Ambitious plans for Vagabond expansion

Stephen Finch plans to turn Vagabond into an international chain after securing a £3.5 million injection of growth capital from private equity investor Imbiba.

He hopes to open at least three new stores in London in the next 12 months, before rolling Vagabond out across the UK.

Then he aims to start opening sites in Europe and the US, as he is convinced the Vagabond business model will allow it to thrive across the world.

Finch told DRN: “Our site level of financial performance is industry leading, not just in wine retail but in the broader food and beverages space. The site level EBITDA is in the mid-20s percentage points and that is consistent across the estate. We have managed to deliver good sales quickly in new sites, with consistently good gross margins, consistently low staffing costs and keeping a tight control on expenses. That led to a lot of private equity guys putting forward offers.”

The off-trade/on-trade hybrid model allows Vagabond to sell plenty of wines at a high margin. Customers buy pre-paid cards and serve themselves wine by the glass from Enomatic machines, bringing down staffing costs, which helps makes the stores profitable.

Finch launched the first site in Fulham in 2010 and the sixth outlet will open its doors near Paddington Station next month.

“I initially built Vagabond to be scalable and replicable, and I am very satisfied to see outside investors recognise that,” he said. “We want to grow by rolling out, not just in London, but elsewhere in the UK. To do that at the pace we want to do it, we are going to need more financial firepower than we can manage ourselves. We looked at crowdfunding versus private equity and we felt private equity would be the right option for us.” Imbiba is a specialist investor in the UK leisure and hospitality market, and it has enjoyed great success with chains such as bar group Drake & Morgan.

“With Imbiba, you also get the knowledge and experience of the sector and the connections to landlords across the country,” said Finch. “It’s pretty easy to get money, but to get someone who is really able to bring something to the table is great.”

He is confident in Vagabond’s prospects going forward, because he believes it can offer an experience that Amazon and the multiple grocers can never match.

“We are selling an experience more than we are selling wine,” he said.

Finch added: “There’s still a bit more to do in London before we start messing about further afield. But other UK cities are attractive. We are not sure about the whole market town thing. We need to make a decision on that.

“It all depends on availability of good sites, but fortunately there seem to be a lot of them. I would be disappointed if we do fewer than three new Vagabonds in the next 12 months.

“We are pretty interested to go international. Wine has a universal appeal. At the right point in time we will plan to do something in Europe and in the US.”

When asked how big the chain can become, he said: “I’m reluctant to throw out a figure, but there’s a lot of runway ahead.”

DRN also asked if he is worried about newcomers to the market mimicking the model and providing increased competition.

“We have been doing well for a while, and I have always been surprised that no one has come along to do what we are doing,” he said. “A few small guys have started, but no one is doing it at scale. Now that we have a higher profile it might trigger someone to be ambitious. I expect some people trying to get into the game, but I take comfort from knowing how complicated it is behind the scenes. To do it well is a whole different ball game.”

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