Conviviality Retail on course to meet ambitious expansion target as profits grow on the back of soaring Prosecco and ale sales

01 February, 2016

Conviviality Retail is on course to meet its expansion target of opening 50 new Bargain Booze and Wine Rack store in 2015-16 financial year.

The group is keen to expand Bargain Booze out of its northern heartland into the lucrative southeast market, while also taking Wine Rack to affluent pockets of the north, and said the new openings of a Bargain Booze store in London’s Bermondsey area and a Wine Rack in Wilmslow, Cheshire, are evidence of this.

Chief executive Diana Hunter said the firm will have opened 50 stores, if not more, by the end of the full financial year, and said it would be similarly ambitious on its expansion drive the following year.

The number of stores owned by ‘multisite franchisees’ – those that own two or more shops – has grown 7.4% to 276, versus 257 this time last year.

Sixteen new franchisees have joined the group, resulting in 19 stores opening in the first half, compared to eight in the prior year. Closures have reduced by 49% with 18 closures versus 35 in the comparable period. 

It will also open another large BB’s Warehouse superstore in the south before the year ends.

Sales are up 0.8% at Conviviality Retail thanks to its continued expansion, while like-for-like sales – which only take into account stores that were operating a year ago – were down 1.3%.

However, last year they were down 1.7% and Hunter told OLN: “Those like-for-like sales have improved over the first half and I am incredibly positive about it. In the context of a very difficult and challenging market, that’s a fantastic result for us.

“As franchisees focus on their own like-for-like figures they are improving, and we are sharing best practice, highlighting some that are doing well and showing those that aren’t doing so well how they can grow.”

Average franchisee has been maintained, and the retail business saw an EBITDA of £4.5 million, the same figure seen a year ago.

Hunter said: “These strong results reflect the unique business and the partnership we have got together with franchisees. It really pleases me that these results are showing that the strategy we started on three years ago was the right one.”

In October the firm bought Matthew Clark and With the stroke of a pen – not to mention a £200 million cheque – Conviviality was transformed from a buying, distribution and marketing operation for its franchisees to the biggest specialist drinks wholesaler in the UK with a truly national reach across both off- and on-trade.

Anyone who reasoned that Hunter’s first major acquisition, of Wine Rack in 2013, signalled an intent to nail the company’s colours firmly to the take-home mast has been forced to reconsider.

The business has been renamed Conviviality divided in two – Conviviality Retail and Matthew Clark – with Hunter the chief executive and a managing director for each arm of the business.

David Robinson is the new managing director of Conviviality Retail, which focuses on the company’s franchise store operations in the off-licence and convenience sector.

He joins the business from Home Retail Group, where he was most recently chief operating officer of Argos and a member of the group’s executive board.

Hunter said that rather than worrying about the group neglecting its retail offering, franchisees were very positive about the acquisition of Matthew Clark as it signified the group’s ambition, increased its buying power and offered them access to Matthew Clark ranges.

Overall group revenues rose 38% to £252 million for the 27 weeks to November, 2015. EBITDA was up 43% to £6.5m, while group profit before tax and exceptionals was up 2.8 per cent. Gross margins climbed 0.5%.  

The business went from holding net cash of £1.2m to net debt of £98.5m as a result of the Matthew Clark takeover. Conviviality said its integration of the business was “ahead of plan”.

The retail business enjoyed growth over Christmas, with like-for-like retail sales up 1.1% in the two weeks to January 3, 2016. Wine Rack was the driver of this, with sales up 11.1%.

Champagne and sparkling wine was up 31%, with four bottles of Prosecco sold every minute, while premium bottled ale grew 300% and cases of craft ale rose 218%.

Hunter said: “The UK retail environment continues to be highly competitive.  The strategy to continue to strengthen our fascias and brands through innovative marketing and service extensions has been key. The Bargain Booze App continues to grow its user base with 46,000 downloads and 82,000 redemptions.  The most popular offers have been Jack Daniels and Strongbow Cider, with redemptions of 2,793 and 1,256 respectively. 

“In April 2015, click and collect was piloted, with a gradual roll out to 165 stores.  This development phase has been a very informative process and by April 2016, a further 1,000 lines will be added to the offer. 

“During the summer, we undertook an advertising campaign highlighting Bargain Booze’s comparative pricing to Aldi and Lidl and this was well received by both our suppliers and customers and has ensured greater brand recognition. 

“This activity has been followed during the autumn with a targeted campaign to demonstrate the value and choice in our franchisees local areas, enabling them to compete more effectively in their local markets.

“The pipeline for new stores is at a three year high with 162 potential sites under review and we are targeting a net increase of 50 stores by the year end, ensuring a strong start to the new financial year. 

“The Retail business remains positive about acquisitions although it is important that any opportunities are in the right locations to complement the existing brands and franchise business.

“The strategy to grow our Wine Rack business is showing positive results with like for like performance showing consistent improvement through the year at 5.3% and Christmas peak weeks at 11.1%. 

“The try before you buy any wine offer has had positive response from customers and their recognition of the specialism in wine and spirits has been demonstrated in the sales increase during the peak weeks of 10% and 21% respectively.

“Looking to the year ahead, trading is in line with expectations, we have a strong pipeline of Franchisee openings in our Retail business as well as a strong pipeline of customers in the Matthew Clark business. 

“Our focus will be to continue to provide our franchisees and our on-trade customers with exceptional choice and value from the ranges we offer, with excellent service through our people and supply chain.  We have exciting plans for the year ahead as well as building on our excellent progress already underway. 

“We will continue to invest in our business, our Franchisees and to expand in both our heartland and further afield. 

“With Matthew Clark we now have a firm foundation in the expansive on-trade market from which to build on, and our success over the important Christmas period gives us confidence that the second half will deliver further profitable progress.

“The new team members have been recruited and are working well with our existing talent to grow our business and continue to deliver our integration which is significantly ahead of plan, benefitting FY17 financial year onwards.”

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