Over the last five years Majestic Commercial has slowly, but surely started to give the on-trade’s major drinks distributors a very different competitor to worry about. One armed with a nationwide network of stores capable of giving on the ground support to its customers. But in 2016 sales have slowed up and managing director, Ben Nicholl, and his team have had to face up to difficult questions both internally and externally. Here he explains what steps have been put in place to help it bounce back next year.
Majestic Commercial is currently lagging behind the company’s other divisions, but is confident it has the strategy to get its on-trade sales back on track in 2017.
It’s been a contrasting year for Majestic Commercial, the specialist drinks retailer’s dedicated division set up to look after the on-trade and corporate business.
On the one hand the word in the trade is positive with many customers and suppliers going out of their way to single out Majestic for their level of service and quality of wine. Which was borne out in last month’s Wine Business Solutions’ annual analysis of the UK on-trade which identified Majestic, along with Matthew Clark, as being the two stand out drinks distributors in 2016 in terms of new wine listings acquired over the last 12 months.
WBS claims Majestic now supplies 5% of all wine lists in the UK. A performance it rather dramatically describes as “cutting a swathe through the UK on-premise” market. Peter McAtamney, the report’s author and head of WBS, told The Buyer last month: “Customers clearly prefer their model to most of the established distributors.”
Which might be over stating matters a little. Either way it must have been a big fillip to the Majestic Commercial team, headed up by Ben Nicholl, which had otherwise only really been in the news over the last year for returning what even Majestic’s chief executive, Rowan Gormley, said were disappointing figures.
Its own staff magazine admits it has not been the “easiest few months for Majestic Commercial”.
Certainly compared to the big gains being achieved in its retail division, headed up by John Colley who joined the business a year ago after a career in DIY and general merchandise retailing.
Whilst Majestic’s retail business grew 5.7% in the six months of trading to September, with revenues up 5% to £117.9 million, and a 9.1% increase in new customers to 820,000, its commercial division slowed to only 1.2% growth, a return of £23.4m in sales, down from positive double digit growth in previous years. And a long way of a previously stated target of £100m within five years.
As it says in its staff magazine: “In September we hit the news for the wrong reasons, and after five years of excellent sales growth we are now trading in a more challenging environment.”
By its own admission the problems lie in four key areas:
- taking on fewer customers
- having a high attrition rate of current customers
- being hit by poor exchange rates with the US and Europe.
- the latter resulting in price increases “that we haven’t been able to pass onto our customers quick enough”. It was forced to introduce two different prices in 2016.
But, as with the rest of the Majestic business, plans are in place to get its on-trade division back on a firmer footing. This will rely on four key factors:
- winning new business
- retaining existing customers
- improving margins per bottle of wine sold
- and making its operations more efficient or what it calls the “removal of task”.
You get the impression the jury is out even within Majestic itself on its Commercial division and that it will have to rely even more on its burgeoning retail and new e-commerce platforms to make up for any shortfalls if it is to hit its ambitious £500m sales target by 2019.
But in Ben Nicholl they have what you might call an Arsene Wenger figure. Someone who has been with the business since 1994, seen Majestic hit the heights, helped set up the company’s on-trade and commercial division, achieve its double digit growth success, and is now under pressure to return it to its former glories.
He believes to do that it has to succeed in what made it a breath of fresh air for many on-trade customers in the first place. To act more as a business partner, than just a supplier of beers, wines and spirits.
Now talk of “partnerships” and long term “business plans” are now so commonplace across the drinks distributors that they have become cliches, but it is arguably how Majestic carved its own point of difference in the on-trade. Helped to a very large degree by the fact it has a network of large, retail stores that can potentially offer a greater level of personal service than its major competitors.
Nicholl explains: “When we first started out we had an inferior offer to our competition. But we had very good sales people who were willing to work hard and to act more like consultants for our customers.”
But regardless how good your service is, the on-trade ultimately wants good and exclusive wines to sell. Which is where Majestic was, initially able to come in to its own, being able to use its strong relationships with producers and suppliers from the retail side to work up exclusives in the on-trade.
Partnerships with key suppliers like Winery Exchange, now WX, and Copestick Murray meant it was able to offer a growing list of exclusive and tertiary brands, at competitive prices, to an on-trade increasingly looking for its own point of difference.
It currently has an exclusive list of over 100 wines, 84% of its range is only available in the on-trade, with the other 16% being “touches of colour” from its retail offer.
All of which, he stresses, are backed up by a sales team, focused on acting more like account managers, committed to helping customers make their wine lists more profitable.
If it is able to add value and increase the average price of a bottle of wine they sell it does not need to be fixated on winning new accounts, says Nicholl. For example, he cites the big difference it has made just by moving the average bottle of wine sold at Lord’s cricket ground from £21 to £27.
“It is one of our clear objectives that when we win a new account, or sit down with a customer, we look at what good looks like and how do we achieve that. It means that if a competitor comes along we can show them what we have been able to do together,” he explains.
“If you win an account just based on price, they will only buy on price and you will not be able to hold on to them.”
He says the big step change for the commercial division came during the big recession of 2008 and 2009. In times of difficulty businesses are for more open to the idea of trying something, or “looking for an alternative supplier”.
It has worked hard to build on that foothold in the market and grow sales from around £18m then to close to £47m in 2016.
“I think out two key strengths is that we source and buy good wine, and we employ capable, intelligent people. The attitude of our staff is very important, we encourage them to have an entrepreneurial spirit,” he adds.
It also switched in 2010 to supplying its on-trade customers direct from its stores rather than a central fulfilment centre, which makes a lot of sense when 85% of its customers are within 10 miles of a store.
If the Majestic Commercial division is to get itself back in its board’s good books then it will need to do a lot better in attracting and retaining what Nicholl has targeted as being between 30,000 to 40,000 independent food-driven of which it only currently has around a 10% share.
Again its latest company magazine points to the work it is doing with an “external agency” to do “lead generation work for us”. Particularly around Majestic’s ability to provide “on trend” wine lists, staff training and help with stock control and cash flow issues. Work that is generating 25% of new enquiries that its team can then go in and build on
“I don’t think there is a single silver bullet. It is about getting the overall product right. From our service, to our range, to the ability of our team to share their experience with our customers, help them make their wine experience better and allow people to graduate up their wine list,” explains Nicholl.
Key to that is ensuring its front line staff are going in to see their customers as often as they want. “It’s about relationship building. Keeping that emotional bank account with your customer topped up. You can only do that if you are having regular meetings with them.”
It is also working harder to share data and analyse sales figures with its customers so that they ave the most relevant list for their customers. Which is very much part of the “test and learn” mantra of the overall new look Majestic group.
Nicholl says setting standards and working to the right values is very important to him. Yes, you will win and lose accounts, but it is how you operate as a business that he believes is the most important.
“It is like when Brian Clough went to Leeds. He wanted that team to succeed but to do it in the right way.”
Noticeably he says he feels it is “our duty” to try and get an English sparkling wine on to all of the lists it manages.
Doing things right
Equally where and when it has had to raise prices this year on some wines due to the poor exchange rate, it has looked to explain the changes, and the reasons to its customers. “The feedback from customers on the whole has been OK. They want to be treated fairly and reasonably, and there to be no ambiguity. It is part of the open relationship we have with them,” he says.
For someone who has worked in the same company for close to 25 years, he says he is excited by the new management team and what he describes as the “huge amount of positives” that have been implemented over the last 18 months.
Changes, he believes, are being done in the right way, for both Majestic and its customers.
How effective those changes are being implemented will ultimately come out in the end of year figures, but Majestic Commercial can’t be accused of not trying to get things right both internally and externally with its customers.