Analysis: Majestic’s shock change of tack

The strategy is contingent on the viability of the US market working out for them, will this gamble will pay off?

One of the key points made by Peel Hunt’s analyst Pritchard is that the move to realise Naked’s potential relies heavily on the international market, in particular continuation of growth from the US.

To date, the company has highlighted good growth from both the US and Australia markets – in November, it revealed US growth had risen by 19.3% to account for around half of the total Naked business, thereby contributing around 15% of sales to the wider Majestic Group. At the time, group chief financial officer James Crawford said it could see the US as the growth driver of the Naked business and “in time, of the group”.

“When we look at addressable markets, the US has a market around eight times the size of the UK that we can invest into and with very attractive economics as well,” he said in November.

Which bodes well for the new business, if they can pull it off.

“The USA is the big thing, the viable of the whole strategy is contingent on the states working for them,” Pritchard told db. “If that works it will be very interesting for them, if it doesn’t, well, it will be interesting for them in the other direction.”

He points out that after a couple of false starts they seem to have got the formula right.

“This time around they seem to be getting the quality of consumer they’re after,” he said.

But as Naked Wines builds its international business, another name will disappear from the UK high street, leaving the UK consumer with a bit less choice.

As Liberium analyst Brown points out, “There’s no better place than a Majestic wine store to experience wine, it’s a great shopping environment, but a very different customer base to Naked Wine.”

But maybe not for much longer.

 

For our exclusive interview with CEO Rowan Gormley, following the publication of the analysis, please see here

9 Responses to “Analysis: Majestic’s shock change of tack”

  1. Trundlesome1 says:

    What a contrast to when I worked there in the late 90s, early 2000s. A fast growing business under Tim How that seemingly could do no wrong. He always said to us quite openly that Majestic would be in trouble if the supermarkets became more competitive. It is a pincer movement. Aldi from one side and Waitrose and M&S from the other.

  2. Charles Crawfurd says:

    In my humble opinion a very strange decision to dump the Majestic name which has a far better image than Naked ever will. OK Majestic needed to cull the number of stores etc to meet modern trends and lower costs but that could have been done and made it much more of an on line retailer that could challenge the wine society et al. I am sure they will be the winners in gaining those top end customers rather than Naked. Tim How if he is still around must see this as a very sad day.

  3. KOP says:

    I’m not surprised at all at what’s happened – looking at it now as a former supplier and shareholder, the current management teams handling of the business is about as good as our Prime Minister’s feeble attempt to manage brexit. Time for a seasoned Professional to step in and clear the decks – DAN J where are you ?

  4. At what cost Naked Wine is growing? By giving wine away? Once the cash from Majestic will finish, Naked Wine will soon disappear. If Naked Wine worked when it started due to their marketing, now they are forced to give wine away to get new subscribers and still, are struggling. Majestic wine is fuelling Naked Wine false growth.

  5. And lets not forget that Naked Wine was the creature of the CEO, Majestic was already there. A previous comment mentioned Brexit, the CEO choice is like our PM wanting to pass her deal despite not having the support, so is the CEO. The two businesses together cant survive at least under that management, so the one that will go is majestic. If there was another CEO would have probably chosen Naked Wines

  6. MD says:

    The writing has been on the wall for sometime now for multiple retail specialists…that’s why Majestic is the last one! They simply cannot compete with the supermarkets. Shedding some stores and re-branding some as Naked Wine stores is not a bad idea but it will only be a temporary measure. Maybe they should consider a joint venture with a major coffee brand to increase footfall?

  7. Peter Hanna says:

    It’s sad to see Majestic go. It is another illustration of the difficulties of working on low margins. I’m afraid retailing wines, without other product range to support the low margin cannot work. We’ve seen the loss of Oddbins/Threshers/Vic. Wines and now Majestic. The model of being a National wine retailer is bust. It’s bad news for wine lovers, the Supermarkets have defeated the specialists, and to pile more misery on the wine lover is the news the Supermarkets are moving more to own label and presumably importing bulk wine and UK bottling. Being able to wander around the store and browse the wine range with the possibility to taste before buying will be a thing of the past. Sad news

    • Hugh Sturges says:

      Hi Peter

      There are always the independents, sourcing and supplying interesting wines, often owned by passionate wine lovers and most offering tastings on a regular basis. Support your local High Street.

  8. Tim Waters says:

    The model of being a national retailer in any field is bust. All costs are rocketing – rents, business rates, (minimum) wages and, more importantly, the growing commoditisation of products in light of ever-widening availability makes convenience a bigger deciding factor as to how and where to shop than quality or service. As a result, specialist retailers, as in those with focused product ranges, need an awful lot more to differentiate themselves and create a compelling reason for customer loyalty than the product itself. In the ‘old days’ enthusiastic and knowledgable staff’ kept retailers like Oddbins and Majestic punching above their weight – but it is no longer the ‘old days’ – even online retailers like Naked Wines are fast passing their sell-by dates. Some new ideas, please !

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