You've got to feel for the Majestic Wine warehouse manager in St Albans. When the chief executive lives 200 yards from your store and is prone to have a nose through the door every evening as he walks the dog, you have to be at the top of your game, day in, day out.

Thankfully, chief executive Tim How seems happy with the store's performance, just one of the 136 warehouses that make up one of the most successful off-licence operators in the country.

But while Majestic sales may buck the downward trend in the market, the high street off-

licence is under pressure from the supermarkets' and the growth of their convenience formats.

The card up How's sleeve is the increasing number of people developing an interest in wine. "I know our shoppers also shop in supermarkets," he says. "We just have to persuade them not to buy their wine there."

How believes persuasion takes the form of delivering value, a great range of wine and great customer service from knowledgeable and friendly staff. In March, 28 Majestic stores had fine wine departments; by Christmas there will be 40.

Having opened eight stores over the past year with another five scheduled to open by Christmas to take the total to 141, Majestic is on track to reach 200 stores within five years.

A passionate wine aficionado, it would be just as easy to imagine this smooth, well-mannered businessman in an avuncular role, but his conversation, peppered with phrases such as "frugality is key", "meetings are a waste of valuable time" and "less is more", reveals a terrier. "Cost control is fundamental to our business, from running a tight ship to site selection," he says. "Finding the right sites is a huge challenge, but we won't be forced into overpaying and we're willing to be creative. We've got an eclectic bunch of stores: former car garages, churches and pubs."

Majestic's Watford HQ remains relatively small, even though the chain has more than doubled in size from 80 stores five years ago.

But HQ is still able to double up as the depot thanks to low levels of stock-holding. Most stock goes straight to store and average stock turnover is 12 weeks, a turnaround time admired throughout the industry.

How is keen to bring in the best IT systems to create efficiency savings that can be passed on to the customer. This is vital, he says, to compete with well-oiled giants such as Tesco. "Our number-one strength is our customer service, but if you cannot compete on price, you cannot compete."

But to try and provide the masses with cheap plonk would be tantamount to suicide, says How. "There is no point in slugging it out on cheap drinking wine with the supermarkets. Our average price per bottle is now £5.85, up from £5.66 last year, compared with £4 at the supermarkets. We also have Pétrus on sale for £900 a bottle - if we can sell wine at that price, it is the right thing to do. But we are determined to offer value to customers, simply because we have to when the big four sell 75% of all wine in the UK."

Majestic has stuck rigidly to the strategy of only selling wine by the case. That may put off a swathe of customers. But they say imitation is the sincerest form of flattery, and, as Asda, Sainsbury's et al announced plans to sell wines by the case this autumn, Majestic posted another stellar set of results; interim results out this week showed Majestic Wine's half-year pre-tax profits up 16.7% year-on-year to £7.5m, with sales up 3% to £91m. The average spend per transaction was also up from £121 to £128.

Future growth will come through new store openings, driving up average customer spend further, increasing customer visits and taking more customers away from supermarkets as interest in wine continues to grow, says How.

He is also putting plans in place to increase internet purchases. These are up 35%, but account for only 7.2% of sales, one tenth of which are in the two weeks before Christmas. It's hoped a new web platform will enable this.

How admits other experiments have failed. Majestic has tried to branch out into other areas such as luxury olive oils, glassware and books about wine, but How now believes in sticking to what he knows best.

"Glasses and books just didn't sit well in a dusty wholesaler. We tried olive oil, but ended up giving most of it away. We're not going to stray too far from wine, beer and spirits."

Rosé and Champagne have helped drive wine sales over the past few years, but the trade is having to work harder to find the next big thing, says How. "There is no longer a new wine-producing country to discover. So it's more about finding interesting regions and grape varieties. And as our customers are more likely to be knowledgeable about wine, we have to be quicker than everyone else with new finds to keep up with demand for new tastes.

"There is huge interest in Sauvignon Blanc, Pinot Grigio and rosé. With reds it's Pinot Noir, and Malbec and Rioja are becoming more popular. The full-bodied New World Shiraz and Cabernet Sauvignons are becoming a bit old hat as people develop a taste for more subtle flavours."

With this in mind, How says Majestic's marketing strategy is also getting more sophisticated. From day one, Majestic began collecting every new customer's personal data, which is used to track and analyse 90% of transactions .

"We mail price lists to most of our customers from the database, but we want to be better at targeting specific customer groups and working out what is driving their purchases.

"We have started to communicate with different customer groups. For instance, if a customer has bought rosé or Champagne recently, they will receive a mailing about a 40%-off deal on rosé Champagne."

Mailing lists are only effective marketing for Majestic's loyal customers, How admits: they're not enough to persuade mainstream wine drinkers away from the convenience of picking up a £4 bottle from the supermarket. But as marketing improves, How believes he can entice more customers away from the supermarkets.

It will not be easy, though. It will probably take Majestic another 10 years to increase its share of the UK wine market from 3% to 5%, How

estimates.

"Execution is much more important than having a great idea. Add that to consistency week after week, month after month, and you've got the best strategy in business. Tesco does that and it's the most successful retailer in the world."n



Q&A



Which business do you admire?

I think John Lewis, Marks & Spencer and Tesco are all great businesses. The person who has done the greatest job for the longest though is Sir Terry Leahy. A business leader has to build a talented team and you have to listen to their opinions as well as your customers, and that's what Sir Terry has done for years.

Majestic has a reputation for attracting graduates. How do you do it?

Wine is fun. It's an exciting place to work and all our staff get the opportunity to travel abroad at least once a year. We put a lot into training - 140 of our staff have done their WSET (Wine & Spirit Education Trust) diploma. That's something I haven't even done. Our business depends on talented people in our stores. Running a store is one of the hardest jobs you can do. You go to work with one agenda, and head office will send you through another 500 actions, half of which will be reversed the next day. I like to keep things simple and cut out the bureaucracy.

Will you manage to have a Christmas celebration with your staff?

We always have a party for all our staff on the first Sunday in January, when we're not selling much wine, in the Grosvenor in London. Some shops shut early to allow all our staff to get there. Most people take the opportunity to get dressed up and there's a lot of wine involved - most of us wouldn't survive without it.

What do you do in your spare time?

I'm building a new house on the Norfolk coast as I do a lot of dinghy racing there. I'll be out on the dinghy most weekends between April and October. I have won the club championship before but I was only second this year - I will try and win it back.

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