Fireside chat with Majestic Wine CEO Rowan Gormley

A meet cute with billionaire Virgin Group founder Richard Branson was Majestic Wine boss Rowan Gormley's first lucky break. Getting fired was his second. He's led the £274 million pound wine retailer's turnaround since April last year, overseeing a 24% rise in the share price, and the entrepreneur is confident the company can handle stockmarket volatility.

After meeting Branson, Gormley was tasked with the job of launching Virgin Money in 1995 and then Virgin Wines in 2000, later taken over by Laithwaite's. He was fired soon after.

But this, he tells Interactive Investor, was a blessing: "Had I not been fired I would still probably be a middle manager in Laithwaite's!"

Instead, in the worst recession since the Great Depression and with very little cash, the connoisseur and a bunch of his friends from Virgin Wines decided to set up a new vino venture - Naked Wines. Against the odds, they pulled it off, emerging as pioneers of the crowdfunding model.

"2008 was a crazy time, it looked like the world was going to end and we had made this decision to set up a wine company," he explains. "It forced us to be radical and come up with a proposition that was overwhelmingly better. To do that we had to help the wine makers and what they needed to most in 2008 was money.

"It was only when [crowdfunding website] Kickstarter launched two or three years later that I thought 'that's what we do!'"

Hunting down the unsung heroes

Naked Wines' subscribers, or "Angels", pay £20 a month, which is invested in independent wine businesses around the world. In return, Naked Wines is able to buy the product at exclusive prices, which are passed onto its Angels. In the beginning, Gormley's team had to sniff out the good stuff themselves, but many now come directly to the company through word of mouth. The model is so popular there is currently a waiting list to invest.

Majestic's share price has outperformed the wider market by miles"Our job is to hunt out the unsung heroes, the real people behind great wines and help them set up their own company. All our wine makers need to do is make great wine, they don't need to be great sales men, worry about regulation or cash, we do all of that. A lot of the best wine makers aren't the most famous or well-known because they tend to be people that spend time in the cellar rather than on television."

But since April 2015, Gormley has had even bigger things to think about. After a shocking Christmas in 2014, Majestic Wine's previous boss and company lifer Steve Lewis was shown the door. In what's known as a reverse takeover, Majestic acquired Naked Wines for £70 million and installed Gormley at the helm to lead the turnaround. It's all been "very exciting" for the new boss and, results-wise, it's so far, so good.

"The people are brilliant, all the hard things have been done well and the things that haven't been done well are things I understand [customer service, for example]."

Dutch courage in volatile times

With its latest results showcasing a festive corker, Majestic's share price has outperformed the wider market by miles. They're up over 28% this year already. The poor old FTSE 100 is down 6%.

The boss helped group sales jump 12.2% in the 10 weeks to 4 January, supported by sales growth in retail (7%), commercial (11%) and at Naked Wines (29%). Wine merchant Lay & Wheeler was the only hiccup, tripping 3.5%.

Ultimately, Gormley's three-year transformational plan to generate sales of £500 million is on track. With three lines of attack, Majestic first has to nail the retail basics. Then there are two major projects to get off the ground - one is around product availability and the other is focused on rebuilding the IT platform. The final step is to integrate the multi-channel retail experience, combining store, online and mobile.

The new "Definition" series sold over one million bottles in just three months"The thread running through all of this is taking our key asset, which is the customer experience, delivered by the people, and taking it on a step and making it even better than yesterday," he says.

That Gormley has kick-started the group's turnaround in what remains a very challenging industry backdrop is impressive. Specialised retailers have typically struggled against the supermarket chains, which are often able to slash prices and rely on the ease of a one stop shop. But Majestic's gem is its customer service and passion to help people find the right wine.

"The economic turnaround is filtering into people's pockets very slowly and retailers have too much space and are discounting hard to get people in. They have got zero service propositions, a commoditised wine offer, so all they can do is discount. Virtually all are struggling to get like-for-likes moving in the right direction."

With its eyes set firmly on gaining more market share, recent product launches were popular over Christmas. Its new "Definition" series sold over one million bottles in just three months and it was certainly a Craft Christmas for beer and spirits. The crisp Definition Limoux Chardonnay is one of Gormley's favourites: "It's an absolutely gorgeous bottle of wine."

Adventurous with age

Known as one of the most mature wine markets in the world, the British public are getting even more adventurous with their pallet. In 30 years, British taste buds have journeyed from French vineyards, to Australia and New Zealand, and Argentina. But the adventurous aren't just looking further afield for their plonk and the surge in demand for craft beers and spirits sold by Majestic is here to stay, reckons Gormley.

'Make sure people never want to shop anywhere else and the sales will look after themselves'"A Baby Boomer will be impressed by a brand that spends millions on advertising, whereas Millennials want something made in a kettle in Shoreditch, by someone with multiple piercings, tattoos and a big bushy beard," Gormley jokes.

"Actually, the reality is that craft gins and beers just taste better. Because the big brands have spent so much on marketing and very little on what goes into the bottle. I think the move towards craft and independent is a long-term one and will continue."

With demand flat, the Liv-ex 100 ended 2015 at 238.26, the fine wine industry just avoided a fifth consecutive year of falling appetite. Experts are hoping the worst is over, but Gormley reckons Majestic is well-placed for growth either way.

"At Majestic we only have about 10% of the market share and at Naked we have the square root of nothing. The opportunities for us to gain share completely exceed market volatility numbers. The wine market will do whatever the wine market is going to do; I just can't worry about that too much. My focus is on building the customer service, make sure people never want to shop anywhere else and the sales will look after themselves."

After all: "It's too important to mess around with bad wine."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.