Tuesday, 22 March 2011

Oddbins - is this the end for a once proud wine retailer?

Like many an avid wine enthusiast whose voyage of discovery began in the late 1980's and early 1990's, I have fond memories of many happy hours - not to mention a fair amount of money - spent in the vinous heaven of Oddbins. A wide-ranging, dynamic and continuously evolving wine list, combined with innovative marketing, fair pricing and enthusiastic staff was the secret of Oddbins' success. I remember that Australia, USA, Southern France, Spain and the Rhone were particularly well represented, although other emerging new-world countries were also given a helping hand. In short, for the budding enthusiast and seasoned aficionado alike, Oddbins was the "happening" place to find new and exciting wines. Indeed, many of the relatively unknown growers whose wines populated the shelves in those heady days have since gone on to become much sought-after, iconic names. Others have all but disappeared from the UK market, which is a great shame, because many of them were deserving of more attention.

Having been acquired by Seagrams in the late 1980's, Oddbins' success continued well into the late 1990's. But by 2002, things were (for a variety of reasons) on the slide and Seagrams sold the business to the French wine retailer Castel. An even more lacklustre performance (in terms of both marketing and choice of wines) by Castel saw things go from bad to worse until, in 2008, the Company was sold to a consortium headed by Simon Baile, son of Nick Baile, who was the owner in the pre-Seagram days.

Fast-forward 3 years and Simon Baile's grand design, aimed at restoring Oddbins to it's former glories, appears to lie in tatters - as do the finances of both the Company and many of it's creditors. Those creditors - as can be seen from the proposed CVA (Company Voluntary Arrangement) now available to view on the Deloitte website - include many of the current and former staff of around 130 shops, who are owed wages and/or severance payments ranging from less than £100 to several thousand. Then there are the landlords of the shop premises, utilities companies, local authorities, and of course the wine growers and agencies, who have continued to supply Oddbins with stock, despite what must have been some pretty ominous warning signs. Many are small, independent growers, whose very livelihoods are threatened by the prospect of having to write-off debts of perhaps a few thousand Pounds. Others are somewhat bigger and arguably better placed (though I imagine not best pleased) to sustain some pretty significant losses. For instance, the relatively small Champagne grower Drappier is owed £80,000, UK wine agency Hatch Mansfield is owed £200,000 and Chilean wine grower Concha y Toro is owed £250,000. Several other companies and large growers are owed six-figure sums and many more are owed five-figure sums. Even wine haulage and shipping company J F Hillebrand is owed almost £25,000 - and believe me, that amount of money shifts an awful lot of wine. The full list of creditors, as shown in Appendix 6 of the CVA, makes for sobering reading. The list is as long as your arm and the debts total somewhere in the region of twenty million Pounds.

The most staggering figures of all, however, are the amounts owed to Her Majesty's Customs and Revenue (HMRC) - over £3,000,000 in unpaid VAT and PAYE, and almost £5,500,000 in unpaid excise duty. Speaking as a (very) small independent wine merchant myself, my Company settles its VAT bill every quarter, without fail - it would be seriously negligent of us not to, for the simple reason that it was never our money in the first place. Furthermore, if we don't have the money to pay excise duty, we don't get our wine. The bonded warehouse sees to that, because it is their job. In both instances, if we failed in our obligation to pay these taxes, you can bet that HMRC would be down on us like the proverbial ton of bricks. Which begs the question, who - if anybody - at HMRC has been keeping an eye on Oddbins? Suffice to say, some serious questions need to be asked.

So what sort of a future lies ahead for Oddbins? The idea behind a CVA seems to be that a company which is essentially insolvent gets to carry on trading, subject to agreement by at least 75% of the creditors to accept a guaranteed percentage of the monies owed to them. In this case, the proposed fixed dividend (i.e. the amount to be paid back to the unsecured creditors) amounts to 21%. In other words, each creditor would receive 21p for every Pound they are owed - and over 48 months, at that. I may be wrong, but I can't see the proposal being acceptable to the majority - and I know what my answer would be, if I were put in that position. Problem is, of course, that most (if not all) of the alternatives may be even worse.

One of the most surprising things about this whole sorry tale is that, despite the rumours circulating on the Internet in recent months - not to mention the dwindling numbers of bottles on the shelves in the Oddbins shops - the real state of affairs only became clear when Deloitte published the CVA. Which, coincidentally, was at around the same time that a Daily Telegraph article, penned by wine columnist Victoria Moore and entitled Oddbins fights back, was published. You can draw your own conclusions, but under the circumstances, it will probably not go down as Ms Moore's finest hour. Then again, we all get the wool pulled over our eyes occasionally, and she'll live to fight another day. Somehow, I doubt that Oddbins will.............


Andy Leslie said...

Nice piece Leon. The scale of the debt is shocking to a finance numpty like me, so reading V Moore's piece where Baille blames the end on the weather just reads to me like he's got no grip on reality.

But I share the sadness at Oddbins passing, not least of course for the jobs that have gone. But personally too they were a part of my wine education fifteen years ago. And I still love their Steadman-illustrated price lists, some of which are on the wall!

I wandered into the Nottingham one occasionally since the last relaunch but never came away with anything - there was just nothing of interest. Majestic are the new Oddbins, it seems to me, though different.

Nick Dobson said...

Nice to know though that after a few years of hard slog, our businesses have finally grown to the point where we're more profitable thasn Oddbins.

Alex Lake said...

Good article, Leon. Like many of us, Oddbins fanned the early flames of my love of wine.

However, the Nicolas takeover was a disaster and the new lot seem no better.

Could someone explain in what sense they're not trading while insolvent now? I got an email from them today suggesting I handover money in the hope of receiving some wine. Fat chance!

Leon Stolarski said...

Well that's one way of looking at it, Nick! Then again, I still need a day job to make a living. :-(

But there's a lot to be said for keeping up with the VAT and excise duty payments - not to mention actually paying the growers and suppliers. At least if I can do that, I know I'm going in the right direction - albeit very slowly!

Leon Stolarski said...

Alex - I'm sure that is a question many people are asking. As has been alluded to elsewhere, the Oddbins of today bears little resemblance to the Oddbins you and I knew from years gone by. I find the current owners' apparent disregard for their staff, suppliers and growers morally reprehensible. Whether or not they are breaking any laws by continuing to trade is another matter. Either way, the idea that they can trade their way out of this mess seems quite breath-takingly arrogant. Or just plain stupid. Or both.

Vinogirl said...

Ah, many fond memories of happy times scanning the shelves of two oddbins branches in Liverpool's city centre...how sad!
But, really, how did they get away with paying no VAT etc?