Analysis: Oddbins’ potential rescue plan

Can Oddbins follow Majestic’s lead?

Can Oddbins’ follow Majestic’s buoyant lead in asserting that it is ‘here to stay’?

Oddbins’ parent company European Food Brokers Ltd blamed its demise on the combined pressures of the uncertain economic outlook on the back of Brexit with its fluctuating currency, with soaring rents on many of its sites and the deterioration of the high street which all led to an “unsustainable, tough physical retail market”.

But given this was the reason EBFL gave for placing the retail business in administration in the first place, it begs the questions of what exactly has changed in the last four months to turn this situation around, as we’re no nearer to any certainty on Brexit and the high street is still as tough as ever.

However UK wine retail undoubtedly received a boost two weeks ago with the news that Majestic was in advanced sales talks with multiple buyers to sell the entire retail estate. A buoyant Majestic boss told db that the potential purchaser would be spending “a chunk of money” to boost the retail business, begging the questions that if Majestic is able to pull it off, will Oddbins be able to secure its future in a similar way?

That remains to be seen – after all, the Majestic deal still hasn’t gone through yet, despite the retailer cracking open the Champagne with its customers after announcing it was ‘here to stay.

There is also the fact that Oddbins had underlying financial problems that far exceeded Majestic’s challenges, and the reasons given for its demise appear to be somewhat disingenuous when compared to the administrators proposals as filed at Companies House.

These reveal that the underlying financial strain on the retail businesses was caused not by Brexit and the high street as stated (although they certaintly didn’t help), but by HRMC revoking the excise approvals of the parent company in February last year having deemed that two of its businesses – parent company and wholesale business European Food Brokers Limited (EFBL), who supplied Oddbins and Wine Cellar Trading as well as independent retailers and supermarkets, and its sister warehousing company, Whittalls Wine Merchants (WWM) –  were “not fit and proper persons to hold excise approvals because of the manner in which they conducted their duty suspended business”.

This ruling effectively meant the parent company lost its bonded warehouse and was forced to pay duty on all its stock, meaning it also could no longer buy in bulk, hindering it and its subsidiaries’ ability to to secure competitive pricing from suppliers, and putting a severe strain on cashflow. Trading under the new conditions became “unviable”, it said, as credit terms were slashed for the retail companies, who were forced to be less reliant on the parent company for stock, hitting trading revenue all round.

At the same time, the companies fell into rent and rates arrears and was unable to pay a £465,000 VAT bill, resulting in HMRC threatening to wind up the company, and landlords and local authorities threatening to take action. Staff payments were also said to have been in arrears.

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