Greg Sherwood MW: The wine trade sailing into head winds

By , 21 March 2024



Online wine retailer Naked Wines is experiencing financial difficulties.

Let’s get one thing straight. I generally hate dwelling on the negative. Whether it’s politics, economics, globalisation, world conflict or thoroughly boring topics like Covid-19, I really don’t see the value in overloading one’s personal experiences with negativity, doom mongering, or more often than not, situations that will ultimately have little to no affect or influence on one’s own day to day life. But of course, we live in a global village, for better or worse, and business and political interactions are intimately interconnected and can potentially have repercussions far and wide, many thousands of miles away.

For all those working in the wine trade, it has been impossible to miss the endless flow of negative news headlines and data coming out of both the UK and EU industries of late. From empty stands and low attendances at Prowein recently, especially within the French producer halls, to negative export data for many of Europe’s largest wine brands, there simply seems little to be cheerful about at the moment. Closer to home in the UK, as the industry started to recover from the reverberations caused by the business troubles of the large wine and restaurant group Vinoteca, news recently broke that the large on and off-premise wine merchant Vagabond had also gone into administration after running out of money after several years of mind-boggling expansion.

I suppose all the economists must be sitting in their tower block offices in Canary Wharf saying, “I told you so”, but that certainly does not make the news any less negative or depressing for SA producers. And, to add fuel to the fire, the phenomenon that is Naked Wines, announced only this week that they would urgently be calling in “debt advisors” to explore refinancing options, which could include securing a new “similar sized (credit) facility.” Certainly, more cause for concern because in 2022, figures from data specialist Statista showed that Naked Wines was the UK’s largest online wine retailer, followed by Majestic Wines and Waitrose Cellar, in the top three. With subsequent data suggesting that Naked Wines had already lost £15m in 2023 as sales to new customers dried up, the desperation of the UK wine retail marketplace suddenly came into clear focus.

Much has changed since 2022, both in economic terms, the cost of financing, and also in terms of general business sentiment, but looking at the UK government’s own economic data on interest rates and inflation, 2023 could indeed signal cataclysmic failure of the wine trade. While I’m not implying Naked Wines is about to go bang, it certainly is, like many large, slightly bloated wine businesses, facing incredibly heavy head winds in 2024 and beyond as consumer spending remains depressed. On a more positive note, Majestic Wines, one of the UK wine industries more successful banner wavers, reported their biggest Christmas earnings in their 43-year history in December 2023, with sales clocking up +8.1% in the lead up to Christmas.

On another more positive note, in a barren field of bad news, it should be noted that Majestic Wines, whom many South African producers sell a lot of wine to, is not just an e-commerce entity, having invested in 2023 alone in another six new bricks and mortar shop openings. They now claim to run over 200 wine specialist premises employing over 1,000 highly trained staff. So perhaps, with the right buying and pricing strategies, there is light at the end of the tunnel. Personally, I would like to put a lot of Majestic’s newfound success at the feet of their previous Master of Wine, Beth Pearce, who rejoined the company in 2013 and pushed the fine wine agenda after years of category ‘dumbing down’, before finally moving to another South African fine wine champion merchant Lay & Wheeler in 2021. Her refocused buying for Majestic Wines might just have saved them from familiar high street pitfalls at a time when large scale bottom-end branded wine sales have seen a significant drop within the cost-of-living crisis of the past few years.

All of the above is obviously brought more starkly into focus as I spend a fortnight in the Cape meeting and talking to producers, both those I am commercially involved with as well as many I am not. The atmosphere can definitely be described as nervous, possibly negative, but certainly confused. Once again, I try and preface any wine trade chatter with South African producers with the positive message that South Africa’s wines are still as popular as ever, but this time, it’s not just supermarket bulk shipped brands like in previous years, it’s more middle market and specifically, South Africa’s fine wine brands that are again capturing a lot of collector attention.

But for all the positivity, I have already gone on record recently as saying I had not seen the broader UK wine trade market place this slow and depressed since possibly 2011/2012 when the full effects of the Lehmans global banking crisis started to take effect on the country’s high streets, hitting businesses and consumers hard in their wallets. But one of the big differences now, compared to 2012, is that back then, money or bank borrowings for businesses were basically free with historically low interest rates. Everyone knew it would eventually come to an end, but they just didn’t expect record interest rate rises to coincide with record inflation at over 10%! A proverbial double whammy!

So we all soldier on in the wine trade, working twice as hard to sell half as much wine, all the while worrying about the lack of interest in wine (and alcohol in general) from Gen Z. I will say though, for most South African producers, their average day-to-day life and business experience is one within a perpetually challenging local environment. It is the nature of the beast whilst living in Africa. So I would like to believe that any challenges can and will be overcome in our normal dogged and determined fashion. With UK inflation dropping to 3.4% this past week, and 2025 (post UK elections) being billed as the year of the ‘proper’ economic recovery, I think there are some things to be positive about!

  • Greg Sherwood was born in Pretoria, South Africa, and as the son of a career diplomat, spent his first 21 years traveling the globe with his parents. With a Business Management and Marketing degree from Webster University, St. Louis, Missouri, USA, Sherwood began his working career as a commodity trader. In 2000, he decided to make more of a long-held interest in wine taking a position at Handford Wines in South Kensington, London, working his way up to the position of Senior Wine Buyer. Earlier this year, he moved across to South African specialist merchant Museum Wines to become the Fine Wine Director. He qualified as a Master of Wine in 2007.


2 comment(s)

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    Greg Sherwood | 25 March 2024

    Hi Tim
    It’s an interesting question I discuss with smaller indie merchants and wine businesses all the time. Let’s be very clear from the start, the race to the bottom, price wise, in the wine trade serves absolutely no one… not even the end consumer because it results in continuous consolidation and ultimately a smaller choice for them when businesses are unprofitable and close.

    So offering a personalised service and value added extras that supermarkets can’t offer, which covers everything from tastings, extra expertise, and personal staff impressions all earn a consumer’s respect. In an ideal world, indie retailers shouldn’t simply be offering the same boring branded products as supermarkets. They should make the effort to differentiate so as to make better margins.

    The South African wine sector has always been fairly good at segregating the wine market and offering diverse brands and tiers for different categories. With all consumers at all levels drinking less, and Gen Zs hardly at all, the focus needs to be on quality and value added services… not mass market brands at low margins.

    Timothy Conn | 25 March 2024

    What is your view of the “profit-maximising” margin? Can smaller retailers still compete by offering boutique services at a higher price? Or is fast turnover at the lowest possible price now the only way to survive?

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