Steve Lewis: Majestic Wine chief drinks to resilience of retailer in downturn

Away from the sky-high rents of town centres, the wine warehouse chain has seen off its rivals and toasted success in the recession

James Thompson
Thursday 17 December 2009 01:00

Steve Lewis, the chief executive of Majestic Wine, has watched the British public quaff their way through three recessions, but says their behaviour has been different this time around. "In the previous recessions, people really hunkered down and went into their shells. But this time people want value for money – they are not just price conscious they are value conscious," he says.

Given that the wine warehouse warehouse chain toasted a 5.4 per cent increase in underlying retail sales for the half-year to 28 September, the retailer seems to have done a good job of sating consumers' desire for quality wine, despite cut-throat competition from the likes of Tesco, Asda and Sainsbury's.

The other big change compared to 1980s is the British "public's love affair with wine" and eating at home, says Mr Lewis, who himself drinks three to four times a week and names Rioja Prado Enea Muga as his favourite tipple.

"In the last decade, we have seen a huge increase in the interest in food and wine. People have become more liberal in trying things," he adds. For instance, Majestic's best-seller at the moment is New Zealand Sauvignon Blanc and other New World wines from Chile and Argentina are growing robustly. French wine still accounts for 37 per cent of its total sales, but it is declining as consumers' tastes change.

Despite this, the early part of the recession took its toll on Majestic, which has 153 stores in the UK and three in France. Mr Lewis, who took the helm in August 2008, just weeks before Lehman Brothers collapsed and triggered the beginning of the credit crunch, can consider himself unlucky with the timing of landing the job.

In the year to March 30, Majestic's profits tumbled by 56 per cent, to £7.4m, as its French business was hit by a sharp fall in "booze cruises" to its outlets in northern France and sales of champagne to corporate clients in the UK tanked.

Since then, Majestic has raised its glass to an improved performance and its latest half-year profits jumped by nine per cent to £6.1m, proving again the resilience of its business model. The wine specialist has always tried to differentiate itself on customer service and the knowledge of its staff. (It hires, almost entirely, graduates.) Majestic also chooses locations that are not on the high street, where troubled off-licences pay high rents and fight cheek-to-jowl with the supermarkets on price. Instead, Majestic opts for sites, such as former petrol forecourts, which have ample parking and are near busy roads.

The recent collapse of Threshers owner First Quench Retail, which had more than 1,200 stores including Wine Rack, sheds some light on the foresight of this strategy. For the record, Majestic is not in the market for any of FQR's former stores. "It is very difficult to make it work as an off-licence operator on the high street," says Mr Lewis.

However, retailers have to move with the times and the recession convinced Majestic to change its long-held minimum-purchase policy to six bottles from 12 in September.

While the retailer has also stepped up its staff training, marketing and online offers during the downturn, as well as adding a two-hour free introductory course to wine for customers, lowering its minimum purchase threshold is the most significant change.

"The six-bottle [policy] makes Majestic more accessible. It is what customers wanted us to do so I think that is a good principle in life," says Mr Lewis, who exudes an understated passion for wine, as well as the retailer.

The early signs are encouraging. While the new policy has led to a "small reduction" in its average transaction price, this has been more than compensated by increased volumes, he says. The average customer now buys eight bottles.

The change also partially reflects the battle Majestic faces against the supermarkets, which have a whopping 70 per cent of the off-trade (non-pub and hotel) market, compared with Majestic's 3.3 per cent.

However, Majestic's store in North Finchley, London, where he spoke to The Independent, epitomises its niche in the market and how it competes with the grocers. It is a "classic" Majestic store, says Mr Lewis, at about 3,300 square feet, on the site of a former car showroom, and on a major arterial road. It is also about a five-minute walk to a Waitrose and just over ten minutes to a Tesco. "I like being near supermarkets as they bring footfall to the store. People can buy their food from them and wine from us," says Mr Lewis.

Given the yawning gap on price between Majestic and the big grocers, the retailer also has to differentiate itself on customer service and the knowledge of its staff. The average price of a bottle of wine at Majestic is £6.41, compared with £4.39 at the supermarkets, says Mr Lewis.

Majestic puts all staff through an induction programme, as well as a knowledge and customer service skills course. Trainee managers also go on a Wine and Spirits Education Trust advanced certificate course and many also take the WSET diploma over two years. It typically takes a trainee 18 months to become an assistant store manager, and between two and three years to become a manager.

Mr Lewis, who joined Majestic in 1985 from University College London, where he studied modern history, is a prime example of the retailer's career progression ladder. He was chief operating officer before taking the helm last year after the retirement of his long-standing former boss Tim How.

So what did he learn from Mr How, Majestic's chief executive for 19 years? "His sheer enthusiasm and attention to detail. He also always picked good people and gave them lots of freedom," he says.

However, Mr Lewis is obviously his own man and has plenty of views on the Government's influence on the sector. On the reduction in value added tax (VAT) to 15 per cent in November 2008, for instance, he says: "I don't think it has made a discernible difference on sales."

Majestic has already said that it will hold off increasing prices in its stores until the end of January, when the Government puts VAT back up to 17.5 per cent on 1 January 2010. But he says the three hikes in beer and wine duty in the last year have been "punitive".

Clearly, Mr Lewis has big ambitions for Majestic and has laid out plans to grow to "at least" 250 stores in the UK. Of its current 153 outlets, the retailer now has a dedicated fine wine display in 66 stores, which is just one of many ways that Majestic has responded to changing consumer tastes recently.

Mr Lewis says: "If you don't have points of differentiation, people will migrate to the best retailers and some of the best retailers are supermarkets."

Steve Lewis: Family, footie and wine

* Joined Majestic in 1985 as a graduate trainee manager and became retail director in 1991. In 2006, he was promoted to chief operating officer, and chief executive in August 2008.

* Lives in London during the week and Hampshire at the weekend. Married with three daughters.

* His interests are spending time with family and being in the countryside, Arsenal, and food and wine. "I am still hoping that Arsenal will finish top of the Premier League. I think Arsène Wenger is a fantastic manager. He is the professor."

* Educated at Bournemouth Grammar School and then went to University College London, where he studied modern history.

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