK's number two water brand.

"The early days were fantastic," says Montgomery. "I had come from a small accountant's practice in Falkirk and suddenly to be part of a branded business where everyone knew exactly who it was you worked for gave you a sense of pride. In those days the business was growing like topsy and the momentum was phenomenal. It felt like there weren't enough hours in the day."

The late Eighties were a period when the bottled water market was emerging as a serious force in the UK market. Since 1989 consumption has risen from 350 million litres to two billion, worth more than 1.6bn with 2.185 billion litres consumed in 2007. The market is predicted to grow to five billion litres a year by 2020. But in many ways the business has changed since those heady days.

For the first time in 30 years, bottled water sales declined in 2007 and 2008, principally due to the poor summer weather. Sales in 2008 are forecast to have declined by about 5 per cent.

"The days when we achieved 50 per cent sales growth in one year are long gone," he admits. "The UK water market is flat and the analysts say it will drop around 2 per cent this year. We will probably beat that but the only way to increase market share is through acquisition."

In March Montgomery snapped up The Speyside Glenlivet Water Company, which had fallen into administration. Montgomery says he is looking at a number of potential water companies in the British Isles but cannot divulge further.

"My task is to grow the business into the UK's leading supplier of natural sourced water. I'm extremely fortunate in that the Altajir take a long-term perspective. When I go and see them in Dubai they talk about their grandparents and what they would do. That gives us room to think strategically and to grow the business when it is right for us."

Given that its largest competitors are the world's two biggest food companies, Nestl and Danone, who between them own Perrier, Evian, Volvic, Vittel and San Pellegrino, and that the two largest beverage companies, Pepsi and Coca-Cola, are eyeing up the bottled water market, Highland Spring's success in a market surrounded by giants is remarkable.

Next year the firm will invest 6m in a new bottling line. The strategic plan is to increase capacity from its present 300 million litres a year to 900 million litres a year and there are also plans on the drawing board to create a railway platform at Blackford, allowing more goods to be transported as freight.

Highland Spring draws its water from a protected underground source beneath the Ochil Hills where no farming, agricultural spraying, building or habitation is permitted within the 2,000-acre catchment area. More importantly, the land has been free from pesticides and pollution for more than two decades.

The water takes about 15 years to filter through the basalt and sandstone strata to boreholes lined with stainless steel which allow the water to be pumped to the surface and then down to the bottling plant in Blackford.

"The environment and our organic status are very important to us," he argues. "We are trying hard to get that message out there."

One way he is doing that is by sponsoring sportsmen such as Andy Murray and Olympic cyclist Chris Hoy.

"The coverage from Andy Murray has been phenomenal. I was down at Wimbledon for the fortnight and the coverage we received for those two weeks was unprecedented," he says looking out the window.

The rain has stopped. Perhaps somebody is smiling down on Montgomery after all.