RIP, Odbins. When the Wimbledon-based chain was in its award-winning pomp writing those words would have been unimaginable, like predicting that the sun wouldn’t rise tomorrow. But after yesterday’s vote at the creditors’ meeting at London’s Mermaid Conference Centre, a high street institution is effectively no more.
Possibly fearing the worst, Oddbins had booked a court date for April 4th to file for administration. It may limp on into the middle of the month, but will then be wound up by Deloitte, unless a buyer can be found for the name and some of the shops.
Like many commentators, I was surprised by the outcome of the vote. The creditors I spoke to beforehand said they would support the Company Voluntary Agreement (CVA), which offered them 21p in the pound over a period of 46 months, because the alternative was even worse. “If we don’t support the CVA and Oddbins goes into administration,” said one, “then we’ll get fuck all.”
What the wine trade felt proved irrelevant in the end. Oddbins needed 75% of its creditors to agree to the CVA and the biggest by far is HM Revenue & Customs, which is owed £8.6m in VAT, duty and PAYE out of a total, crystallised debt of some £20m. In the current fiscal circumstances, it was hard to see the taxman kissing goodbye to £1.8m in favour of only £0.51m from the administrators, Deloitte, but that appears to be what has happened. HMRC clearly had little or no confidence in the future of the business under its current owners.
If Oddbins had continued in its slimmed down form, having recently shed 39 shops and 120 staff, what sort of future did it have? Managing director Simon Baile said that he could “see the profitability of the stores we kept” and believed that Oddbins could have prospered, despite an estimated trading loss of some £4m in 2010. He argued that getting rid of the unprofitable stores, the result of high rents and rates and/or the wrong location, and writing off “45 years of build up in the company” would enable the business to survive and even prosper. Now, we shall never know.
It now seems unlikely that on-going case against Oddbins’ previous owners, Castel, which was set to come to court some time over the next few months, will ever materialise. Baile claims that Castel owes Oddbins £1.5m and that the French were economical with the truth at the time of the sale in 2008. “The pressure on our cash flow because of the French has been enormous,” he says. If Oddbins had won – and it appeared to have a case – half of the money would have gone to its creditors.
Why did Oddbins fail? Baile admits that the management made mistakes and it’s difficult to disagree with him. Their due diligence on Castel was clearly not rigorous enough and they should have further reduced the size of the estate some time ago, off-loading the shops that didn’t work. The range, too,was patchy, with too many over-priced wines, not enough soft brands to draw non-buffs into the shops and some duff choices, particularly from France. The business also appeared to be under-capitalised from the start.
Communication with both stores and suppliers was poor, too. Both complain that Baile never really explained his vision for the business. “He should have got us all together two years ago and got our support,” said one supplier. “When Thresher went down, at least we knew what was happening.”
The broader question concerns the future of the high street, not just Oddbins. Here, there are encouraging signs with the expansion of Wine Rack, the growth in the independent sector and the on-going success of Majestic. Get the business model right and there’s no reason why wine shops or warehouses shouldn’t work. Over the last 20 years, the long-term trend has been one of slow, enervating decline, but maybe that is changing.
In the past, competition from the supermarkets has damaged the high street, but the wine offering from the multiple grocers is worse today than at any point in the last decade. The supermarkets’ obsession with special offers has had a profound impact on the quality of what they sell. The likes of Asda, Tesco and Morrison’s have pretty much given up listing unusual wines in their stores.
It will be interesting to see what the supermarkets do with the 15p tax increase in the recent budget, although many of them had increased their prices earlier this year to reflect what they thought would be a 6.5% (as opposed to 7.2%) duty increase. Prices are less elastic in supermarkets than in specialist chains, but surely the former must pass all or most of the tax on to the consumer this time. The trade cannot absorb the tax increase. Margins are slimmer than ever, with very few importers making more than 1% net profit, and all of the major currencies are stronger than the pound.
The demise of Oddbins is depressing news, not least for its loyal, diligent, famously over-qualififed managers, but a rump of stores may yet survive under their own name or be purchased by the likes of Jeroboams, Wine Rack, Majestic or Lea & Sandeman. But for now, this is a day of great sadness. I don’t know about you, but I feel as if I’ve lost an old friend.
An earlier version of this article was originally published in Off Licence News