Non, je ne regrette rien

03 September, 2010

The UK wine trade has not been upset, or indeed surprised, by Castel Frères’ decision to sell off all the Nicolas stores outside the M25 and focus on London. There was something inevitable about the retrenchment into the capital, after years of persisting with the idea that a national chain of off-licences could get away with a French-only range.

Pierre Castel, the 83-year-old patriarch who heads up the French family business, is said to hate the UK. That may be putting it a little strongly, but it’s true Britain has not been a happy hunting ground. He is thought to have paid over the odds for the first Nicolas stores in 1988, and famously bid an eye-?watering £57 million for Oddbins in 2001.

It’s not clear how much of that fee was actually paid – there were some irregularities found in the accounts that altered Castel’s valuation – but what is certain is Oddbins did not repay whatever figure the family forked out for it. Only once did it turn a profit under Castel’s stewardship – with losses peaking at £10.4 million in 2007.

Misunderstood marketWhile Oddbins was suffering, many of its prime branches were unceremoniously rebranded as Nicolas, a policy which lost Castel most of whatever respect still remained for it on these shores, at least as a retailer.

Now, as the company licks its wounds and concentrates on its London niche, it’s a good time to take stock of Castel’s Great British Adventure. Was it the architect of its own misfortunes, or simply at the mercy of a retail environment which saw off Unwins, Wine Cellar and First Quench??“I don’t think it has ever understood the British market,” insists one senior trade figure. “It’s a hugely successful company in France, but has always tried to implement a model in the UK that it has in France. There’s this inability to try and adapt to the market.”?In Castel’s defence, the Oddbins business was “rotten to the core” when it was acquired, he adds. “It survived on the strength of its former glory and the huge affection the press had for it, but I think it belonged to a different era.

“It needed a massive injection of marketing genius and what it was given was French retail discipline and stock control, which is not necessarily a bad thing, but it shouldn’t have been the top priority.

“Pierre Castel was on the expansion path and talking about 400 stores. I think Oddbins was seen as a route to market, but it didn’t work for all sorts of reasons. It burnt the group really badly and Castel is at a stage in his life where he can’t be bothered with things that don’t work.”?Another senior source adds: “It had a total lack of knowledge of the UK retail scene, filling its stores with mediocre Castel-sourced wines; there was an invasion of arrogant French managers and it even moved all the buying decisions to Paris. It was a recipe for failure.”?Once that failure became apparent to Castel itself, rumours began circulating of a sell-off and stores were rapidly closed or rebadged.

Some wine critics saw this as a kind of assassination attempt on the beloved Oddbins brand, but a former insider does not believe this to be true.

“When Castel was trying to kill the Oddbins brand, it was out of desperation,” he says. “There was never any malicious intent. If the original plan had worked you would have seen 400 or 500 Oddbins stores and Nicolas would have stayed very small. It’s not a colonialist in that respect.”??Too little, too lateHe believes “the Oddbins debacle has left a very deep impression within the group, which was already quite xenophobic and not especially pro-British”.

Were the Castels given the right advice about the UK market? “A lot of that was too little, too late. It’s a big company. Pierre Castel has got some human warmth and a very good business head. He’s a benign dictator. He will say ‘yes’ or ‘no’. A lot of people are devoted to him.

“Nicolas is not a big project any more in the UK. You have that in family companies: the focus shifts, it depends on people and personalities. In a PLC this wouldn’t happen.

“The Nicolas business model was not that of a British specialist wine retailer. It’s the business model of a company which outsources everything to Paris. The buying was done in France and as much of the logistics as possible. It gets a minimum of stock every week and that’s dispatched straight into the stores. It increases logistical costs quite a lot and the further you have to go outside London  the more expensive it becomes.”?Faced with such costs, and soaring rents, Nicolas now accepts that its future in the UK lies in London, where some of its stores are thought to be performing strongly.

Eudes Morgan, Nicholas UK’s managing director, admits: “From an operational point of view, it’s quite costly to operate a network of shops scattered around the country. The small profit made is then spent on administrative and logistical costs.

“Strategically, we realised the prospect of expansion was limited outside the M25 without changing our positioning as a French wine specialist – the same concept which has made Nicolas successful in London for the past 20 years. We do not regret the experience of the past three years.

“We have learned some valuable lessons and it has demonstrated we belong in Greater London.”

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