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Oddbins Ayo Akintola in his own words: Majestic is 'screwing' suppliers

Published:  11 November, 2014

Oddbins managing director Ayo Akintola describes Majestic's recent demand from suppliers for financial support for its new warehouse as "one of the shabbiest business decisions" in the past couple of decades in the UK wine industry. Here, in his own words, he responds to its actions:

Ayo AkintolaAyo AkintolaAyo Akintola

Oddbins managing director Ayo Akintola describes Majestic's recent demand from suppliers for financial support for its new warehouse as "one of the shabbiest business decisions" in the past couple of decades in the UK wine industry. Here, in his own words, he responds to its actions:

It is rumoured that following a heated argument that almost lead to fisticuffs between Oddbins and Majestic buyers at a tasting roughly 25 years ago, the then leaders of both companies agreed that they would not criticise each other in public. The wine retailing business was tough enough, they decided, without either company seeking to score points at the expense of the other.   

Whether this story is true or just an urban myth I do not know, but with the exception of two minor skirmishes, to this day Oddbins and Majestic have gone about their business without reproach or rebuke from the other.  

Well today that entente cordiale ends.

Last month revealed that Majestic was seeking a 4p per bottle payment from suppliers to support the cost of its new distribution centre. This payment will last for six months and include the important trading periods of Christmas and Easter.

Various Majestic suppliers, who thought they had agreed prices with the retailer for the whole financial year, have described the company's behaviour as "unethical", although all (understandably so) have remained anonymous for fear of reprisals.

Well on behalf of all wine distributors in the UK who are afraid of speaking out publicly, can I say that I regard Majestic's behaviour as one of the shabbiest business decisions that has been made over the past couple of decades in the UK wine industry.

In a statement last week Majestic, said: "We've got to transform Majestic from a small company to a medium-sized company, which can compete head on with the supermarkets." 

Well it appears Majestic believes the first part of that transformation to become more like a supermarket is to screw its suppliers, many of whom have loyally supplied the company for years. In the face of its stated expectation that profits will be flat for this year, Majestic has lashed out against its suppliers so it can meet investors' financial expectations of increased dividend payments.

Within the non-grocer sector, the UK wine market whilst ever competitive, has in my experience to date been a largely honourable one, To my mind what Majestic's action does is bring a sense of dishonour to the trade. So as Majestic strives to become more like Tesco (even as Tesco embarks on a transformation process to become unlike Tesco of old), it is important to state why I have decided to speak out and why it should matter for the whole of our sector. 

Majestic is a successful company and has now attained the position of being the bellwether for the UK wine retailing industry. The company has flourished and it is now by far the biggest non-supermarket wine retailer in the UK. As such, everything it does is scrutinised for clues about the health and outlook for the rest of the market. 

By artificially trying to boost its income stream in this highly questionable manner, Majestic is negatively impacting every negotiation between independent wine retailers and their landlords, commercial rent adjudicators, bank managers and financiers. I accept that it isn't Majestic's place to think about the wellbeing of its competitors. But if the Company takes an action that can seriously distort the marketplace then at the very least they have to answer the question as to whether such an action is ethical.    

Secondly, in an ever changing global landscape where wineries and suppliers can sell to any number of markets, Majestic's behaviour pours vinegar over the UK wine industry's international reputation.

If the one of UK's largest drinks retailers is going to make life impossible for suppliers, then we should hardly be surprised if the best parcels of wine go elsewhere - a trend that is already beginning to emerge.

Why bother looking to the UK for sales, when you are going to be expected to fund a shiny new warehouse? What next, funding for new cars for the Directors?

Ultimately, it will be wine-loving consumers who will be impacted by reduced choice if wineries and suppliers decide they prefer to do business with more honourable retailers in other countries instead. 

As someone who has spent over 15 years developing future industry leaders, my third point is very close to my heart and should make the whole industry worried: Just like Oddbins did in the late 80's and 90's, by virtue of its size and standing in the sector, Majestic will produce the next generation of wine industry leaders. The company is sowing the seed in the minds of these future leaders that any action, however unethical, is justified when it comes to meeting short-term financial targets.

Being competitive in the UK wine business is not about extracting every penny out of your supply chain, it is about being innovative, connecting with the consumer, offering excellent service and offering good wines at a fair price. 

Oddbins paid the price for bad commercial decisions in the past, which did impact our suppliers. But since the Company emerged from administration in 2011 with a new owner and a new management team, we have placed our reputations on the line to regain the trust of our suppliers. 

Oddbins, like any retailer, will always negotiate hard upfront with our suppliers, but once we have an agreement we would never renege on that deal. And I can promise any of our current or future suppliers reading this today, that I would rather walk away from this industry and never enjoy another glass of wine again than treat you in a similar manner to Majestic.  

It is important to state that this isn't about being afraid of competition or scoring points over a rival - it is simply much more important than that: 

It defies logic that an otherwise well-run Company with a history of steady growth and profitability will embark on a significant capital outlay without having a clue of how to pay for it and then scrape the barrel by asking suppliers to cough up the cash for said expenditure. I for one can't simply sit quietly on the sidelines when the standard bearer for our industry is behaving in such a morally repugnant manner, trashing the collective reputation of the UK wine trade and poisoning the well for the future.

So on behalf of wine suppliers and the hundreds of independent wine retailers that are all busting a gut to deliver great products to the consumer, I want to underline the fact that Majestic does not represent the way our industry should be run. 

It is time to draw a line in the sand and say enough is enough - even if that means ending a 25 year relationship of respect and admiration between Oddbins and Majestic.