High streets paved with gold

14 May, 2010

The fallout from First Quench’s collapse, as retail units trickle on to the market from administrator KPMG, continues to create exciting opportunities for established independent operators and entrepreneurial newcomers looking to snap up the best sites.

With around 130 former First Quench stores now re-opened by new operators or taken on by previous franchisees and managers, trade predictions suggest that up to 300 to 400 further viable sites will become available over the coming months. The rush to pick up the best ones on offer has been described as nothing short of a stampede.

This clearly represents an unrivalled opportunity, not least for suppliers which suffered the loss of Britain’s most prolific high street chain, to capitalise on and service a new channel for supply. However, as some new operators are discovering, many suppliers have been slow off the mark in terms of restructuring their offering to provide flexible minimum orders, fair credit terms and keen pricing. After all, this is the oxygen with which these budding businesses need to compete.

“This is the biggest opportunity to emerge in UK wine retailing in a generation, and if independent merchants don’t seize this opportunity, they are playing directly into the hands of the supermarkets,” says Toby Peirce, former Sussex County cricketer and, since 1995, owner of Quaff, a successful merchant in Hove.

“Of the 14,000 old First Quench stores that closed, there must be 300 to 400 that made decent money. But now there are whole swathes of towns without an operating wine shop where it must be a no-brainer for an independent merchant to take on one of these sites.” Peirce’s comments are rooted in experience. He recently took on the lease of an ex-Threshers site in a neighbouring?Brighton suburb. Early signs are that through juggling the fags and booze element of the old shop with some of the more pricey and eclectic wines, beers and spirits that Quaff typically offers, the punters are happy and coming back in droves.

Quaff, though, is well established, and its new ability to up orders has “made life easier”. But others are not finding it so easy to source appropriate suppliers, especially those without a proven track record of sales and established credit rating.

“It’s very difficult to establish yourself initially, other than relying on wholesalers and cash and carries such as Bookers, Parfetts and Costco. There is very

ittle guidance or advice,” says John Siddley, who recently opened the Drinks Cellar in an old First Quench site in Churchtown, Southport. “We have located independent suppliers for the fine wine end, but there is a gap – especially at the £5 and below level where we simply can’t compete with the brands on the multiples’ shelves because our size means we can’t get competitive prices.”?Siddley, who has a wealth of past experience in the brewing and on-trade sectors, suggests suppliers should take a longer-term view. “It’s great to be selling finer wines, but it’s the lower-priced stuff that drives footfall, and then it’s my job to persuade people to trade up to £5, £6, £9 wines and above,” he adds.

“This is where I can make my profit, as can the supplier, but neither of us can do this if entry-level wines make independents look expensive compared with the multiples.” Jay Patel, who recently opened the Wine Cellar in Chislehurst, highlights another difficulty. “Spirits and beers are less of an issue, but with wines a lot of suppliers have a minimum order of 10 boxes or more,” he says. “This is a large order for an independent – especially in the early days before you know what wines will be popular with customers.

I might be able to sell three or four bottles of a New Zealand Pinot Grigio each week to a regular customer who likes the wine, but if a supplier will only let me order 15 cases rather than five or less, then I can’t stock the wine.”?Patel singles out certain suppliers whose flexibility has helped enormously in the early days of establishing his business. These include Hatch Mansfield, which also “offers good credit terms, meaning I can order at the beginning of May and not pay until the end of June”.

Mark Calver, sales director of Hatch Mansfield, agrees that the increase of the new wave of independents, primarily rising out of the ashes of First Quench, represents a huge opportunity. “We have targeted these independents to work with, and have done some restructuring to our salesforce and operations to enable us to do so,” he says. “We realise that there may be a disproportionate cost in initially supporting new independents, but over time these stores will deliver good business and also be good for the UK trade.”?Calver is hugely optimistic that the number of what he calls “viable, quality independents, where wine is a predominant part of the business” can rise from its current level, not least on the back of further reinstatement of the better sites from the First Quench estates, “to 1,000 or more over the next two to three years”.

To this end, Hatch Mansfield has become far more flexible with its minimum case order, and allows greater flexibility of orders split between different wines to assist businesses with their set-up costs.

Stratford’s Wine Agencies, another supplier identified by Patel, is also aware of the potential opportunities arising, and is similarly targeting the new independents for business. “Stratford’s currently supplies 300 independent accounts, and we are geared up to the needs of supplying smaller-scale wholesalers and independent businesses,” says managing director Paul Stratford. “We do have a minimum delivery of 20 cases, but can go below with a surcharge, though the difficulty for any supplier is that we obviously don’t have much financial information or track record on these businesses.”?However, Stratford points out that companies like his can offer further benefits. “We have a whole range, including entry-level wines, that we have exclusively for independents, so they – and we – can compete against the well-known brands on the supermarket shelves.” It’s fair to say that many suppliers are only just beginning to realise the scale of the business opportunity that this new wave of independents could offer as it grows. Those gearing up to this channel, with the logistics and wines in place to serve the gap left in the market by First Quench’s demise, should stand to reap the benefits in the near future.

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