just the Answer - Majestic Wines CEO, Steve Lewis
Earlier this month, Majestic Wine posted a 23% lift in H1 sales. CEO Steve Lewis tells us how.
Earlier this month, Majestic Wine brought some colour back to the cheeks of the UK wine market, when it posted a healthy set of figures for the first half of its fiscal year. As good a time as any, then, to find out the secret to the drinks retailer's success, from company CEO, Steve Lewis.
just-drinks: You became CEO of Majestic in August 2008.
Steve Lewis: That's right. Three months before Lehman Brothers went down.
j-d: What did you inherit and what was UK wine retail landscape like?
SL: Somebody once asked me how do you run a good business in a recession. My answer was, you run a good business before a recession. Majestic was in good shape because it was then – and it is now – an extremely tightly-run organisation, with good cost control, high quality staff and a strong focus on its niche market. So, we were in pretty good shape.
In the three years since, we've tried to take every part of Majestic that faces the consumer and take it up a level: We've rolled out 'fine wine' (still wine at GBP20 (US$31) and above per bottle) to 70% of our estate; we've made substantial improvements to our website to improve our e-commerce; we've increased the rate of store roll-out and, even at the peak of the recession, we've continued to invest in our staff – we recruited 300 graduates last year.
In a recession, people expect you to dig a hole, get into it and pull a lid over. But, what we decided to do was what people wouldn't expect us to do, which was continue to focus on what makes us different.
Regarding the market overall, I don't think there is just one wine market in the UK. The supermarkets have done a very good job over the years of popularising wine. They have 80% of the wine market, and 80% of the wine sold in the UK off-trade is sold at below GBP5 per bottle. We're operating in a niche part of that market: The average bottle price in the UK stands today at GBP4.76; in Majestic, it's GBP7.13. We don't run the business to increase our average bottle price – the easiest way to do that is just to put your prices up, and that doesn't signify healthy business.
But, our market share overall has grown: When I joined, it was at 3%: Today, it's at 3.9%. But, look at our market share of New Zealand, for example; we account for 12%. For Argentina, it's 13%, and for Champagne, it's 10.5%. So, we're operating in a niche part of the market, which is very healthy.
If you're a producer who has wine you want to sell in the UK at a retail price of between GBP6 and GBP15, and you've got a lot of it, then Majestic is disproportionately important to you: We are a route-to-market to get to the affluent middle classes in the UK. In buying terms, our strength comes from the fact that we give producers the opportunity to sell large volumes of wine that retails way above the average bottle price. We don't actually sell any of the top five main still wine brands - our customers don't ask us for them.
j-d: How has the recession affected Majestic's type of consumer?
SL: I think it's made them much more flexible about what they consume. The days of walking into a store and only wanting Sancerre have gone – consumers use the tasting counter a lot more, and they're much more receptive to trying different styles. For example, New Zealand as a product group represents 19% of our still wine sales; in the market, it's 5.6%. Australia, meanwhile, accounts for 7.6% of our still wine sales but over 20% of the total market.
j-d: The just-drinks annual UK wine survey this year found that the UK was no longer seen as the most important wine market for brand owners. What role can Majestic play in restoring the country at the top of the tree?
Majestic Wines' CEO, Steve Lewis
SL: Presumably the complaint is that those brand owners can't make sufficient margin in the UK and that the UK consumer won't trade up. The profit margin for the average bottle price (GBP4.76) is very low indeed; the cheapest wine we sell is GBP4.49. But, if we can flourish in this environment, then it's not the market that's flawed, it's the approach to the market. We have demonstrated that the consumer is very happy to experiment and trade up; we've seen enormous growth in Provence rosé, which retails at GBP10 a bottle!
The market is there, you just need to have the right approach to it.
j-d: What's your opinion of the role supermarkets have played in introducing wine to UK consumers?
SL: I'm a big fan of the supermarkets. I can remember a time before wine was seen as part of everyday life here. While there is a lot of work to be done between the supermarkets and suppliers to improve the UK market, it's supermarkets that have popularised wine and they've done a very good job of it.
I see them as intense competition. All of us are in supermarkets 52 times a year, aren't we? But, I think there is a consumer group out there perfectly prepared to buy interesting, quality wine and allow the retailer to achieve good margins – that's what we're doing.
We look to specialise in everything we can do that the supermarkets will struggle with: excellent customer service delivered by graduate-level staff; the ability to order online with free delivery throughout the UK; invitations to attend Majestic wine events in-store, and free tasting in all our stores. My job is to identify everything that Majestic can do really well that a supermarket can't do, and then do it.
j-d: How is online performing for you?
SL: In the last six months, online sales – which represent 9% of total UK retail sales – were up by 8.7%. We're planning for the day when they're 15% of our total sales.
We have a very efficient multi-channel operation; all of our online sales are channelled through the store network. That's anther example of what we can do better than the supermarkets. We've got 175 store teams crammed full of highly-educated, motivated graduates. Each store team is allowed to customise their own homepage, to detail events, staff biographies and wine rates and reviews. Our customers regard our staff as peers, so they're allowed to review the wines online.
j-d: Two years ago, you reduced the minimum order at Majestic from 12 bottles to six. Was that a move to get consumers out of supermarkets and into Majestic stores?
SL: We started a research project and asked what the consumer would change about Majestic. Overwhelmingly, the response was that they wanted to buy six bottles at a time.
We're never going down the route of selling single bottles, but, for many, 12 bottles was too much of a barrier. Aside from events like summer barbecues or Christmas parties, our consumers were topping up in the supermarkets. So, the move was introduced to get those consumers to top up in Majestic instead. That's exactly what it's done. Today, 40% of our sales are below 12 bottles. We've made Majestic much more accessible both to existing customers and new ones.
j-d: How else are you hoping to entice new consumers?
SL: Firstly, we have increased the rate of new-store roll-outs; we'll open 16 new stores this year, compared to 12 last year and six the year before. The introduction of six-bottles is far easier for people to try us out, hence the speeding up of new stores.
We've also just launched our first brand advertising campaign.
We think we've got the company in a really strong position in terms of fitness and its positioning in the market. So, we're looking to let more people to know about us.
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