Will Majestic’s new pricing strategy boost market share?

Majestic’s decision to slash prices on 500 of its single-bottle wines this month came on the back of consumer demand, the wine retailer claimed – but is it likely to help it win market share?

Ken Odeluga, a senior market analyst at City Index said the retailer would “undoubtedly” grow new customers following the recent changes, but said market share growth was more difficult to predict.

“Their recent Christmas like-for-like sales growth of +7% would already be the envy of almost any UK retailer,” he told the drinks business. “That signal of buoyant retail demand also affords Majestic Wines greater leeway than the average retailer to ‘invest in price’ with greater implied margin to spare. That’s a considerable competitive edge.”

A recent pricing snapshot of pricing by pricing promotion analysts Brandview (taken on 19 January) showed a selection of Majestic’s branded wines were considerably more expensive than the same bottles in six other mainstream retailers, prior to the new pricing.

The insight company compared prices of a sample selection of ten wines available in Asda, Morrisons, Ocado, Sainsbury’ Tesco and Waitrose, finding Majestic’s shelf price was the most expensive in eight out of ten occasions, with only one wine being cheaper than one other retailer. However its prices on the same wines in its ‘mix six price’ promotional deal – which the others did not offer – beat its competitors on price in six out of ten wines, with one further wine beaten only by one other retailer.

Brandview concluded that despite removing the six-bottle minimum in October, the retailer “might have struggled to entice shoppers based on the single bottle pricing alone”.

But since the new prices on single bottles took effect, Majestic seems to be closing the gap with the mults on price, at least on its branded offer. Four of the wines in the Brandview sample are now advertised online at prices 13 – 20% cheaper – although the other six no longer available.

This highlights one of Majestic’s biggest strengths, according to Investec analyst Kate Calvert, a differentiated offer which means it has a far smaller overlap with the retailers than the multiples themselves, as pointed out by md Rowan Gormley in an exclusive interview with the drinks business in November.

The non-branded offer helped Majestic cater for a different customer, Calvert noted – one who was happy to buy in bulk and be happy to be guided by its mix-six and by-the-case promotional strategies.

“Gormley’s strategy is all about growing market share from its existing [customer portfolio] by making the offer easier to shop and having more targeted promotions,” she said. “It is very early days, but it one step along what will be a very long road.”

However Odeluga said he would have misgivings about Majestic competing on price on anything other than short-term initiatives and the specialist side was likely to be Majestic Wine ‘s main advantage going forward.

“Inevitably the multiples by nature are diversified enough to defray much of ‎ negative impact by firmer prices elsewhere,” he pointed out. “Much will depend on how far along Majestic Wines is in taking share in the craft beverage market after acquisition of Naked and installation of its founder as CEO.”

He argued that, pointing out the supermarkets are fighting on more fronts than retailers like Majestic. “It already has many of the characteristics that multiples are trying to re-discover,” he noted.