Majestic Wine has just announced pre-tax profit gains of 14.5% for its last financial year - Gemma McKenna catches up with chief executive Steve Lewis to find out the nitty gritty behind the figures.
GMK: Fine wine (bottles over £20) sales are up 18.5%. Can you explain what’s behind this growth?
SL: It seems counter-intuitive in this climate, doesn’t it? We’re just rolling out our fine wine to all of our stores - once that’s complete, the rate of growth will slow. It’s wines at the £20 to £40 that are driving this, we’ve got an average fine wine price of £24.76. This isn’t guys buying 12 bottles of fine wine, but if you have to spend £25 to get a bottle of Pinot Grigio in a pizza restaurant you may as well pay it for a wine you’ll really enjoy to drink at home.
GMK: Lay & Wheeler, the fine wine en primeur specialist you bought in 2009, has grown profits from £0.7 million to £1.4 million. How has this come about?
SL: Statutory profits are actually £1.9 million - in part it’s due to the early arrival of the 2009 vintage - £600,000 - which we didn’t expect to come in that financial year. But to have a company of just 20 people, making £1.9 million profit, is pretty impressive. Our French business, which only has three stores, saw profits grow by 32% to £1.4 million. That’s people crossing the channel to make the £2 [per bottle] saving, or £3 on Champagne and sparkling. We wouldn’t consider opening anouther store in France - a lot of the competition has pulled out, which helps us. It’s driven by the £2 guaranteed saving and a £10 fuel save discount for every £150 pre-ordered. Both of our smaller sister companies are performing very strongly.
GMK: You mention that Argentina, Italy and Spain are stand-out performers - can you clarify?
SL: Argentina makes up 4.4% of our still wine sales - it’s almost as important as South Africa. But our UK market share is 14%. Our overall market share for wine is up to 4% from 3.6%. We’ve got a very savvy, educated customer, which is driving this. The Languedoc is also growing well and Italy is strong - yes, in part it’s thanks to PInot Grigio, but people are also trading up to Gavi di Gavi for example. As for Spain, the prices are really good, and while Rioja is still the main player, there is real interest in some of the more esoteric wines like Albariño and Rueda - there’s also a real resurgence of everything Spanish - it’s become very fashionable.
Our sparkling wine is up 14%, with a lot of Prosecco and New Zealand driving that. It’s become socially acceptable to offer at events in a way it wasn’t before. As for Champagne, it’s grown by 3%, mostly driven by the grandes marques.
New Zealand makes up 19% of our still wine sales and our market share is 11.3%, ahead of a 6% average.
When it comes to Provence wines - we have 35.7% share of the market - which sends a strong message to Provence producers.
GMK: Your online business has grown to account for 10% of sales - do you have a target you’d like it to reach?
SL: We’re planning for the day when it accounts for 15% of sales. The website has got to work quickly, and have good navigation and product pages. Since launching our mobile site six weeks ago we’ve noticed people are spending 20% more time on it, revenue’s gone up 50% and traffic has increased by 20%. Also, we introduced the ability to buy six bottles online instead of 12 - we thought we were losing customers at the checkout who thought they could choose six - so we changed it. We’re convinced we can afford the delivery - last week we sold 1,000 bottles of red Burgundy as an online exclusive of six bottles for £90 in just three hours. If customers had had to spend £180 for 12 bottles I don’t think it would have sold out so quickly.
GMK: Scotland’s new legislation means you can’t offer multibuy deals, such as your discount when you buy two bottles, north of the border. Has this affected business?
SL: It’s had no impact whatsoever. I don’t think our customers were the target market. In fact, it’s been a real positive - and encouraged more experimentation. Previously people bought three different bottles to make up their six, now they’re buying a wider variety because we let them do it. We only learned this last week, but wine exploration is something to be encouraged.