The flotation of Conviviality, a friendly sub-scale off-licence chain, on the stock market in 2013 was one of the most unlikely events in the history of grocery. The really clever bit was when it got serious, reversing it into first Matthew Clark and then Bibendum in a bid to consolidate the drinks trade. The vision of CEO Diana Hunter won widespread support and, with sales and profits growing, its share price had quadrupled by November last year. 

Bargain Booze

Now the wheels have come off, with shares suspended, and the price falling below where it started.

How did it go so wrong so quickly? Some of this looks like straightforward albeit extraordinary financial incompetence (a plc is supposed to be able to add up, and should not simply have forgotten about a £30m tax bill). But questions also have to be asked about certain key management decisions. The first is around Conviviality’s investment on the retail side. Why has a so-called symbol franchise operator spent money (and management time) buying company-owned stores (including but not limited to Palmer & Harvey’s WS Stores)? Matthew Clark is a bigger, stronger business in the on-trade. Surely investment should have been focused there?

The second is personnel based. With ex-CFO Andrew Humphreys stepping down last October, it’s cast a harsh spotlight on his replacement Mark Moran. But the departure of Mark Aylwin at the start of the year may be more significant still. Aylwin was brought in to merge the Matthew Clark and Bibendum operations. With the job done, Hunter wished him well and restructured operations, logically enough, around the three core functions of buying, selling and logistics/operations. But Aylwin also had a big operational role and removing him has left Hunter exposed. And crucially, it’s robbed Conviviality of the only board director with wholesale experience.

It seems incredible that a business could unravel as quickly as Conviviality has. But with tighter margins and sales commonplace after Christmas, plus tough trading and the snow to contend with, it’s not inconceivable that an operation can quickly lose control of cashflow. And you lose it at your peril.