Bestway confident that Bargain Booze and Wine Rack can flourish in challenging market
Bestway has reaffirmed its commitment to making a success of high street drinks retailing amid challenging times for this sector of the market.
The firm swooped in to save Bargain Booze and Wine Rack from the jaws of oblivion after Conviviality collapsed last year, safeguarding hundreds of jobs.
Since then it has been a tumultuous time for the high street as a result of rising business rates and exchange rate pressures brought about by fears surrounding Brexit.
Oddbins has been plunged into administration, along with sister businesses Whittalls Wine Merchants and Wine Cellar, while Hartley’s and Mulberrys owner M&O Trading has fallen into liquidation.
Philip Duffy, administrator for the Oddbins estate, said rising business rates and rents were having an effect on the high street, while consumers are tightening their purse strings as Brexit looms and exchange rates have taken a battering.
“Traditional bricks and mortar retailers are undoubtedly feeling the strain,” he added.
Franchisees at the Bestway Retail business have voiced their concerns to DRN, but the firm insists it can flourish in this challenging marketplace, and it wants to reassure franchisees of its commitment to bricks and mortar drinks retailing.
Dawood Pervez, managing director of Bestway Wholesale and Bestway Retail, told DRN: “We knew that 2018 would be a tough year, but we are 100% committed and there are some building blocks that we wanted to put in place following the acquisition of the Bestway retail network.”
He pledged to drive higher margins and rewards for franchisees through investing in infrastructure and marketing and growing its retail estate in 2019.
Nielsen stats show that sales at Bargain Booze are down over the past year, but that is to be expected as some stores were shut and shelves were barren while Conviviality scrambled to find a buyer.
Some franchisees have had to leave the business, forcing buyers to negotiate with suppliers on slightly declining volumes. Wine Rack’s head of retail, Haydn Hicks, has also vacated the role and he now plans to devote his time to making a success of his own Bestway franchises.
There were fears that the flagship store in Belsize Park, London, would be closed, but Bestway confirmed it will remain open and it voiced its desire to grow the Wine Rack estate going forwards.
Bestway Retail managing director David Robinson recently left the business to take up a new role as chief operating officer at Pets at Home. It has now brought in Andy Cresswell, who left his most recent role as managing director of service station operator MRH in August 2018, to replace him.
Cresswell has not worked directly in the off-licence sector before, but he is a retail veteran and he brings plenty of experience in mid-sized co-ops, forecourts, convenience chains and grocers to the table.
He is enthused about the challenge of thriving in the current climate and he believes Bestway Retail is well placed to do so.
He told DRN: “Our Bestway Retail buying team has delivered a strong performance, increasing retailer margins over the past eight months through improved buying prices on key lines, which is an important step in delivering a strong future.
“Additionally, we have further invested in the rebates available to franchisees through our reward scheme, to drive customer loyalty and encourage upsell on volume. Our Bargain Booze consumer-facing social media platforms and loyalty scheme continue going from strength to strength and we have further dynamic plans for 2019, which will be revealed in the months ahead.”
Salience Search Marketing recently rated Bargain Booze as the UK’s second best drinks retailer when it comes to its social media offering.
Bestway clearly had a huge job in trying to turn around a business that had been left in a somewhat chaotic state. Bestway Retail reported a pre-tax loss of £267,000 on sales of £80.5 million for the three-month period encapsulating the Conviviality deal to its end of year on June 30. Its first job was to shore up supply for franchisees and it has since set about stabilising the business.
Some franchisees have expressed concern at the situation the business finds itself in, although their complaints largely stem from Conviviality's handling of the business and they still hope that Bestway can turn it around by making changes.
“The people at Bestway head office are nice people, but they haven’t got the calibre of buyers that Bargain Booze once had,” said one. “The buying is not good enough and volume is not being harnessed properly. They are still being run as separate businesses. There’s an ongoing flow of a reduction of store numbers. They are negotiating on declining volumes. There’s no reason why it won’t continue to decline. People are getting fed up and they are not seeing any change.
“Bargain Booze was not in the greatest shape when they bought it. We are getting on for a year now. You can get away with it for a while if there’s something coming over the horizon that’s going to turn it around, but I can’t see what’s coming over the horizon.”
Yet Creswell insists there are plenty of initiatives coming over the horizon and that franchisees will benefit by committing to Bestway Retail.
“We remain wholly committed to ‘bricks’ and to the growth of our drinks estate, and with Bestway’s skill and growing focus on digital pathways to improve customer experience, we will also be looking at how we can complement the high street infrastructure, and drive further value-add into the business through incentivising increased footfall into the stores as a win-win for our franchisees, and importantly, for their own customers,” he said.
“Certainly, 2019 is going to see more movement in the high street. We have further plans, which will be unrolled across the year, which includes investment in our brands and in our Bestway retail estate.”
As for Oddbins, industry insiders fear there will be no saving it this time, eight years after it was last plunged into administration. It began life in 1963 and the estate grew to 350 stores across the country at its peak, when high street drinks retailing was in its heyday. EFB purchased the Oddbins name and rescued a smaller collection of stores from the brink in 2011, The estate now stands at 47 stores, and managing director Ayo Akintola’s plans to return Oddbins to a 300-strong national chain sadly have not come to fruition.
“EFB bought that businesses eight years ago and they have never been able to scale it up, so you are left with, in the scheme of things, a small estate,” said an insider. “The 47 stores are spread very thinly, it is not getting bigger and its wine-led offering has been eaten away by everyone else.
“You cannot over-emphasise the effect on the market of The Co-op getting its act together. Their expertise, the scale they have got in alcohol buying, that will filter down to Nisa and Costcutter, so you’ve got 5,000 stores, and that’s an awful lot of stores. When you have got 47 Oddbins stores spread from Aberdeen to London, it’s hard to compete. Aldi and Lidl have gone big on wine too. Everyone else is eating away.
“It has been hit by business rates. You can see how something can go from being profitable to marginally profitable to falling off a cliff.
“Oddbins always pitched itself as selling odd stuff you can’t get anywhere else, but all of a sudden everyone is doing it. There are highly specialised local merchants with a good online offering, the Co-op has got its act together and business rates are increasing – it’s a perfect storm.”
A source in the City said Oddbins might appeal to some buyers with a love of wine, but added that in commercial terms high street drinks retailing is a difficult sell. The administrator could be forced to close the stores down, or talk to managers about buying their stores, as we saw when Thresher collapsed.
“If Oddbins go down this time I fear they may not find a new buyer in this difficult high street retail environment,” said Greg Sherwood MW, senior wine buyer at Handford Wines. “Will be very sad. Another route to market potentially closing for many wine producers.”
Despite the woes of Oddbins and M&O, the off-trade appears to be in rude health. BWS sales enjoyed strong growth throughout 2018 and then climbed 3.8% over Christmas (Nielsen). There are clear winners and losers, and if Oddbins cannot be saved that volume should be swept up without too much damage to the wider trade.
EFB blamed Brexit for its struggles, which caused pro-leave commentators to rail against it. But one Oddbins employee said: “I can tell you for sure Brexit has absolutely been the death knell for the company. The company has indeed has it problems but they have been massively exacerbated by Brexit. We cannot buy wine for the price we once did. Simple maths. The exchange rate has plummeted since Brexit.”