Mike Lukan
Chief financial officer, Purple Wine Company, Sonoma Wine Company, 9119 Graton Road, Graton, 707-827-4540, purplewine.com, sonomawineco.com
Employees: 165
Professional background: Engineer, management consultant, investment manager, CFO
Education: MBA, University of Western Ontario; bachelor of industrial engineering, Dalhousie University
Age: 49
What do you see as the essential role of a financial leader in the current environment?: To help your organization's management become better stewards of the owner/shareholders capital. Financial leaders are required to focus more and more on their role as strategic partners with the executive management teams of their organization. In an increasingly volatile and information driven world analyzing opportunities and assessing risk has become essential, and financial leaders are uniquely positioned to help accomplish that.
What are the biggest changes you've seen in your industry?: Several of the bigger changes in the industry are the global supply and demand shifts and the changing consumer. Beyond annual fluctuations in the grape harvest, supply and demand is being influenced by significant long term trends. Demand in much of Europe, the largest global supplier, has been declining while US and emerging economy countries see demand continue to increase. Supply is being affected differently in different geographies but there are significant implications for sourcing, brand development and domestic and international opportunities. The behavior of the wine consumer is changing as well, from the impact of the recent financial crisis to the addition of 80 million millenials to the ranks of alcohol beverage consumers. Understanding how to get the attention of consumers, distributors and retailers is affecting how wineries think about brands, marketing, and distribution.
[caption id="attachment_78047" align="alignleft" width="200"] Mike Lukan[/caption]
Tell us about the particular challenges and opportunities your organization has met in the recent past: The big challenge and opportunity for us has been the high growth in our brands. Because we had well positioned brands in the premium and super-premium segments of the industry, the financial crisis actually accelerated our growth rate as consumers traded down. At the same time, we made an acquisition of another brand, Four Vines, in 2010. This created a challenge to secure grape and wine supply since our company does not own vineyards. It also strained our balance sheet as we needed to both fund working capital, and complete the transaction. We made some calculated judgments on entering into long term contracts for grapes and wine, and with the help of our lenders we were able to take advantage of the opportunity.
What advice would you give to young emerging financial leaders?: Think like a long-term investor and behave like an owner. The numbers are important but understanding all aspects of your business and how value is created in your industry is critical. To be a leader you need to be an effective manager. You can be brilliant with numbers but to make big things happen you will need to engage your team and others at all levels in the organization.
What's the best advice for weathering today's economic environment?: First and foremost you have to ensure that the financials are sound and take the actions required to do that. Certainly, you should work closely with your lenders and other stakeholders to do this. Once that is accomplished, I think it very important to look at what opportunities exist in the current environment, from accessing historically cheap capital to taking advantage of opportunities that may be provided by nervous or gun-shy competitors.
How do you think your business will change in the next five years?: I think there will be consolidation in all three tiers of the industry. Distributor consolidation will continue and we are also likely to see a greater percentage of wine sales at larger retailers. This should result in a growing private label wine and alcohol business. Suppliers will respond to this and to other forces with consolidation as well. Domestic grape supply is likely to be constrained by not enough new plantings and competition from alternative crops so imports are likely to make up a larger share of the domestic market especially if the dollar appreciates. Emerging economies will continue to increase consumption at high rates and their impact will become greater and greater on the industry.
What is a decision you wish you hadn't made? What did you learn from it?: Most decisions I've regretted are missed opportunities, either during my time as an investor or as an operator. I always try to understand what I may have missed. Sometimes I just didn’t have enough information and I’m OK with that, but I always look back to see if I either misjudged the size of an opportunity or its perceived risk.
