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News
Wine world waits on Oddbins
Oddbins is set to outline the results of its strategic review today, with the wine industry on tenterhooks as it waits to discover the fate of the UK off-licence chain.
The firm’s struggles echo those encountered by others in the independent retail sector which have fallen by the wayside in recent years amid overpowering competition from the supermarkets. First Quench Retailing, the owner of Thresher’s, collapsed in 2009 and the Unwins chain bit the dust in 2005. Oddbins itself has been eroded over the past few years too, seeing its number of stores drop to 128 from 250 over the past decade, and that was before the announcement of a further 39 store closures made earlier this week.
Today’s announcement, which is almost certain to contain yet more bad news, will be the latest in a string of blows to hit the independent wine trade. The fact that three quarters of UK wine sales now come in the supermarket sector tells its own story, yet Oddbins has recently claimed that it has the highest average consumer spend on a bottle of wine – around £8 – of any UK retailer. In the face of such margins, the fact the chain is struggling so badly is even more worrying and, perhaps, damning from a management perspective.
Aside from the human cost – the drinks business understands some store workers were given as little as six hours notice that they were losing their jobs – the knock-on effect of a major retailer collapsing can have catastrophic consequences right the way down the supply chain.
Suppliers are currently not able to secure credit insurance to supply the chain and it is known that some have already complained about late payments. Oddbins’ most recent accounts show it made a £4.6 million loss over the year. Though this was an improvemnent on the previous year’s losses of £6.2m, there is a widespread belief that the company cannot return to profitable trading in its current form.
If the company enters into a creditors’ voluntary arrangement, which many expect to be the most likely course of action, suppliers – who already face difficulties turning a profit in the notoriously difficult UK market – will either have to accept reduced settlements for their products for a set period of time or move to wind-up the company. There is still a chance, of course, that managing director Simon Baile could opt to place the company into voluntary liquidation.
On top of its difficulties in making repayments to suppliers, Oddbins has also had to contend with ongoing legal costs to fund its long-running battle with the chain’s former owner Castel, though Baile has not disclosed what exactly the subject of the legal dispute might be.
Once the dust settles on today’s announcement, speculation over who will buy the stores Oddbins is getting rid of will head the agenda. Wine Rack has already ruled itself out of the running, but some smaller regional operators might be tempted to pick up one or two stores in their local area if they become available.
The full statement from Oddbins and a list of the stores set to close will be published on the drinks business website later today.
Alan Lodge, 11.03.2011
There will be many lessons to be learned from the (latest) Oddbins saga, but based on what we have learned at DoILikeIt? talking to consumers, one of the major mistakes was not getting a good website up and running as soon as the current owners took over. This has been a weak spot throughout. Taking a stance against branded wines is also a very questionable position. Not selling Blossom Hill is understandable, but turning one’s face against some desirable, well-known premium Spanish and Australian wines is less so. Consumers like buying these. And finally, the high per-bottle purchase figure has to be set against a buying policy that often involved sourcing wines via middle-men who need to make margins of their own.
All this news about Oddbins is very very sad. Oddbins has opened many many eyes both from and towards the UK wine trade. Innovative as it was, at the time, now it is fighting against the tide. Given average wine spending in the UK most of the moneys flow into governments accounts. By the end of the month the trade might face the 20 pound sterling excise duty for the first time for a 9 litre case. Trade and retail margins go over this and the VAT kills what is left, of what looked as a nice business. Supplying Oddbins for over 15 years directly out of Spain I have seen and felt the erosion first hand. With wine treated now as a commodity by the huge supermarket powers and loads of producers world wide on their knees the environment, most likely will not change anywhere soon….
I am an ex member of the Oddbins management team who jumped ship almost 2 years ago in search of greater things. It was about this time in winter 2008 that we all started to realise what the general public now know for sure, that cut backs in staff and training and a bad attitude towards staff and customers by the upper management, has rendered this once mighty brand, an archaic symbol of the death of staunch middle England who once thought themselves recession-proof. This company is run by men with their feet nowhere near reality and without the ability to listen to the people on the shop floor who were banging their heads against a wall trying to tell them that they were making grave mistakes.
There is still room for independents on the high street but it is quality wines at good prices with knowledgable and motivated staff that will keep small people afloat against the supermarkets and Oddbins lost all of those things, with poor buying decisions, staff cuts and a stop on training.
The fact of the matter is, Oddbins deserves to go under,because people like Simon Baile need to learn from their short-sighted and catastrophic mistakes.
While I agree with Louis about Oddbins’ history, I’d have to say that there are some grounds for optimism among the new independents and innovative young online offerings such as Naked Wines. Draconian duty levels hurt entry-level wines far more than premium ones. A £15-20 bottle in the UK can still be a good buy when compared to the same wine in the US or other parts of Europe.
I left Oddbins in 1996, after 7 years with them. By all accounts it sounds like the rot started to set in sometime after that. It’s hard for any company to maintain being at the top of the game forever, but one could not predict that their fall from grace would be so complete. In my day Oddbins was known for a great range, value for money and knowledgeable and motivated staff. Contacts in the trade have told me that the staff quality went down over time and customers as a result found that the atmosphere of the shops had changed. I am not sure whether the wine side of things changed, as I live in Australia now, but their website shows that their range doesn’t seem to have the breadth and depth that it once did have. I am not sure though that one can blame the supermarkets for the demise of Oddbins. They have been a potent force in the UK for 20 years and the Coles and Woolworth’s owned stores here have an equally strong presence, but independents manage to survive nonetheless. So what has been the root cause of Oddbins demise? Has it just lost the sparkle that it once had?