Freixenet: Next gens finally given the chance to sparkle

Every year, winemakers Freixenet release a new, much-anticipated Christmas TV advert in a marketing initiative that has become a feature of the holiday season in Spain. The family-owned Catalan firm has always bet on the power of publicity and is known for hiring big Hollywood names such as Gwyneth Paltrow to star in the ads in an effort to gain market share and strengthen its position as one of the major independent drinks companies in the world.

Last year, however, Spanish TV watchers had to make do with a re-run of the 2008 ad, directed by and starring Martin Scorsese. It was quite a shock and graphically illustrated the seriousness of Spain's economic crisis of the past two years.
 
Yet Josep Lluis Bonet Ferrer (pictured), the newly-appointed second-generation chairman of the Freixenet Group, maintains his optimism about the future of the company. The firm has announced that it expects to at least repeat 2009's performance this year, and he argues that the characteristics of Freixenet have, to some extent, isolated the firm from the worst effects of the crisis. While conceding that sales in Spain have suffered, he says the food and drink industry has been less affected than other sectors. "Companies that have a large level of international diversification tend to suffer less, which is certainly the case with us," Bonet exclusively tells Campden FB.

He describes Freixenet as an SME in the global context of the drinks industry – the company makes just eight different types of cava and produces over 100 million bottles a year. Its largest rivals have much more firepower to acquire market share and have been eager to absorb as many quality competitors as they can, including Freixenet.

"We've received several and recurrent offers," Bonet confides. "But we don't want to even listen to them. The core of the family remains strong and united. The family lives well and we don't want more than we have. Our goal is to carry on developing the company and achieving growth." Freixenet has worked hard to be the global reference for cava production, the traditional wine from Catalonia, and other sparkling wines including champagne under the Henri Abelé brand. The emphasis on marketing and the aggressive targeting of export markets has a long tradition at Freixenet, which traces its roots back over 150 years to Sant Sadurní d´Anoia where the Sala family began making and exporting quality wines to Latin America.

The company's story begins in the early 20th century when Dolores Sala married Pedro Ferrer Bosch, whose nickname as the youngest son of the owners of "La Freixeneda", a local wine-growing estate, gave the firm its name.

Since then, it has gone through an impressive transformation that has turned a modest, regional outfit into a world-class competitor with subsidiaries in 18 countries and a turnover of €600 million. Today, the generation of the family responsible for this growth is stepping aside, opening the way for the next one.

Talk of a "new" generation is, however, not what it might seem. Bonet is well into his 60s, while other current members of the board, six men and six women, all siblings or cousins, range from 45 to 70 years of age. Bonet has been a member of the top management of the family group since the mid-1960s, but it was only three decades later that he was granted official membership to the board, despite having attended its meetings, along with two of his cousins, for many years.

"It has been somewhat of a Lampedusian movement," says Bonet, referring to the Italian writer Tommaso di Lampedusa, whom he promptly quotes: "'Something had to change so that nothing changed.' The transition took 20 years to complete," he continues, revealing that the unhurried succession was masterminded by his uncle Josep Ferrer Sala – a sprightly octogenarian who has been at the head of the firm since 1957 and who is described by Bonet as the great architect of Freixenet's journey to the business it is today. Sala is the youngest of four siblings, and his three sisters, were his sole companions on the board for decades. But by slowly engineering his own exit from the day-to-day management of the firm, Sala has managed to promote a harmonious passing of the baton, according to his nephew.

The process, which lasted for almost two decades, included several stages. First, Sala created and presided over a board of directors that met every fortnight to analyse the most important matters of the day. These issues would then end up on the table of the management board. At the time, the three eldest next-generation male members of the family had directorships, but were only informal members of the management board.

Around 1995, Sala proposed to his sisters that it was time to formalise the participation on the board of the three next generation executives. For that to happen, statutes had to be established allowing the three cousins to own company stock for the first time. Each of the three were awarded half a share of Freixenet. In 1997, Sala's slow-moving transition advanced a littler further when he outlined to his sisters a plan to nominate the three next generation members to senior positions in the board. His sisters promptly agreed, but it took two more years for the nominations to be effective. "It was an interesting process," says Bonet, who was named chairman of the group, a position that had been held by his uncle for the previous 21 years.
 
If anyone thought that the four elder siblings were about to fade away from the business in the early 2000s, they were wide of the mark. It was only in the second half of 2009 that they came to the conclusion that it was time to call it a day and take a back seat. The next generation was then instructed to talk among themselves about how best to update the composition of the management board. They agreed to bring in nine new members, six of whom were women who had not been before.

The top executive positions were shared between Bonet and his cousins Enrique Hevia Ferrer, who was named vice-chairman and chief financial officer, and Pedro Ferrer, who is now the chief executive. Sala and his three sisters have kept a voice as members of a newly-created experience committee that was set up to provide advice to the new board. "My uncle is in perfect shape, and we've been part of his team for all our lives," Bonet remarked. "I have worked with my uncle since 1965 so, to a
certain extent, the transition was a natural one."

If truth be told, Bonet has had to wait longer than he would have wanted before being named chairman. His mother, Dolors Sala, was a legendary businesswoman who, in the late 1930s, decided to keep the family's wine business going even after her husband and oldest son were murdered in the Spanish civil war "for the simple fact they were businesspeople," Bonet recalls. She relinquished the day-to-day management of the firm to her younger son in 1957, when she was already 68, but retained the title of chairman until her death, two decades later.

The difficulties faced by the firm in the post-war period helped to galvanise the family. "Family cohesion at Freixenet has always been huge," Bonet says. "The four siblings have formed an indestructible clan." The new board now has the hard mission of keeping the firm as successful as their predecessors, who have turned Freixenet into the ninth-largest wine group in the world. The recipe for success is unlikely to change with the new board. Bonet describes the principles that rule the business as:

1.    If the family is united, the firm can grow.
2.    If the products don't have quality, they cannot be competitive.
3.    Innovation is of the essence – Bonet says Freixenet has always been innovative in the Spanish wine market, introducing techniques that would be subsequently followed by the competition.

"Our vision is global. We aim at the world," says Bonet. "In the 1960s, when we were still dealing with the matter of how to grow in the Spanish market, I remember having conversations with my uncle about international markets. By that time he was already stressing that we should work in England, but Freixenet invested there for several years before it started to make money."

Freixenet was also an early believer in the potential of the American market for wine consumption and now owns a winery in California. But Bonet preaches that more than exporting, Freixenet has a vision of transnationalising its business, consolidating its privileged position in several markets, and looking for opportunities to set foot beyond the 18 countries where the group's 60 companies already operate. These include the likes of Germany, a massive market for sparkling wine where the group sells over 40 million bottles a year. The strategy of going beyond exports of cava has led to the group purchasing wineries in new world markets such as Argentina, Australia, Mexico and Chile. And more could follow, according to Bonet: "We are willing to go to any market where opportunities present themselves."

The new board will be hoping their strategies will afford them the same level of success seen by the retiring generation. However, they may face an even more drawn-out succession as the family transitions into the third generation and must select managers from over 50 family members. Some are already in the business, but Bonet doesn't discard any alternatives to guarantee the continuity of the group.

"Even opening up our capital is a possibility, although this is not a plan that is already being discussed," he says. But it is likely that the Ferrers will not rush to a decision. "We have 10 or 15 years to prepare our next succession," Bonet forecasts. The next generation will not be expecting a call soon.