I'm no fan of retail. But there is more in this bottle than meets the eye. Majestic is best known for its just over 200 wine store outlets across the UK (“MR”). The best comp is German “Jacques’ Weindepot”. MR is the leading specialist wine retailer in the UK. The outlets look more like wine warehouses in non-prime locations than high-street stores. The typical customer drives to an MR outlet every three months or so and loads the back of her SUV to be well-stocked with wine for a while.
Luckily there is more to the business than physical retail. Majestic also owns "Naked Wines" ("NW"). NW was acquired in 2015 for c. GBP70m. With this purchase, Majestic also found its next group CEO: NW founder Rowan Gormley. NW runs an innovative direct-to-consumer wine club which is revolutionizing the classic supply chain of the global wine industry with its various intermediaries and indirect order processes. It connects consumers directly with vintners. The takeover of NW was a picture-perfect example of: “if you can’t beat them - join them.”
For full disclosure, there are also two other very small divisions which we will not specifically analyse: "Commercial" which is wine wholesale; and Lay & Wheeler, a wine advisory business for corporate customers, events and catering firms. These two smaller divisions exhibit flat revenues, are profitable and thus support themselves.
Majestic Retail
MR is active in the highly competitive wine retailing sector. The business model is under pressure from a variety of competitors. MR sells at affordable to upper middle price points. On average, customers of MR are not high-end wine experts but people who appreciate good wine and are willing to pay a reasonable price for it. Competition thus includes increasingly aggressive supermarkets and even discount retailers. If you, like we do, regularly shop at ALDI, you will have noticed
