The Big Interview: Diana Hunter, Conviviality Retail CEO

It’s been a whirlwind 16 months for Diana Hunter. Since joining Bargain Booze from Waitrose in February 2013 as CEO, she’s led the company through a stockmarket flotation, made two key acquisitions and started rationalising and updating the company’s store estate as part of a wider strategy to help the brand expand out of its North West heartland.

And there’s plenty more to come, she promises in a frank interview with The Grocer - including the launch of a wine Rack franchise operation and possibly even further acquisitions. It’s all part of Hunter’s ambitious three-year plan to shake up the business - now called Conviviality Retail - the first fruits of which will be revealed next month when Conviviality unveils its annual results.

When it floated on AIM last July, it was seen by some as a surprise move given the challenges faced by the off-licence sector over the past few years - not least from the supermarkets. But the gamble appears to have paid off, with the company’s share price hitting a high of 199p in January against an IPO price of 100p and currently trading around the 171p mark.

Conviviality also “traded well” over Easter, according to last month’s post-close update and directorate, with like-for-like retail sales over a comparative six weeks to 27 April 2014 increasing 2.2% for Bargain Booze stores and 6.5% for Wine Rack stores.

That said, Hunter concedes that the full-year results will be impacted by the company’s strategy to weed out underperforming stores. “When we floated last year, I was very clear that we’d have to face store closures,” she says. “And the reason for that was that the previous approach to recruitment to franchises and store openings wasn’t always focused on quality - it was more about hitting a store numbers target rather than a quality of sales target. I knew we would have to close stores… because they weren’t in great locations and some of the retailers that were brought into the business didn’t work with the ethos of the business.”

With this in mind, the company has also bought back at least 57 stores in its 615-store estate from franchisees and “incubated” them until suitable franchisees can be found.

“What’s been really pleasing for me is how well the team coped with the Wine Rack acquisition. We could cope with more”

It has also hit the acquisition trail. Last month, it bought 26 Rhythm & Booze stores in Yorkshire from Bibby Retail Services for £1.7m. The stores will be rebranded - with three converted to Wine Rack, six to Bargain Booze Select Convenience and 17 to Bargain Booze. “Acquiring existing off-licences has been a really good way of us making sure we build that trade relatively quickly, and Rhythm & Booze has been a really important acquisition because it’s a key target area for us,” says Hunter. “We haven’t been heavily populated in the region. We’re very dominant in the North West, but in Yorkshire and the North East, although we do have some stores, it’s not to the same level of density.”

The acquisition followed that of 22 Wine Rack stores last September. The plan is to expand the Wine Rack brand beyond its Southern homeland, in the same way the company is “not limiting Bargain Booze to the North.” Hunter thinks there’s appetite across the country for both Wine Rack and Bargain Booze. “Our job is to make sure the consumer understands what each of those propositions stands for,” she says.

For Wine Rack, that’s offering knowledgeable consumers great customer experience. The company has already provided a glimpse of the future for the chain with the first new-look Wine Rack store it opened in West Byfleet, in November. The new design features a seated tasting table for customers and will provide the template for future stores. Hunter aims to open another 12 of the new look stores this financial year, bringing the total to 37.

In Bargain Booze stores, the wine assortment has been rearranged so that it is merchandised by flavour rather than country of origin. This won’t be replicated in Wine Rack, where customers are a bit more knowledgeable about wine and “are looking for something a bit special, a bit different.”

Customer service

Hunter believes the new-look Wine Rack offers something the multiples cannot. “There is something missing in the market. If you want to go somewhere and just explore and talk with someone about your choice of wine, where do you go? There’s nowhere to go,” she elaborates. “You can ask in a supermarket, but they’re always very busy. So if you want great quality advice and to be able to look through different ranges and maybe taste wine as well - it’s actually very difficult to get that experience. Some of that personal advice and service consumers want back.”

Wine Rack, she says, is a destination wine offer that offers consumers “quality advice.” Unlike Rhythm & Booze, Wine Rack stores will retain their branding. Hunter reveals that a franchise model will be launched for the brand later this year in the “right locations.” “The Wine Rack franchise model is ready now,” she says. “What we want to do now is get the franchisees to test the model.”

Conviviality is currently looking to incentivise retailers by offering shares to retailers, increasing frequency of franchisee meetings and introducing a reward scheme. “We’ve spent a lot of time focusing on our franchisees. Their success is our success,” says Hunter. “We’ve been making sure their margins have been improving and that there are good incentive schemes in place - they’re actually getting cash benefit by working with us, plus, assuming all goes to plan with our year end, they’re going to be shareholders as well. That’s really important - because franchisees will want to grow for us. And from my perspective it is better to grow from within.”

That said, Hunter doesn’t rule out further acquisitions. “What’s been really pleasing for me is how well the team coped with the Wine Rack acquisition. We could cope with more.”

The company certainly has the capacity to take on more stores; its Crewe warehouse is currently at around 40% and capable of serving 1,200 stores. Meanwhile, it’s rolling out new refreshed fascia designs across the estate and plans to consolidate the six different Bargain Booze and Thorogoods fascias it currently operates to four over the next two years. Another priority is to raise the profile of the Bargain Booze brand through TV ads - it has been on air twice in the past year - with a more local marketing focus for Wine Rack, says Hunter.

Looking ahead, the big threat remains the multiples, but Hunter’s not fazed. “There’s a huge explosion of the multiples’ c-stores coming in. But my view is that our franchisees can trade effectively alongside them and that’s because it is an off-licence led convenience offer - it’s a clear point of difference and consumers appreciate the choice.”

Especially when some of that choice has disappeared. “You had a number of big players fall by the wayside and the growth of the supermarkets certainly put pressure on businesses like First Quench; there’s no doubt about it. But I think there is room for a destination local off-licence that offers great value, offers choice and offers friendly personal service, and I think that’s what our franchisees do.”

And so they should. After all, that’s what the company’s convivial ethos is all about.