Everything’s rather exciting in the refined world of wine right now. Majestic Wine has uncorked a £70m acquisition of Naked Wines and unveiled the online fine wine club’s founder Rowan Gormley as its new chief executive, toasting what it hopes will be the start of a much needed turnaround.
Majestic bid adieu to the last chief exec Steve Lewis, who had been with the company since joining as a graduate trainee 29 years ago, in February, after a torrid Christmas trading period. The retailer’s shares plunged more than 25% in two days in January, after it revealed like-for-like sales had risen just 1.1% as it slashed prices to compete with the price war-embroiled supermarkets.
Naked Wines is of an entirely different vintage. Founded in 2008, its 300,000 ‘angels’ (aka customers) pay £20 a month, part of which goes to support wineries, to get 25-50% discounts on fine wine. In 2014 its sales were £74m, up 40% on the previous year, although it made an EBITDA loss of £3.3m.
So buying Naked Wines and its entrepreneurial founder, rather than hiring a seasoned brick-and-mortar CEO, is a nothing if not a statement of intent from Majestic. And while the two companies will still operate separately, it has plusses for both of them.
‘This acquisition will significantly accelerate the planned development of Majestic's online capabilities whilst providing Naked Wines with a nationwide store network to allow a Click & Collect delivery option for its customers,’ Majestic chairman Phil Wrigley said. It would also give Majestic access to the US and Australia, ‘increasing our potential customer reach eightfold.’
There are of course risks. Gormley was also behind the launch of Virgin Money and Virgin Wines (previously another of his own ventures, Orgasmic Wines – starting to see a pattern here?), but has never led a PLC. And the startup spirit of Naked Wines could well be fully clothed and even swallowed altogether by Majestic.
Trickiest of all, though, will be injecting fizz back into Majestic itself, as the supermarket price war continues apace with Aldi and Lidl branching out from bargain basement wines. Majestic’s shares were down more than 5% to 300p in mid-morning trading, although that’s probably largely down to its dividend being scrapped, with it only being ‘progressively reinstated’ by 2018. Gormley won’t be able to toast his new job for long.