A vintage year for independent retailing

21 January, 2011

When the first CDs were pressed, it heralded the death of vinyl. Who would ever again want the aggravation of bulky records, prone to scratching and warping and which needed turning over after 20 minutes, in the face of such digital convenience??There’s a parallel to be drawn with drinks retailing – especially at the specialist end of the market. The obituaries for independent off-licences have been written ever since supermarkets first started gaining alcohol licences. What kind of consumer would realistically bother to make a separate journey to a drinks shop when they could pick up everything they were ever likely to need with their weekly groceries??Yet, according to BPI figures, vinyl sales have been gently rising for the past three years. And while the format only accounts for a tiny proportion of album sales, it is increasingly treasured by traditionalists as well as DJs who prefer the purer, warmer sound quality, and who form emotional bonds with the packaging.

Independent wine merchants have done much the same job in the drinks world. Their numbers have witnessed a significant increase in recent years – especially in recession-ravaged 2010. For some wine drinkers, visiting an independent shop is an almost spiritual experience, worlds away from the walls of wine lit by fluorescent lights in the multiple grocers.

The demise of First Quench at the end of 2009 paved the way for what may one day be regarded as the most explosive year in history for independent wine shops. Around 100 opened their doors for the first time last year, most as start-ups, others as extensions of existing businesses. This unprecedented tidal wave of launches brought the numbers up to around 600 stores.

This needs to be put into context. Nielsen calculates there are around 24,000 independent off-licences – many little more than dispensaries for white cider and lager four-packs. So even within the independent niche, the top-end wine merchants are rather marginalised in terms of numbers.

Neither can they claim a large chunk of the wine market. Independents account for just 3% of off-trade wine sales, according to recent Nielsen data, compared with 6% of beer and 5% of spirits. Yet the arrival of these operators has sparked an enthusiastic response from suppliers who, like consumers, are both excited and relieved by the extra options such shops offer them.

Much has been written about the fact so few First Quench shops are still operating as off-licences, but this misses two key points. Firstly, the stores were – and still are – being sold on the open market.

Off-licence owners did not get automatic priority over, say, the owners of pizza delivery companies or mobile phone retailers, or anyone else who felt like bidding for vacant retail space. Simply totting up the numbers in this way tells us little about the health of the specialist drinks retailing market.

Secondly, many First Quench stores were failing because they were in locations where the rent was too high for the turnover they were able to achieve – a legacy of the sale- and-leaseback deal the company struck with landlords. These were toxic sites as far as other drinks retailers were concerned. This doesn’t apply to all First Quench branches – company insiders knew exactly which addresses were worth investing in, and which ones were best left alone – and many former Threshers, Bottoms Up and Wine Rack stores are now thriving in the hands of independent operators.

Christie & Co, which handled sales of First Quench stores to independent buyers, insists it was encouraged by the level of interest shown in the estate by small business people, which, it says, illustrates a fundamental faith in the sector generally.

Head of retail Tony Evans says buyers have taken a “flexible” approach, frequently incorporating a food element into their offer. This might mean a fully-fledged convenience store, particularly in neighbourhood locations, or a delicatessen in a more well-heeled area.

For independent off-licences in the middle ground of drinks retailing – territory once occupied by the generalist Threshers – life doesn’t get any easier.

Nailsworth Wine & Spirits in Glouc­estershire opened eight months ago in a former Threshers store. “The details were emailed to me by Christie & Co,” says owner Jazz Mann, who has previous experience of running drinks shops. “I had a look at the figures and thought I’d give it a go.

“But it’s been really hard. I didn’t realise how many loss-leaders the supermarkets did. I’ve tried to put in a massive selection of different things supermarkets tend not to do. It tells you something when I spend more time in supermarkets buying my stock than in the cash and carry.”?Alarmingly, the shop’s neighbours include Tesco, Morrisons, the Co-op and a specialist wine merchant. At Christmas, Mann took advantage of a two-for-£25 deal on Jack Daniel’s in the supermarkets which saved him £15 on the case price from his regular wholesaler.

Now that the promotion has finished, consumers are coming to Mann’s shop for the whiskey he has hoarded, and is able to offer more cheaply than the current grocery price.

He looks for similar deals on beers and wines, but finds it hard to generate sales on canned lagers.

“We would like to put in some more wines,” Mann says. “I get visits from a lot of wine suppliers but they’re all catering for the on-trade and their prices are too steep – the on-trade is working on bigger margins. My prices have got to be cheap.”?Is there a future for shops like Mann’s? “It depends on the area,” he says. “Nailsworth is quite affluent. I think there is a future, but in other areas where you haven’t got the money I think they’re going to be finished. I’m a bit nervous, to be honest.”?

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