Majestic Wine chief executive Steve Lewis believes the grocers’ 80% share of the wine market has peaked. The retailer reported a 14.5% uplift in full-year pre-tax profit today and Lewis believes there are significant market opportunities. Retail Week looks at reasons why he might be spot on.
Service: Majestic prides itself on recruiting graduates and training them well. Lewis’ target is to recruit “the sons and daughters of our customers”, i.e. intelligent, middle class twentysomethings. Staff are encouraged to be friendly, engaging and provide knowledgeable advice. Majestic faces competition from the grocers, notably Morrisons and Tesco who have both embarked on a recruitment drive to increase service in beers, wines and spirits in the last year. But Lewis says: “The reality is that even if you put a wine advisor in a supermarket – and at any one time there’s a supermarket that tries it and gets rid of them – people aren’t used to people approaching them in supermarkets, they’re like nutters on the bus.”
Organic growth: While the grocers have not halted expansion, the focus is very much on the existing estate. Majestic, meanwhile, is investing £11m in new stores, opening 16 new stores next year and targeting 330 stores in 10 years time. Clearly this is a fraction of the grocers’ estate but – combined with its first national TV adverts which aired last month – Majestic’s brand is reaching new shoppers.
Range: While the grocers’ buying power is indisputable, Majestic’s links to growers are second to none. Lewis says: “If I could build a pipeline to New Zealand I would, in most cases we are our suppliers’ number one or two customer.” Moreover, Majestic is benefitting from Italian and Spanish growers’ keen to get cash flowing through the business and selling at lower prices.
A new customer: Majestic made a significant move last week in reducing the minimum online and over the phone order from 12 bottles to six, echoing the in-store offer introduced in 2009. Lewis says: “This has allowed us to reach a new customers that would not have shopped for 12 bottles of wine and open in areas we couldn’t have previously.
French operations: Lewis sees France as an opportunity. He says: “Sainsbury’s, Tesco and Oddbins pulled out of France this time last year and the French supermarkets are not very strong on new world wine as we are.” In addition, Majestic is now offering ferry and money off fuel deals for customers travelling to Calais – the retailer estimates customers will save £2 a bottle by making the trip.