Reaching terra firma

17 October, 2008

It's been 10 years since the Thresher-Victoria Wine merger. Graham Holter looks at how

times have change


When Thresher and Victoria Wine pooled their resources in August

1998 to create a new business called First Quench, there was no shortage of confidence going around.

"This is a genuine merger, bringing together strengths and learning of both parties in a new estate with around 3,000 stores, 20,000 people and some 13% of the take-home market," declared marketing director Ralph Hayward, six months after the deal had completed.

"We now have the muscle to take on anybody and win. Previously, the high street specialist retailer against the multiple grocer was a bit of a mismatch. Not any more.

"I can assure everyone that the future of the specialist retailer and those who supply them is assured. Our new estate can only get better and stronger as the cultures merge."

Still standing

Let's start on a positive note. First Quench (since renamed Thresher) is still with us, which is actually no small achievement given the tough trading conditions faced by the multiple specialists in the past decade. But the estate is now around half of what it started out as - even accounting for Thresher's acquisition of former Unwins stores - and employee numbers have slimmed down to 12,000.

In 1998, First Quench's 13% market share was almost equal to that of Tesco, which claimed 14%. Today, the supermarket giant is up to 34%, or thereabouts, while the multiple specialists have retreated, battered not only by the grocers but the internet, independent wine merchants

and the advance of Majestic.

Thresher has kept itself busy, not just with integrating and rationalising what started out as the biggest retail estate in Europe, but innovating, too. Threshers+Food and the purchase of the Leaping

Salmon business was a bold move, but ultimately one which proved a costly distraction. Three-for-two remains an eye-catching deal, but fails to take account of the

Thresher customers who prefer to buy single bottles.

More recently, Thresher has finally started breathing life into one of its most lucrative assets, Wine Rack, and the launch of The Local gives the chain a presence in the convenience-led end of the market. Exclusive-label drinks have been launched, franchising abandoned

and freeholds sold off.

Nobody could accuse Thresher's owners and directors of lacking energy or an appetite for change, but with hindsight they missed some opportunities which might, from a 2008 perspective, seem rather obvious.

Take warehouse sites. Thresher had launched the Booze Barn concept in 1996, more as a way of competing with Calais than Majestic, but had given up on the idea by the time of the merger. Victoria Wine, meanwhile, was experimenting with a rival concept called Martha's Vineyard which got as far as four branches. First Quench initially seemed keen on the idea, hinting at an estate size of 50, but had soon torn up its plans. Critics said the range available was not appreciably different to that on offer in a standard Victoria Wine, while directors blamed the difficulty in finding suitable sites.

The irony is that, when First Quench was created, Majestic had just 75 branches. By the end of this year, it will have nearly 170. It's often observed that the competition seemed to give Majestic a clear run at this end of the market, and if anyone was in a position to challenge it, it

was First Quench - which instead tried to compete in high street locations with limited parking.

Missing a trick?

Another curiosity is First Quench's lack of ambition with internet sales. This is all the more confusing as the company was well-placed to take advantage of the web: Thresher had its Drinks Direct gift service and Wine Rack Direct home -delivery brand; Victoria Wine had Post Haste and Cellars Direct.

The retail site was abandoned with alarming speed as Nomura looked to cut costs, when arguably it should have been investing. These days, Thresher has a great website but it can't sell you wine - despite the fact the online drinks market is now worth upwards of 700 million.

First Quench/Thresher hits its 10th birthday with a clearer vision of its own identity and a more stable structure than it has enjoyed for some time. That gives it some kind of platform, but in a sense it also removes excuses and hiding places. With no assets left to sell (except its name and its inventory), Thresher has to hope that its operating structure, its chosen store formats and its carefully honed ranges

will be sufficient to keep the business profitable.

Will it ever have, as Ralph Hayward predicted in 1999, "the muscle to take on anyone and win"? Ask Tesco, and ask Majestic. But then nobody really believed the bombast of the early years: the Thresher/Victoria Wine deal was essentially a defensive tactic, more about safety in numbers than market domination.

Ten years on, we have a clearer idea of what Thresher wants to be. But perhaps not a definite idea of where it's really going.




First Quench created from Whitbread and Allied Domecq estates

1999 Allied sells 50% stake to Punch

2000 Nomura buys business, which makes 28 million loss, for reported 225 million

2001 Terra Firma, led by Guy Hands, takes control from Nomura; David Williams named chief executive. Company is profitable thanks to "operational efficiencies"

2003 Origin wines launched.

Company name changes to

Thresher Group

2004 Roger Whiteside replaces

David Williams

2005 Two-for-three promotion launches; 200 Unwins stores bought; The Local launches

2007 Terra Firma sells; Vision Capital takes control. Yvonne Rankin replaces Roger Whiteside.

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