What on earth happened at Oddbins? The quirky off-licence chain has called in the administrators for the second time in eight years, warning of job losses - yet this time three-odd years ago it was doing well.
The signs were all positive: sales were up 11% year on year and profits had surged 124% on the back of a massive investment in the shops. To top it off, it had just been named Drinks Retailer of the Year at The Grocer Gold Awards 2015.
So how did things go so dramatically wrong? Now that Oddbins is staring into the abyss once more, who might want to buy its ailing shops? And what does this say for the future of off-licences?
Oddbins has, officially at least, blamed Brexit for its woes. Its only public statement on the administration reads: ‘The deterioration of the high street, combined with the continuing economic uncertainty surrounding the withdrawal of the UK from the EU, has resulted in an unsustainable, tough physical retail market.’
The weakening of the pound has indeed wreaked havoc on many wine businesses, sucking away much of the sector’s profitability. And while Companies House documents show sales fell year on year at Oddbins’ parent company European Food Brokers from 2015 to 2017, it was only after the referendum that it actually posted a loss.
But that’s not the whole story. There had been signs of instability at Oddbins long before the UK voted for Brexit.
After being bought out of administration in 2011 by drinks wholesale and retail magnate Raj Chatha - a former chairman of Nisa-Today - it was added to his empire of off-licences trading under Whittalls Wines. And the Oddbins turnaround project initially looked like it was ticking all the right boxes.
It recreated its witty, quirky voice using social media (and posters). It educated its staff about wine, putting many through their WSET exams. Its stores began hosting more tastings and ‘meet the winemaker’ events, and ditched “identikit” big brand wines in favour of smaller producers, heralding a return to the niche, upmarket ranges that won over shoppers in the early days of the business. At one point, the chain said it was considering offering the brand up as a franchise.
The message? That the old Oddbins was back. The problem was that the market was changing irrevocably. “Places like Majestic have put a lot of effort into value wines under a tenner in the last few years, but Oddbins was always relatively premium,” says Him senior insights manager Blonnie Walsh.
Shopper tastes have moved away from wine, too. While beers and spirits have been buoyed over past years by the rise of ‘craft’ drinks and an influx of trendy, premium newcomers, wine has struggled to stay relevant, with the category slipping into volume decline in the off-trade last year.
Majestic’s own turnaround has employed many of the same tactics as Oddbins, focusing on customers, engagement and range. But it has been considerably more successful, largely thanks to a heavier investment in online and a ruthless crackdown on its branded suppliers as it chased better prices. It also has the Naked Wines sister business as a pathfinder.
But, Walsh adds: “I would credit the discounters [with Oddbins’ demise] more than anyone else. Especially in BWS they have just grown and grown, and they’ve done well in premium wine, where they now have a really competitive offer.”
It’s not all about competition, though. “Oddbins’ profitability was always dragged down by its London stores,” says a senior convenience sector source. “A small number of stores in its estate were profitable and taking a nice turnover, but the cost of the London stores and their business rates sucked the life out of the whole thing.”
And in 2016, the business fell foul of the taxman. HMRC deemed Whittalls’ management not “fit and proper” to warehouse duty-suspended alcohol and its authorisation to trade in duty-suspension was revoked.
“There were questions around their due diligence around who they traded with”
Alan Powell, excise duties consultant
“There were questions around their due diligence around who they traded with, and the judge wasn’t convinced they had been honest with HMRC about their understanding of the situation,” says excise duties consultant Alan Powell.
A two-year appeal followed, but was dismissed by a tribunal in early 2018.
“There is no doubt the decision affected Oddbins. It meant they would have had to trade cash upfront to source goods,” says Powell. “It put their cashflow under a lot of pressure. If they had their warehouse approval taken away they wouldn’t have been able to receive wine into their own warehouse and may have had to put it in a third party’s, which also incurs a cost.”
Which raises the question: who in their right mind would want to rescue Oddbins the second time around?
One year ago the obvious answer would have been the now-disintegrated Conviviality, which eagerly snapped up P&H subsidiary WS Retail’s estate of stores - shortly before its own spectacular collapse in spring 2018. A corporate buyer would now be much harder to find.
Turon Miah, principal associate at Gowling WLG, suggests “interested parties might include competitors such as Majestic”, but this would be a surprising outcome. Speaking to The Grocer last year, Majestic’s retail MD Josh Lincoln said buying stores was not a priority.
“I believe a chunk of Oddbins stores might be viable on an individual basis,” says our convenience source. “The best case would probably be to sell some to their managers and let them run the shops as individual ventures. That’s what happened when Threshers collapsed: some of the managers made a decent run of it because they were passionate about their category.”
This, they suggest, is the future of the high street wine shop. But as a rule, it seems the format may have had its day.