Maverick chain bends to high street pressure

26 January, 2007

Oddbins could be forgiven for giving up trying to entertain the small army of wine critics who continue to mourn its days as a maverick and slightly reckless pioneer of weird and wonderful wines. The focus is on the ugly business of making a profit in a high street poisoned by the huge market share of the multiple grocers.

The prize is potentially bigger, but hard to obtain. The irony is that Oddbins could win all sorts of media friends by running crazy offers on Greek or Brazilian wines that don't sell, but Castel wouldn't have a business they could write about for very long. Head buyer Emma Nichols prefers to put the emphasis on a strong range of fairly-priced wines, yielding realistic margins (she insists they're not excessive) and in 2006 did away with price promotions in favour of a sort of upmarket everday low prices strategy. Some 400 wines that were new to the high street were launched by Oddbins last year.

The company has already pared down its head office team, and with Nichols off on maternity leave for six months, trainee buyers Julie Buckley and Claire ­Illingworth are being thr own in at the deep end with their respective promotions. The lack of bodies in the buying team has raised eyebrows and some questions about Castel's willingness to properly resource its business, but ­Nichols argues that the absence of promotional schedules means there is less to attend to these days.

The cutbacks, or "streamlining" as the company would rather describe the exercise, have not hit shop staff.

"It's really tough in the high street and we need to be as competitive as we can be so there have been some ­redundancies at head office to streamline the costs," says Nichols. "Our structure is pretty lean there. It's focused on trying to drive sales."

There are now senior cluster managers to concentrate on administrative issues such as staffing and security, while sales managers get on with generating sales - both at retail level and in the thriving wholesale division.

A highlight of 2006 was the launch of two own-labels: a red and white from the south of France, produced by Castel . In the first three months Oddbins shifted some 200,000 units and is sufficiently enthused by the results to extend the range .

"We're looking at potentially sourcing wines at a higher price point, more classic appellation wines under an Oddbins branded banner, and changing the label to reflect a higher price ," says Nichols. Castel is likely to be the supplier, though Nichols says Oddbins will be "looking at all the options". She has been instrumental in creating a more mature relationship between Castel and Oddbins, delisting many of the less interesting wines produced by the French parent company.

" The way I see Castel is as a resource. The economies of scale it can transfer on to us are very beneficial. We have a lot of control over costs and that's a real advantage for us.

"Sancerre, Pouilly-Fume and Châteauneuf-du-Pape are increasingly becoming commoditised and it helps if you're talking to suppliers as part of a larger group to get prices that allow us to offer good value for money."

There was some excitable talk in Wimbledon last year about a n expansion programme for Oddbins, but common sense has since prevailed and the estate size is likely to remain about the same, with unprofitable sites being churned. Nichols says the strategy for the year is "more of the same" but admits there is work to be done to explain the pricing structure to consumers. Perhaps suppliers could do with another briefing, because a feeling persists in some quarters that Oddbins' margin demands are too high.

Nichols maintains that the terms Oddbins offers are fair. "We can be confident in telling suppliers that what we're asking for is nothing more than what we need to compete on the high street.

"I think [the pricing strategy] is working but it needs more time to bed in. We need to communicate it to consumers. We've made every effort to reduce single bottle prices and we're paying for the case discounts [of 20 per cent on six bottles or more] out of our own margin. The prices we're asking are a genuine reflection of the value of that bottle of wine."

With independents rapidly springing up to occupy some of the territory traditionally occupied by Oddbins, and supermarkets becoming increasingly fascinated with "fine wine", Oddbins has to work hard just to stand still. Family firms are immune from many of the short-term pressures that bedevil companies backed by shareholders or venture capital, so perhaps Castel will be prepared to play the long game. But even family companies need to be profitable - just ask the Wetz clan - and the pressure is on the Oddbins team to make a success of the new strategy.

Oddbins

31-33 Weir Road, Wimbledon,

London SW19 8UG

0208 944 4400

www.oddbins.com

Parent company: Castel Group

Current size of estate: 246 shops

Key personnel: managing director, Fabrice Bidault; head of buying, Emma Nichols; buyers, Julie Buckley and Claire Illingworth

Year founded: 1963

Number of employees: 807

Turnover: £122 million to Dec 31 2005

Profit/loss: £3 million loss to Dec 31 2005

Developments in 2006

Fabrice Bidault takes over as

managing director

Purchase of 45 Wine Cellar branches

Own-label red and white wines launched

Flat pricing structure replaces

high-low system.

Challenges for 2007

Extensions planned to own-label range

Price policy needs further explanation to consumers

Estate expansion ruled out




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