Reclaiming the high street

In the words of Bob Dylan, the times they are a-changin’. With the big four supermarkets slashing their wine ranges by up to a third in a bid to better compete with discount retailers Aldi and Lidl, wine brands that thought their position on the shelf was bulletproof are suddenly in danger of being culled.

Ayo Akintola, Oddbins’ managing director

But provided the liquid inside the bottle is delicious and the brand has a compelling label and a genuine story to tell, there are a number of other, more exciting avenues producers could and should be exploring in order to retain their presence in the UK, which remains an important shop window onto the world, no matter how hard navigating the tax-ridden, profit-squeezed landscape can be.

The success of Aldi and Lidl’s own-label driven ranges over the last few years has changed the game and forced supermarkets to rethink their wine strategies. And while the supermarkets will always maintain a stranglehold on the market and will continue to account for the lion’s share of wine sales in Britain, as their ranges become smaller and less eclectic just as consumers are becoming more fired up, clued up and curious, shoppers will be driven to look elsewhere for their wine fix. Many are now seeking satisfaction at independent merchants, online merchants and high street multiples like Oddbins and Majestic, both of which have big plans to shake up their businesses this year.

Majestic’s acquisition of Naked Wines this April for £70m brings together two of the strongest players in UK wine retail. New chief executive Rowan Gormley, founder of Naked Wines, has a big job on his hands as he seeks to bring Majestic back into growth – in June the company reported a 22.5% drop in pre-tax profits – but it’s a challenge he’s hungry for. “Majestic’s growth had slowed over the last few years and the board were looking around the market at who was growing and why. They realised it was smarter to buy Naked Wines than try to copy it,” Gormley explains. His strategy will be to run Majestic and Naked as separate companies but for each to profit from the other – Majestic has gained an extra 300,000 customers through the deal, while Naked will now be able to offer its clients the chance to buy wine online and collect it at their local Majestic store via a click-and-collect service, saving considerable delivery costs.

Rowan Gormley, new CEO of Majestic Wine

“My aim is to get the best out of both companies – they both have complementary strengths and are stronger together than the sum of their parts – there’s not as much customer overlap as would appear from the outside,” comments Gormley.
Among his short-term goals for Majestic are revamping the stores to make them look less like warehouses, opening smaller format stores, scaling back new openings from 10-15 a year to 2-3, and dropping the six-bottle minimum spend. “We need to make the stores less intimidating – you walk through and can’t see the other side as a canyon of wine is piled up to the ceiling. It’s not hard to fix,” says Gormley, who is trialing dropping the six-bottle spend. “Telling people who come in that they can’t buy wine doesn’t feel great,” he admits. Gormley’s top priority, however, is energising and motivating his 800 staff. He puts Majestic’s slowed growth down to increased staff turnover.

“Head office were making the decisions rather than the stores and the best people weren’t being rewarded,” he reveals. “I try to grow people and then get the hell out of the way and let them do it. I worked at Virgin Wines for 13 years and that was Richard Branson’s management style. It was effective for him and it’s been effective for me.”

Fervent competition

It seems like everyone wants a little Naked action at the moment. Having been snapped up by Majestic, also on the prowl is Oddbins’ managing director Ayo Akintola, who admitted to the drinks business that he was behind a recent PR stunt that saw select members of Naked’s marketing and e-commerce team sent love letters and bottles of wine in a bid to woo them over to Oddbins.

“I’ve been tracking Naked staff for a while as they’re good at what they do but the question was how to approach them,” he says. “I could have gone after a senior member to push whole team over but that would have been crass so I went about identifying individuals in a creative manner, then The Guardian got wind of it, which made life difficult.” So far, no one has switched allegiance to Oddbins.

Akintola is adamant not to follow the supermarket model of deep discounts. “I wish I had a magic wand that would make the supermarkets disappear, but they’re there and they have the volume,” he says. “Our model isn’t rocket science, it’s about finding interesting wines at good price points that stay the same price all year round and are hand-sold to customers in a fun, engaging way.”

Flagging up the importance of winning consumers’ trust, Akintola observes: “Our core customers are aged between 25-45 and 45% are female. Women are very loyal customers as long as you don’t royally balls up,” he jokes.

Since the likes of Tesco and Morrisons started shrinking their wine ranges, he’s noticed the phone ringing more often. “Suppliers that were chasing the Tesco accounts are calling us up now and are showing an interest,” Akintola says, though won’t reveal whether he’s taken on any of the wines dropped by the big four in recent months. His biggest criticism of the UK wine trade is its inability to see the bigger picture.

“The trade looks at things one dimensionally. We spend too long navel gazing at our direct competitors rather than thinking about where a consumer’s spend will go. LK Bennett can give me more competition than a six-bottle promotion at Waitrose,” he says.

Like Gormley, Akintola isn’t in a huge hurry to expand, having learnt from his predecessor’s mistakes. “The plan is to open more stores but it’s not an arms race. If opportunities present themselves then I’ll look into it but the old company went belly up from wrong sites and I’m not going to make that same mistake,” he insists.

Indie rush

But while Oddbins and Majestic will seek to grow cautiously, a number of independent wine merchants in the UK have successfully expanded from a flagship store into mini chains.

Bottle Apostle has just opened a fifth site in Primrose Hill to add to its stores in Clapham, Crouch End, Victoria Park Village and East Village, all of which have a community feel and a rotating selection of 16 wines on pour via Enomatic. The merchant has become the go-to example of how to successfully grow a single shop into a mini chain without diluting the spirit of the brand.

But while the situation seems rosy to outsiders, general manager Christopher Sherwood is keen to stress that expansion hasn’t been easy. “Despite the recent increase in independents across the UK, to make a meaningful profit takes huge effort and single-minded focus in the long-term,” he says.

Roberson Wine’s Flagship store, which will soon close

Another successful indie in the same model is Borough Wines, which started life as a stall in Borough Market in 2002 and now runs six stores: Hackney, Dalston, Stoke Newington, Kensal Rise and Clerkenwell alongside the Borough original. Founder Muriel Chatel believes shrinking supermarket ranges present independent merchants with an opportunity to grow their market share. “The age of supermarket dominance appears to be subsiding,” she observes. “Increasingly, customers are seeking out a richer retail experience than is afforded by the supermarkets, involving personal service and specialist knowledge, which is powering growth in the independent sector.”

Stephen Finch, owner of Vagabond in Fulham, Charlotte Street and now Spitalfields, believes a dumbing down of supermarket ranges will lead customers to look elsewhere. “The indies are poised to claw back market share. There’s a new crop of hungry, innovative merchants doing a great job in engaging with wine drinkers, who are becoming more discerning about where they buy their wine from,” he says. Charles Lea of mini fine wine chain Lea & Sandeman is also confident in the future of bricks-and-mortar wine retail. “There is still a significant demand for good wine shops, just as there is for good bookshops, which can thrive in the internet age,” he notes.

One merchant turning its back on bricks and mortar is Roberson Wine, which announced last month that its flagship store in High Street Kensington is to close at the end of August after 24 years. The decision was in part driven by a desire to increase its role as a supplier to independent merchants around the UK, with wine business development director Adam Green admitting that a number of merchants weren’t keen on the idea of taking on wines from a direct competitor.

While a great showroom for the company, today the store only accounts for 13% of Roberson’s total sales. All of the company’s wines will be available to buy online, hinting at the direction innovative merchants are taking their businesses in. Another trend Green has noticed is the blurring of lines between on and off-trade venues, with an increasing number of wine merchants offering customers the chance to pop their cork in-store for a small fee and enjoy their chosen wine with charcuterie and cheese platters, like the recently opened Humble Grape in Battersea, and a concept The Sampler was early to pioneer. Richard Bray of Swig is excited by the trend. “A lovely wine shop is a remarkable and wonderful thing, much like a good book shop. We’re going to see more hybrid shops with tables and chairs offering cheese or charcuterie for people to nibble while they drink their newly bought wine for a small corkage fee,” he says.

Merging the on- and off-trade

In a twist on this trend, restaurants are also seeing the potential of adding a wine shop to their venue, allowing diners to buy the quirky drops they were recommended by the sommelier to enjoy at home. Where Vinoteca and Kensington Wine Rooms have led, the likes of Jason Atherton’s new Social Wine and Tapas have followed. “The trend for combining off- and on-premise into one venue increases opportunities for customers to taste wines prior to buying, and a shift to being drinks rather than wine specialists via great ranges of artisan beers and spirits have set new benchmarks in terms of what customers can expect from the experience of drinks retail,” says Green, adding, “The indies have a big role to play in creating a ‘craft beer’ level of interest and engagement with millennial customers, which will be a real watershed for wine.”

In another merger of on- and off-trade, on going to press Convivality Retail, owner of Bargain Booze, was poised to buy on-trade supplier Matthew Clark. With 575 stores, Convivality is one of the UK’s largest off-licence chains, while sales at Matthew Clark broke through the £100 million mark last December. Simon Jerrome, head of wine purchasing at Matthew Clark, neither confirmed nor denied the rumours, telling db, “We’re speaking to a number of interested parties and we would not suggest there is a set buyer currently.”

Social Wine and Tapas

Online potential

While online wine sales still only account for 11% of the UK off-trade and 5% globally, it’s a category that is set to grow significantly in the coming years, with predictions putting the figure at an 18% share by 2018, meaning merchants should ignore incorporating an online offering into their businesses at their peril. The online wine market in the UK is currently worth £720m and has been led by Laithwaites, Naked Wines, Corks Out, Yapp Bros and Swig, with increasing numbers of sales coming via mobile phones and tablets. “With the power of the internet the wine retail landscape will change but it will take some time,” admits Jason Yapp of Yapp Bros.

Top of Ayo Akintola’s priority list this year is ramping up Oddbins’ online sales. “We haven’t given a lot of attention to the online side of things over the last few years,” he admits. “Year-on-year sales are growing by 50% but from a very low base. I want to take what we know works in store and transfer it online but to do that you need tech savvy staff with wine knowledge,” he explains – hence the Naked love letters. The master plan is to raise online sales from 3% to 25% of total sales in the next three years.

But while online may appear a silver bullet solution for some retailers, the reality is far murkier, as Gareth Groves, managing director of Walker & Wodehouse, Bibendum PLB’s recently relaunched independent retail and regional wholesale arm, points out. “Wine is heavy, breakable, cumbersome and expensive to deliver,” he comments. “Bottles don’t go through letterboxes and for many businesses you need to sell at least a case to make things viable. Add in the resource and expertise required to run a brilliant website and the future of online wine retail looks a bit more complicated,” he says.

Integrated approach

Rowan Gormley believes the future of wine retail lies in a more integrated multi-channel approach. His long-term goal is to “reinvent wine retail” in the UK, a revolution he believes mobile phones will play a critical role in. “The future of wine retail will be completely independent of channel. I remember a friend once told me in the early days of the internet that one day we won’t even know what a modem is – it will be the same for wine one day – the channel will become incidental,” he says, revealing that almost half of Naked’s sales now come from mobile phones. Certainly, as supermarket wines become increasingly uninspiring, the lure of the independents, with their quirky ranges, passionate staff and engaging service will prove catnip for inquisitive wine lovers who feel let down by the big four. “The supermarkets’ share of the curious consumer will continue to fall, and those are people that spend money,” predicts Bray of Swig.

We’re living in a fascinating time for wine retail where the key players’ roles are become more deeply defined, with the supermarkets and discount retailers catering to those seeking commoditised wines at low prices and the indies capturing the hearts of clued up consumers with compelling wines coupled with stellar service. The market is more fractured and fragmented than ever, but it’s never been more exciting.