Retail profile: Nicolas UK

Stocking wines from its native France almost exclusively, Nicolas UK is catering to a niche market. There’s no real scope for expansion, but that’s perfectly okay, the off-licence chain’s MD Eudes Morgan tells Graham Holter.

As business ideas go, a national off-licence chain specialising in French wine takes some selling. Life is tricky enough for chains with the luxury of scouring the world for their products, let alone one which limits itself to a category in such well-documented decline.

Nicolas UK does offer a small selection of international wines (Swiss Chasselas, anybody?) but they’re really only there
for their curiosity factor.

This most misunderstood of chains still derives 98% of its wine sales from French wines, and that’s the way it’s likely to stay under the stewardship of its Paris-based parent, the family-owned Castel.

Revered it might be in France, but Nicolas is hardly talked about in the UK. There was a flurry of negative publicity when it began seizing some of Oddbins’ best sites, in the days when the two chains were part of the same stable. But once Castel had given up on Oddbins, one of the drinks industry’s most enduring soap operas was at an end and Nicolas returned to the quiet life.

There is a reticence about engaging with the media, which was also a characteristic of Oddbins throughout its Castel years. British critics have rarely been kind to Castel’s wines and are generally even more scathing about its retailing philosophy.

This stand-off is a shame, because Eudes Morgan, Nicolas UK’s charismatic managing director, makes a hopeless pantomime villain. He’s been in the UK for seven years and has an English wife, though they speak French at home and he apologises, unnecessarily, for his accent.

He talks enthusiastically about the chain’s UK fortunes, but never resorts to hyperbole. He acknowledges, unprompted, the controversies of the Oddbins saga, though he does not want to talk about the past, or his employer.

“I don’t especially comment about Castel: it’s not my job, simple as that,” he says. “I am managing director of Nicolas UK – that’s tough enough.”

Around the UK

Nicolas UK now has 73 stores, having closed a small number of unprofitable sites last year. Most of the remaining estate is in the London area, including a wine bar at Canary Wharf, but there are now four stores in Scotland and others in cities including Manchester, Bristol and Cardiff.

Morgan is not at liberty to divulge figures – the Nicolas accounts are, in any case, complicated by the terms of the divorce with Oddbins – but he reports that “we are positive on trade”. He adds: “We have gained customers, not massively, but we have gained every year and that’s important. We have good success in Scotland and the north. The west is more difficult. In the south some are very good.

“We continue with the sale of shops: maybe two or three are still unprofitable, and to be honest we are not really sure we can expand Nicolas – it’s a niche market, we know that. It’s doing well in London but the French wine market is more difficult outside.”

Would it make sense to retrench into the M25 area, and abandon ambitions of being a national player? “Yes and no. On paper it seems absolutely logical,” Morgan admits. “Some stores we knew had no future for us and that’s why we disposed of them last year.

“Some, like Cardiff, we progress, we continue to improve. Our business is more in London but some shops [elsewhere] have a very big turnover – we have George Street in Edinburgh, and Deansgate is fantastic in Manchester.” Indeed the Manchester store has the 10th largest turnover in the estate.

“The problem with this kind of shop is not really the turnover, it’s rent, inside London and outside London too. In George Street we’ve just had a 30% increase on the rent. If we’re leaving this kind of position it’s because of the rent, and that’s a shame.”

Nicolas UK moved to smaller headquarters last year, in Richmond, and has a head office complement of just 15. The buying team remains in France, though Morgan says there are “maybe 100 lines specific to the UK, especially white wines”.

But Nicolas UK does not carry more non-French wines than its stores in France. “We want to stay in this niche market – which is becoming more and more niche,” says Morgan, when asked about Nicolas’s loyalty to French wines. “It’s quite interesting for us: the more French wine declines in the UK, the more it helps us, because we are more and more specialist. It’s quite bizarre, but it’s logical. The supermarkets don’t list so much French wine but people still love French wine. Our competitors like Oddbins and Majestic are doing well on French wine too.”

Going against national trends worked well enough 30 years ago, Morgan observes, when a swashbuckling Oddbins threw its weight behind Australian wines. Critics might argue that the Nicolas policy is more about conservatism than an attempt to be radical, but Morgan insists consumers can make more interesting discoveries in his shops than in the multiple grocers.

Although branches are obliged to take certain lines, like the entry-level Petites Recoltes, and Champagne Nicolas, managers can tailor the rest of the range from a central list of 1,200 products. Spirits are channelled through Gordon & McPhail; Morgan is proud of the range of 50 malts, which perhaps surprisingly eclipses the Cognac and Armagnac selection.

Castel has eight châteaux, and inevitably their wines are available at Nicolas. The company also bottles some of the third-party wines on sale in branches, but Morgan dismisses the idea that Castel floods its UK stores with its own products – its wines are generally more suited to hypermarkets, he points out. “Of course with Petite Recoltes it’s Castel bottling, that makes sense, but it’s our buyer who chooses. If you don’t like the wine you can criticise our buyer.”

Service ethos

It’s often noted that independent wine merchants offer a level of service that chains sometimes struggle to match, because they have a personal stake in the business. How does Nicolas keep its people engaged?

“Our staff need to be really motivated, because of course we are not especially cheap,” says Morgan. “Service and advice are very important. They understand what we’re doing; we discuss with them what we want to achieve.

“They’re really involved in our strategy and what we’re doing. We have a lot of communication with them. Sometimes they criticise my decisions, but we discuss and I explain why. They have commissions so they fight for the big sell.” The branches have traditionally attracted French employees but “more and more English people are coming to work in Nicolas”.

Morgan reports to his own boss every three months. He praises Pierre Castel’s decision making: “I see one guy, the boss. If he says yes, it’s yes, and if he says no, it’s no, and that’s fantastic. The answer is straighter. Sometimes it’s not the answer you were waiting for, but that’s life. I explain what I feel about the market, what we need to do. He has a fantastic logic. With Oddbins we made some mistakes, we know that, which we’ve tried not to repeat with Nicolas.”

Relations with the press remain a little prickly, and Morgan believes he will “have to wait a few years for people to really forget the link” with the Oddbins situation. Last year’s press session at the Nicolas wine fair in London was poorly attended by journalists, which must have been embarrassing given that 40 suppliers had turned up. The successful consumer tasting was attended by 1,500 customers over two days, and will be repeated twice this year.

Morgan may be too modest to realise that a dedicated press tasting, over a full day, would almost certainly draw a lot of journalistic interest. He betrays no bitterness towards the chain’s critics. “I can understand; I’m not stupid,” he says. “They have a bad image of Nicolas and say ‘I will not find a good wine’.”

But neither is he actively courting their favour. “Today we have plenty of work to do with the customers and with the staff, and that’s more my focus, to be honest.”

Uncertain future

It’s hard to see exactly where Nicolas goes next. Morgan is dubious about taking the brand online in a serious way; there is no warehouse to cope with logistics, and he’s nervous about undercutting the service offered by branches. He appears to rule out an estate expansion, and the wine bar concept has stalled because of escalating rents.

What will the future hold? “I don’t know, to be honest,” is Morgan’s frank answer. “We try to continue to improve what we have today. We will improve our web presence, we will continue with our own shops and see what happens.”

But there is unlikely to be much of an overhaul of the central Nicolas proposition. “It’s part of France,” he says. “Customers coming into a Nicolas are coming into France. It’s a French shop. It’s not complicated. And that’s enough.

“I know you may say it’s French arrogance, but France is still magic; people love it. Maybe not the French, but France. If they go into the shop they find France and plenty of wine they don’t find anywhere else. That’s what we try to achieve.

“We have I think a fantastic range – I know some parts of the press say no, but I think so. It’s not French wines as the English market represents. We are far, far away from the French wine in supermarkets,” he says. “Maybe that’s why some wine writers don’t like our range. But the customer likes it because these are the wines they find when they go to France.

“That’s why there is not space for 500 Nicolas outlets in this country. Or maybe we change completely, change our range for British tastes, but today we believe it’s a mistake to do that. Of course,” he repeats, “it is a niche market."

Graham Holter, April 2010