The Buyer assesses the enormous changes taking place at Majestic Wine that is helping to transform its business.
If the latest sales figures from Majestic passed you buy this morning then it might be worth taking a look.
For it is not just the fortunes of the Majestic management team, its staff and is 200 odd stores that are at stake here. Its influence goes a lot further than that.
As the UK’s biggest specialist wine retail business it is in everyone’s interests that Majestic gets is act together, keeps its customers (and the City) happy and ensures good quality wine is being promoted and sold around the country.
For the premium on-trade, Majestic has also quietly become one of the sector’s major drinks suppliers, offering a wide number of interesting wines and, thanks to its retail background, a range of services very different to standalone distribution and wholesale businesses.
If Majestic is catching a cold then you might want to send out for some Night Nurse. Which was very much the case in September when its shares fell by a quarter on the back of news that it was not on course to hit its 2017 year end market profit predictions of £16.1m.
Thankfully today’s half year results show it is turning things around. Although admits trading is still “challenging” not made any easier by the fall in sterling following the referendum vote in June.
It is still reporting a £4.4m pre-tax loss compared to a £4.5m profit for the same period last year. But its like-for-like sales rose 5.7% over the last 26-week period putting it back on track to hit an ambitious sales target of £500m by the end of the 2019 financial year with overall sales up 13%. Shares jumped 3.9% to 313.5p in morning trading following the half year results announcement.
In a nutshell today’s six month figures show:
- Majestic Retail sales: Up 5.7% like for like (its sixth consecutive quarter of positive like-for-likes)
- Naked Wines sales: Up 26.7%
- Majestic Commercial (including on-trade): Up 1.2%
- Lay & Wheeler: Up 27.8%
- It is now predicting full year 2017 figures to be between £430.6m and £443.4m
- Profit before tax expectations for the full year 2017 is between £11.9m and £12.4m
- It has re-instated its dividend on the back of the above figures.
Radical changes
Rowan Gormley’s arrival at Majestic Wine has helped transform the business
It is just over 18 months ago that Majestic bought Naked Wines and in one of the more unusual business deals in recent times put the founder of the company it had just bought in charge of its own business.
But in Rowan Gormley, Majestic was not just looking for someone with sound wine knowledge to take it on to the next level. No, it was his entrepreneurial skills, his ability to use wine as a tool toengage with consumers with reasonably high levels of disposable income, backed up with a strong data driven business model that got him in to the chief executive chair at Majestic.
In turn, Gormley knew he had some of the skills needed to turn round what is effectively a major bricks and mortar retailer with e-commerce and wholesale parts bolted on. But not all of them.
Arguably his biggest decision was to get the right person in charge of the all important retail division. Only by getting that part of the business all singing and dancing would he then have a chance to get its online, e-commerce and on-trade wholesale arms fully firing as well.
For that all important role he did not look at the wine sector at all. But general retail and John Colley who was is more familiar with how to shift large volumes of furniture, DIY and brown goods than the finer contents of a wine bottle.
After some 23 years working for some major high street chains including, Woolworths, B&Q, Argos, Screwfix and most recently a Dutch DIY chain, Maxeda, the opportunity to move in to wine, and more importantly team up with the business talent of Rowan Gormley was what attracted him to the role of managing director of Majestic Retail.
As he told The Buyer at Majestic’s new Watford offices last month: “I have worked for big corporate retailers, private equity (during his five years in Holland) and now an entrepreneur in Rowan Gormley. Yes, we are a PLC, butit is being driven by an entrepreneur. That is one of the main reasons why I came.”
That and his background in “building sustainable growth” for what he calls a “multi-channel, brick and click businesses”.
Turning Majestic around
He says the challenge he found at Screwfix is not too dissimilar to what he now has at Majestic.
“It was a successful company, with a family run ethos, which we took from £130m to £500m business. I learnt a lot about running multi-site, multi-channel businesses, about executing home delivery, click and collect,” he explains.
Screwfix, for example, had no retail stores before Colley went there.
Building and opening new stores is not an option for Colley. He and the rest of the Majestic team is going to have hit its 2019 £500m sales target by just being a lot better at what it does in every aspect of its business. That means getting a lot more wine bottles in the right place, in the right channel at the right time. Across the online and on and off-trades.
Colley’s goal is very clear. “I want Majestic to become the Apple store for wine. We have got some of the same DNA that Apple has. We want to get to the stage that any place, at any time, anywhere in the country you can access the Majestic brand. Be its on your desktop, on your phone, where it takes two clicks to buy a bottle of wine, or going in to a shop.”
That certainly was not the case when he came on board about this time last year. He explains: “Our stores were under performing. We only had 66% product availability which meant one in three customers were being disappointed. Our supply chain and delivery process had not moved with the times. Ranging was the same in every store. The shopping experience was very inconsistent. We only had a single view of our customer.”
Pretty damning stuff, and reflected in sales figures at the time that put Majestic on the naughty step with its investors and the City.
Getting back to basics
Core retail messaging is helping transform the in-store experience
So how has he gone about trying to change things? “If you get it right then retailing is pretty simple,” he says. “You give your customers what they want, where and when they want it, so that they come back and spend more with you. That means having the right stock in the right store.”
Sounds pretty simple on paper, but clearly not that easy in practice. Colley continues: “It has been a case of going back to retail basics. I had not worked in Majestic before. I did not have a knowledge of wine. We had to listen to our staff. So in January we asked all our staff to say where they wanted Majestic to be in five years time (its head office has those pledges written in bottles to be opened in five years time). We now, for example, have 194 different modules (range planograms) for all our stores (rather than just five previously).”
He adds: “We have made sure we have the right type of wines in the right shop. We have also our simplified our strategy so that our plan is on a single page. It’s all about making those things happen so that everyone in the business understands what we are doing.”
The man tasked with coming up with all those 194 different modules is Richard Weaver, buying and merchandising director, who has been with Majestic for some 18 years.“The new ranges went live in-store in September. But they have been a year in the making and preparation,” he says.
Gormley has also noticeably given Weaver a position on the board. Not only in recognition of his skills and importance to the group, but he is also able to ensure the DNA of Majestic, the parts of the business that worked and made Majestic successful in the past are still listened and adhered to.
Transformation years
Richard Weaver says he has seen more change in 18 months as there had been in 18 years
He has certainly been taken a back about how much has been done in the last year and a half.
“I have seen as much change in the last 18 months as I have in the last 18 years,” he says. But in a good, and much needed way, he stresses. “For our customers it has been about the simplification of our offer. For us it has been about changing our mindset.”
None more so than himself, considering how long he was part of the old management team. “It has made me realise that in the past we had not being doing basic retail skills.”
Not out of negligence, more out of looking to do something different on the high street. But he concedes in the end they were “struggling to see the wood from the trees”.
“But we have learnt from our the past and can now move on,” he says. Equally it is also about “tapping back in to what Majestic was doing so well in the late 1990s and early 2000s”, and doing it “in a changed environment”.
The old Majestic certainly would not have been able to cope with implementing all 194 different range plans if it had not involved a complete change in attitude from head office right through all the stores, says Weaver. “But we have not made unnecessary changes. Just changes that help the business work better.”
It is clear talking to Colley that has meant getting the processes, the mechanics right. The flair and the creativity can come later, once you have the core retail skills right. It’s a lesson that Tesco, for example, has had to learn. Go back to basics in order to get its own sales moving again.
Clear, simple strategy
Majestic now works as hard to get its messaging right to staff as it does its customers
After all any plans cooked up in a boardroom have to be implemented by staffaround the country, who have to buy in to and quickly and easily understand those ideas. Hence having all its strategy laid out on one simple page of its company handbook.
Colley explains: “We are working hard to make things easier for our staff and our customers with less promotions. We are more focused on selling wines each with their individual stories. Like our exclusive parcels of wine. Going back to what made Majestic famous.”
The changes are very evident in store. A trip to Majestic a year ago was more of a logistical exercise of working out how many bottles of a particular wine you had to buy to get an offer, meaning you were always faced with having to buy a lot more wine than you wanted just to get the basic offers on shelf.
Now it reminds me of a trip to the optician’s where you given a choice of lenses before one finally slots in to place and you can suddenly see all the letters on the board. The promotional and ranging changes made at Majestic mean you can now see the wine, look at the labels, read the stories, rather than constantly having to check what deal they are on. The offers are still there, they’re just a lot easier to see.
One of the key changes, says Weaver, is to now have all its Definition own label wines in one place. It helps customers realise that this is Majestic’s own brand, but also better showcases the great wines that its buying team have worked so hard to source and make, he says.
It appears to be working. Sales across the 17-strong Definition range have topped £5m in 10 months.
Test and learn
Majestic’s new stores are making full use of the large store format with clearer, simpler merchandising and ranging
It is all part of the new “test and learn” philosophy of the company. Very much a Gormley strategy that has brought him success at Naked Wines. If an idea is worth doing, then it is worth being tested inside and out first, to get it right.
The overhaul of its merchandising and ranging has also meant a new way of working for its wine buyers, says Weaver. By being so much closer to the needs of each store and its customer base, buyers can source the right amount of certain wines for the business. “We have a lot more structure, more discipline, to our buying process,” says Weaver.
For all the different store ranges the business now has a core of around 700 wines that it is being bought on a regular basis. Of which around 450 go in to all Majestic stores, with around 200 lines that are then dependent on location and demographics. “In the past we tried to do everything in all our stores,” says Weaver. “It means we are more driven by what our customers want. It challenges us all to push the envelope more.”
But by being more controlled about what is being bought on a volume basis, it can then dedicate more time to finding the exclusive, and interesting parcels that makes Majestic stand out.“But our buyers love it. It is what they want to do,” says Weaver. “They can also work closer with suppliers to find different wines. Which is good news for them as we can all work to better margins.”
It can also, says, Weaver, “test and trial” different wine styles, varieties and countries and be more experimental with its offer.
This new approach has also seen the buying, merchandising and marketing teams work much closer together, says Weaver. “There is a lot more interaction now between the buyers and the marketing team. They can share the story about the wines, which can then be broadcast to the business and out to our customers.”
He adds: “It’s been challenging but the store staff is more engaged about what is happening than ever before.” They also have far more ability to “match the right wine to the right customer” in their specific shop. “That is what is going to make us different.”
Next day delivery
One of its key strategic, and arguably well overdue innovations was to introduce, earlier this month, next day delivery. Hardly an innovation, but the fact Majestic can now get wine to you within a 24 to 36 hour window is a massive step change for the business. Providing its new revamped logistical arm can cope.
A lot rests on the coming weeks leading up to Christmas and New Year. The festive trading period is essential for all drinks and retail businesses, but it is crucial for Majestic. It is both a true test that many of the processes and steps that have been put in place behind the scenes actually work internally and externally. But it will also be a vote on how far the consumer as a whole has come to accept and understand that they have a new, improved Majestic to visit.
Clearly Majestic, Gormley, Colley and all will be judged on their financial performance. But for Colley the real success of the new look Majestic is a bit more touchy feely than just the bottom line figures. The last year, he stresses, “has all been about getting the proposition and customer experience right”.
He adds: “We want to build our five star reviews. We are at around 88% which is not bad, but we want to get that higher. We have to own the customer relationship. If you don’t want a mailer, we’ll send you a text, or we can phone you.”
“It’s about creating an in-store experience you can’t get anywhere else.”
What’s coming next
Majestic’s Definition own label range has seen sales jump by merchandising all the wines together
As for other innovations being rolled out or plans for the future Colley rolled out the following:
- a new revamped app and consumer website which is due to go live next April.
- Wi-fi in and broadband in all its stores.
- more developments with its successful Definition own label brand which has picked up awards and demonstrated Majestic’s ability to build brands in their own right. Like with the New Zealand brand, Ned.
- a bigger craft beer and spirits range.
- more of its When It’s Gone It’s Gone limited edition wine parcel offer.
- potential for smaller format stores that take the Majestic offer to higher footfall areas. This would not only allow Majestic to sell more wine, but perhaps more importantly make more consumers aware about what it is doing and a way to promote its wider offer. Colley says it already has 20 to 30 locations that it thinks would suit such a format.
Majestic is a very different business to what it was six months ago, and it will be different still in six months time. Such is the pace of change being demanded and delivered across the business. It’s going to be fascinating to see how it gets there.
- Part two of our detailed report in the to changes taking place at Majestic will concentrate on its commercial division and the work that Ben Nicholl and his team are doing to deliver a different offer to the premium on-trade.
