Majestic funding request angers wine suppliers

Majestic Wine has angered a number of its supplier wineries by asking them to help fund a new warehouse for the retailer in the UK.

One trade source said several suppliers were ‘furious’ over a Majestic request that they pay an extra four pence for each bottle they ship to the specialist wine retailer.

Majestic has sought extra funding from suppliers to help fund its move to a new warehouse in Hemel Hempstead, near to London, as first reported by trade magazine Harpers late last week. The funding period was set to last until the end of April 2015.

Profit margins are tight in the UK wine trade and pressure has increased in the past five years due to duty tax rises and a weaker national economy.

‘We can’t get involved in this,’ said one Majestic supplier, who did not wish to be named but who felt no option but to decline Majestic’s request – despite concern about being delisted as a result.

‘I don’t want to lose the business, but we can’t afford to do that,’ the supplier told Decanter.com. ‘Their decision to invest is welcome, but that development is typically planned and budgeted and should be built into their plans.’ It’s highly unusual for suppliers to be asked to fund a capital expenditure project, the supplier added.

When contacted by Decanter.com, Majestic said it had ‘asked suppliers for their support’ during its move to the new warehouse, but it said commercial arrangements with its business partners were confidential.

‘We are confident that the new distribution centre will [help to] grow our business, but it will also benefit all our business partners,’ the retailer said.

Majestic has earned plaudits for being a relative success story as a specialist wine retailer in a market where others have failed.

In June this year, some analysts said they were concerned about weakening sales in the group’s most recent financial year.

‘I would say Majestic has been more friend than foe to the wine trade,’ said Clive Black, a retail analyst with Shore Capital.

‘They could be playing with fire here,’ he said of the warehouse funding plan, ‘but if the new warehouse is likely to grow their business, that might be something [for suppliers] to think about’.

Written by Chris Mercer