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Neighbour’s £120,000+ Loss to Oddbins: a Drop in the Ocean

March 28th 2011, by

Fortunately for us, it’s not Château Bauduc that’s owed £152,000, but Château Lauduc. Hervé Grandeau, whose vineyard is 10 miles up the road from us, will have to accept 21p in the pound if the beleaguered chain survives a creditors’ vote this week, or less if not. Over 500 creditors are owed over £1000 each, including 100 wine and drinks suppliers who risk losing between £10,000 and £310,000. (Update, 4th April. As HMRC – see ‘The executioner’ below under CVA: will Creditors Vote Against? – refused to back the survival plan, Oddbins will enter administration today.)

15158Everything seemed fine last October and November, when Hervé supplied Oddbins with 50,000 bottles, or 15% of the production from his 59 Hectare Bordeaux vineyard. As a small-time negociant, he’d also bought wine from neighbouring Châteaux – about 20% of the total bill of €180,000 – to supply the chain.

‘Much better health’

There seemed little cause for concern towards the end of last year for outsiders, even if some people say that the writing was on the wall. Tim Atkin MW, one of the UK’s most authoritative wine writers, noted as recently as 24th November 2010: “Oddbins has not yet returned to its glory days of the late 1990s, when it was arguably the best wine retailer in the world, but it appears to be in much better health than it was two years ago, when the French company Castel sold the business to its current British owners.”

You can imagine Hervé’s dismay at the beginning of March, following weeks of not having his calls returned, when news broke that Oddbins was to close 39 of its 132 stores. “The business is being restructured,” read the ominous public statement.

All gone horribly wrong

Since then, the company’s woes have been in the business columns (‘Oddbins seeks to uncork rescue funding‘ said the Guardian) and lifestyle sections:  “Oddbins has been fending off accusations that it couldn’t afford to pay its suppliers for some time now, but it has finally surrendered all pretence of being absolutely fine” wrote Victoria Moore, The Telegraph’s wine critic. The story has been the talk of the wine trade – both in the press, in blogs and on Twitter.

p1050391_2Some articles, like this one by the Assistant City Editor of The Telegraph, are blaming the great British public: “Wine lovers everywhere should be feeling a touch ashamed this morning. News that Oddbins has appointed restructuring advisers and is under the cosh reflects badly on all of us. Every bottle of wine we’ve bought in the supermarket over the last year has been a bottle we haven’t bought from Oddbins and its rapidly diminishing off-licence peers.”

Personally speaking, I believe that if you don’t buy from me, it’s not your fault.

My feeling about the Oddbins proposition is that overinflated single bottle prices (‘indecently so’ says Victoria Moore) are a big turn-off for passing trade: I bought from the shops in the Fulham Road and Kings Road last year, neither of which have parking to take advantage of the “20+% off for six bottles” deal. £9.95 a bottle seems a lot if the same wine is £7.95 for six.

As for sales by the case (20% off etc), the spirit of the delivery terms on Oddbins’ website shows why only 3% of sales came via the web: “Due to the nature of the products we sell, we require that they are signed for by an adult upon delivery. We cannot accept any instructions to leave the goods in any location, however secure, without being signed for.”

Any home delivery specialist knows that’s a no-no, and they must have failed to engage customers with a steady stream of one-size-fits-all email offers. ‘Dear Wine Lover’ or ‘Greetings all’ surely doesn’t cut it anymore.

CVA: will Creditors Vote Against?

The company, which can’t pay it’s debts of £20 million, has entered into a Company Voluntary Arrangement, or CVA, whereby creditors will vote on 31st March to keep the business afloat and accept 21p in the pound of what they’re owed – repaid over 46 months – or give it the thumbs down.

oddMost observers anticipate the worst. “The atmosphere here tonight is like the Coliseum when the Christians are on the menu” Sid Wadell, the darts commentator, once said. He was being serious, and so is the mess that Oddbins are in, but it does feel like there’s a queue forming to get a glimpse of a public execution.

The executioner may be Her Majesty’s Revenue and Customs, which is owed £5.5 million in unpaid duty alone, plus PAYE and VAT of £3 million. Many wine suppliers are entitled to ask just how Oddbins managed to escape paying such a colossal sum earlier, as duty should have been paid as soon as the goods were released to the shops from a Bonded warehouse (which is controlled by HMRC). If that £5.5 million was made up of wine duty alone, that’s 3,250,000 bottles, or 25,000 per store.

In a bizarre twist last Friday, the company “applied to enter administration, in an effort to prevent claimants derailing the CVA.” It transpires that a winding up order had been made by British Gas, which is owed the princely sum of £57.65.

Suppliers in the pooh

p1080581Whilst everyone can sympathize with the staff and, to some extent, the company management, a happy conclusion for hundreds of suppliers looks unlikely. The list of 800 or so creditors, as published by Deloittes – google ‘Deloittes Oddbins cva’ for the pdf – is astonishing. There are some big bills from big companies which have made the headlines, but it’s the little guys who will really struggle. Over 500 creditors are owed more than £1000 each, including 100 wine and drinks suppliers – growers, brewers, distillers and merchants – that are owed between £10,000 and £310,000. Added to which, there are numerous service providers – software, couriers, shippers etc. (There’s even the aptly named P Larkin Interiors with an outstanding bill of £10k: ‘Going, Going’ is one poem that springs to mind.)

UK merchants Les Caves de Pyrène have said that the growers they represent are owed £145,000 and a great many producers are left to carry the can.

Château Le Grand Verdus, owed £12k, is a stone’s throw away from us, and they’re not insured. Château Rousseau de Sipian, owed £31,000, is quite far away in the north of the Médoc and owned, I believe, by Brits.  A quick tot up of a few Bodegas and Vina Bodegas shows that they’re owed £550k between them. Then there are domaines, châteaux, wineries, merchants… As Hervé made clear to me, even if Oddbins lives to fight on, how can the business survive if suppliers insist on being paid in advance?

p1030945Looking back, Oddbins made their buying strategy clear when the new regime took over.  It might now be fashionable to blame the supermarkets (when hasn’t it been?) but somehow I don’t think they would have allowed their buyers to be quite so cavalier with other people’s products, services and livelihoods.

“Our buyers will go out and buy whatever we fancy,” owner Simon Baile told Victoria Moore, then of The Guardian, in January 2009. “And I don’t just mean a couple of parcels a month – I mean a lot of what we fancy.”

Pity then, for Hervé, that someone fancied rather a lot of his stuff.

Some good news for Hervé

Finally, there is some good news. Hervé should be covered by his insurance for 80% of his loss, even if €36,000 is still a lot to lose if he doesn’t see any of the money owed to him. He took out a contract which was backed by the French state, and the EU he says, that covered exports for small businesses, called Cap+ Export.

When I asked Hervé if this somewhat attractive insurance plan was still available (kerching!), he told me that it had been scrapped. With the potential losses in store from Oddbins and the like, I can’t see the authorities rushing to resurrect the scheme any time soon. So the EU picks up part of his tab, and we’re looking at bigger insurance premiums in the future.

I guess we’re all losers, one way or another.

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