When Conviviality stepped in to acquire Matthew Clark and Bibendum in quick succession there was much talk that future deals across the drinks distribution network would follow. In reality not a lot else has changed, but the move by Copestick Murray, that has up to now always been on the supplier side of the fence, to take a 40% stake in Slurp, the predominantly online retail business, feels highly significant. Tim Carlisle offers his verdict on the move.
Look close enough and you will see examples of wine businesses increasingly moving across channels and in to areas of business they would not traditionally tread. Copestick Murray’s decision to take a stake in Slurp, the online wine business, is a real statement of intent, says Tim Carlisle, former head of retail at S H Jones, Slurp’s parent business.
When S H Jones swooped to buy Slurp’s UK business from administration in 2013 many people were quite surprised that this historic, traditional wine merchant would take on what was then considered one the UK’s most innovative online wine retailers.
Coming on the back of purchasing Hawkshead Wines in January of the same year it was followed up shortly afterwards with a partnership between Steven’s Garnier and S H Jones that saw the latter taking on the former’s regional wholesale business. At one time S H Jones was operating five shops, integrating two on-trade businesses and running three independent business websites at the same time.
Growing and acquisition seemed to be the order of the day, and yet now four years on a good chunk of that business have been sold to Copestick Murray. What does that mean for the wider industry? Is it a good move? What challenges await? And what does it say about wine retail in the UK?
What are the details?
S H Jones directors had already split the retail business away from their regional wholesale business. The wholesale arm retained the locally recognised S H Jones name whilst the retail arm has been rebranded under the Slurp banner and took in the retail shops, Hawkshead, Slurp and their private client business. This move made some sense following on from the spate of acquisitions a small staff team were operating what was now a diverse and complex business. In turn it would be easy to see that any business competing against specialists in each of its sectors could struggle to suit both arms of its operations.
Spinning the retail arm off enabled focus to come to the wholesale business, while bringing in Hugh Taylor as both managing director and shareholder of the retail arm brought focus, investment and some digital expertise to that side of the business.
With both sides now able to focus on their own speciality the retail arm is now in need of further investment to grow the business into one of the major online premium wine retailers in the UK, and it is this side that Copestick Murray have bought into. The on-trade business will continue to trade from their shared premises, but will remain a separate entity under the S H Jones name, and owned by the Jones family.
Is it a good move?
As far as Slurp is concerned bringing in investment and a forward thinking innovative business like Copestick Murray must be a bit of a no brainer. As for Copestick Murray, time will tell but they are a canny and intelligent bunch. The Slurp online business has been rebuilt from an almost zero base in 2013, their reputation renewed and a far more pragmatic approach has been taken and an extensive list of customers is already in place – historically one of the most expensive elements to building any online wine business.
What is yet to be seen is how Copestick Murray can use it to deliver greater profitability across its own portfolio of wines, or whether after spending money it can deliver growth as well as profitability. History suggests it can, but whether the Slurp business will look the same then as now is another point entirely.
What does it mean for the wider industry?
Whilst not a game changer it will change some things. If I was a large supplier of wines to Slurp I would be sending my best people to visit its team in the next week or so and offering them a few special carrots ahead of Christmas to keep my hand in. There seems little doubt that Slurp will now sell more Copestick wines than it has previously, and that growth won’t come entirely from new business but will move across from other suppliers.
Other online retailers will start to see a more proactive Slurp, hungry for a bigger slice of the pie engaging in more and more activity, while importers and distributors can look at Slurp as a significant target for their wines.
What challenges await?
One of the biggest challenges awaiting Slurp going forward will be to ensure all parts of the business are looked after, invested in and made profitable. The relatively low cost base of an online model can make profitability relatively easy to achieve as long as margins are looked after, but transferring that to retail shops is another matter.
While one shop is attached to its warehouse, getting the other shop to perform profitably could be the greatest challenge away from a wholesale business able to bring warehousing and logistics with it. Whether that shop will still be open in five years as a sole outpost is another matter entirely. If Slurp can make it work then with Copestick behind it there is nothing to suggest that a foray into a limited degree of expansion couldn’t work. The closest thing we have to a model of multi-channel business with a retail front is Enotria&Co’s ownership of Great Western Wine, which it has chosen not to expand, and so it seems entirely possible that Slurp could decide to shrink back to having what will effectively be a cellar door.
At the same time the challenge of operating in the same space as another wine business, part owned by some of the same people, may cause its issues, and if as it seems Copestick are mostly interested in the online side of the business a move to Copestick’s head office cannot be a million years away allowing them to share a lower cost base overall. A great deal of that will depend on the future of the company, on whether Copestick buy out the remaining 60%, stay as minority shareholders or sell.
What does it say about wine retail in the UK?
Of course wine retail is still important and interesting, what is more interesting is that agencies, importers, brand owners and producers are all looking at increasing their own shrinking margins by getting into direct to consumer sales one way or another. For businesses going down this route they can add a retail margin to their own agency margin. In this case while Slurp may only be a small part of the business, if it is able to sell good volumes of Copestick’s own wines at high margins it will go a long way to ensuring it remains profitable in the long term.
Retail remains a tough proposition, but with the right wines, bought and sold at the right prices with healthy margins it is possible to excel. If the likes of Copestick Murray are looking to come into retail then it is still an attractive proposition. How big this news is will depend not only on how successful Slurp is over the next five years, but also how the rest of the independent trade, in particular, reacts.
- Tim Carlisle formerly ran the retail business for S H Jones and is now new business development manager of The Vindependents.