In Vino Veritas

26 April 2019 - Elizabeth Nichols

Luke Morris, Corporate Finance Partner, gives his personal view on recent changes in the wine retail market.

The High Street has barely been out of the headlines in recent years. It's always been a sector in which I have been involved, but the last few years have really enabled myself and my corporate finance team to build up some interesting case studies and contacts. This is because wherever there is change in a sector then you can expect there to be transactions: owners looking to exit while they can, businesses looking to merge to achieve savings, and existing management teams moving on when it seems they are all out of inspiration.

Casual dining perhaps best tells the story of what has happened to the High Street. Post-recession there was a boom in new places to eat, fuelled by private equity awash with cash, and greedy for scalable brands promising high returns (there's a lot of value between the potato and the chip).

But then unfolded a series of events. Consumers, spoiled by all this new choice on the High Street, became pickier. Local authorities interfered, as they usually do, with rent and business rates reviews (and they only ever seem to go in one direction). The fall in the value of the pound has affected input costs, and the government has mandated minimum wage increases and mandatory pension contributions.

At the same time, the government has had to deal with Brexit, the most thorny and intractable political issue in years, and which has seemingly alienated EU nationals. The very people who disproportionately staff our High Street eateries.

And I have not even mentioned the internet. Or Deliveroo.

That said, that is just casual dining. All is not lost. We have seen good demand for strongly branded independent retailers we have been engaged to sell, especially where they have a niche or a strong customer following. The difference for the customers of the clever retailers, is that they (the shoppers) aren’t really bothered about the retail anymore. They are about the leisure or the experience.

I was recently interviewed for BBC Look East, covering Naked Wines. They've effectively reverse-acquired traditional wine retailer Majestic, and are betting their chips (or grapes?) on the very smart model of connecting Majestic’s independent winemakers with many individual Naked Wine subscribers, who are part of an online community, sharing tasting notes to rate and review wines. Naked would even describe themselves not as retailers but as a “winery".

You see, the secret to being a strong retailer in 2019 is not to be a retailer. Simple.

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