Chain or shackle?

News Analysis: The sad state of the Unwins chain raises questions about why DM Private Equity acquired it, says Patrick Schmitt. Ian McLeron, Unwin’s marketing director, comments.

The visible evidence is damning. Go into any Unwins’ branded store and the story is the same – a handful of SKUs spread thinly across the shelves, a cigarette counter with great gaps and, more often than not, a despairing staff member, hovering by the till with
little to do.

It’s a sorry state for a business dating from 1843, and the question must be not only why has this happened but what is the future for this long-standing chain?

Although it is tempting to place all the blame on the current owners of the retail brand, a venture capital group called DM Private Equity, the Unwins of today is in part a product of past management problems, not helped by altered shopping habits. Not only was Unwins put up for sale in 2004 by its previous owners, the Wetz family, after three years of losses, but its £32m price tag included almost £21m of debt. Sources suggest that the then 84 private shareholders of Unwins, who descend from four branches of the Wetz family, were in a dispute with each other.

Initially, it was believed that Unwins would be bought by Castel, which was keen to expand Oddbins; but Castel failed to seal any deal – it felt  the price was too high. It was in this environment that DM stepped in.

Having bought the chain, the firm embarked on a sale and leaseback deal, selling the Unwins property package to a developer called Helical Bar for £25.5m, who then raised £51m offloading the freeholds in a series of auctions. This leaves the Unwins brand in DM’s hands and run on a leasehold basis. 

But why the lack of stock in the stores? As one source said, “As long as 18 months ago, Unwins were paying bills extremely slowly, and bit by bit people stopped supplying the company.”

So what’s the future? Unwins’ marketing director Ian McLernon puts the current stock problem down to “a changing range and changes in the structure of the business”. He assured the drinks business that a “restructure” would be completed by mid-December. “We are in the midst of consultation about how we should run the stores, and we are in the process of rebuilding our ranges in time for Christmas.” He also said that the proposed plan is “to move to a multi-site manager model, whereby one manager would run between five and seven sites,” as opposed to the existing individual unit manager set-up.

“Because of the close proximity of the sites this is possible,” he added. And the advantage of this approach? “It gives greater flexibility and it saves money,” he said.

But one source suggested that the deal being offered to those managers interested in becoming franchisees is far from attractive. It could involve an upfront fee for taking on the Unwins name, possibly as much as £12,000, as well as the costs of sub-letting the shop from DM. It also was suggested that all the stock for the shop must be bought from Phillips Newman Wholesale, owned by the Unwins Wine Group.

McLernon admitted that “there will be an upfront fee, but we haven’t confirmed it”. However, what must be questioned is the current value of brand Unwins. After several months of diminished stock, consumer loyalty towards the off-licences has surely been eroded? Could it be too late to recover that  goodwill, especially with the supermarkets growing in the convenience retail sector and the renewed efforts by the likes of Threshers? Further, could the effect of Unwins’ poor in-store range put consumers off the specialist sector as a whole?

It also has been reported to the drinks business that DM is moving staff from Unwins’ headquarters in Dartford, a 6.5 acre site, to DM’s central London offices. McLernon confirmed that “the buying, marketing and sales people have been moved to London,” but also pointed out that Unwins “still have a head office function in Dartford, and still have a large number of people based there.”

But one outstanding issue has to be, why did DM buy Unwins? After all, as one source said, “What DM got for the shops they owed the bank, leaving them with approximately 400 leases and none of them running to full potential.” DM is also apparently in the process of raising revenue from the estimated 200 flats attached to Unwins’ stores. This involves either persuading existing store managers occupying the flats to pay rent, or making them redundant and finding new tenants.

However, one reason put forward to explain DM’s purchase of the chain was an aim to secure better distribution for Palandri, an Australian wine producer that DM has a small (less than 5%) stake in. But this could be only a secondary reason for buying the chain, although interestingly, Phillip Wetz, ex-joint MD of Unwins, is a non-executive director for Palandri.

Another possibility put forward to explain DM’s interests in Unwins was the Dartford site, which could be extremely valuable if developed. However, a spokesperson for DM pointed out that the company “has no plans for the site to be developed – we are a tenant.”

That leaves just the initial statement of intent by  the chairman of DM Private Equity, Phillip Cook, on acquiring Unwins. “We look forward to strengthening the brand name and to growing what is already an extremely successful retail operation.”

That will provide little comfort to the some 2,000 Unwins employees wondering just how this business can be resurrected. db

 
Future Fillip to Phillips Newman?

One piece of positive news in the Unwins tale is the intention to expand the Phillips Newman retail operation, which is a subsidiary of the Unwins Wine Group.
Currently there are two operating stores, but a spokesperson for DM Private Equity said it had identified another eight Unwins branded stores as suitable for the Phillips Newman format, which involves arranging wine by style, not price or country. These 10 stores are under Phillips Newman management, and DM’s spokespersons said the company’s chairman, Phillip Cook, “is keen on the concept of Phillips Newman”. db