Profile: Steve Lewis, CEO, Majestic Wine

Leadership styles / 23 January 2012

Steve Lewis stepped up as CEO of Majestic Wine just as the recession hit, but has still managed to increase profits and market share. He talks to Helen Mayson about graduates, grapes and why the firm has got so much more to give

Majestic Wine's head offices on an unassuming industrial estate in Watford are somehow not what I expect when I pull up for our interview.

From the outside it's a somewhat dull-looking 1960s warehouse space. Inside, it’s a hive of activity, a huge open-plan office with cluttered desks against burgundy walls, a profusion of proudly displayed industry awards and high, airy ceilings. The combined distribution centre and office is an interesting mix of the practical and creative.

I tell CEO Steve Lewis as much, and he looks pleasantly surprised. "We had them refurbished not long ago," he smiles. "Though we’re going to need to move in a few years. We’re bursting at the seams."

Lewis, whose own desk is out on the floor with the digital, HR and marketing teams, likes the attitude that an open-plan space encourages for practical as well as cultural reasons. "If we've got a bit of a problem you can pull two buyers over, then pull someone over from e-commerce, have a bit of a huddle and ten minutes later you're off and moving in the right direction."

You can see why an open environment suits Lewis – after all, it's not like he has anything to hide. Majestic has gone from strength to strength since he took over as CEO from Tim How, with pre-tax profits in 2010-11 up 26.6% from the previous year. Total sales were up 10% too – not bad for a man who joined the company as a graduate trainee in 1985.

After studying modern history at University College London, Lewis was drawn to Majestic partly due to his love of all things French.

"I've always been a bit of a Francophile – I used to spend a month a year in the Loire Valley on exchanges and I’ve always really liked food and wine. I could also see a complete revolution in standards of food and wine occurring in the UK in the early 1980s," he says. "I don't think it’s any coincidence that Majestic has grown alongside this revolution."

He quickly progressed to store manager, then retail manager, until former CEO How promoted him to Chief Operating Officer (COO) in a well thought-out move to prepare him for the top job.

"The move to COO was very much succession planning," he says. "It's all credit to Tim How. I think it says something about his maturity, self-confidence and intellect to appoint your own successor and do so three years before your departure. He was a big influence on me.

"It also says something about the board at Majestic and its confidence in building for the future."

Decisive action

Taking the reins in 2008 after How retired, Lewis found the UK on the brink of recession. "I knew, because I'd been through two recessions before, that this one was serious."

He took the tough decision to freeze pay for all employees, a move that was hardly likely to make staff warm to the new CEO. He broke the news at the company’s annual conference, telling his staff that the profit target would remain the same as the previous year, and that, if they exceeded this figure, a percentage would be given back in lieu of a pay rise.

"At the end of the year, we were not only able to give them what would effectively have been the pay rise they didn't get, but we were also in a position to give them a profit-related bonus."

Retail management, as a generalisation, does not place enough emphasis on customer service. the standards are very low.

Steve Lewis, CEO, Majestic Wine

This kind of savvy thinking also meant that Lewis didn't pull back on vital investment in the company, despite a gloomy financial prognosis for UK plc. "Instead, we took every area of the business that is customer facing and moved it up a level, forced it up there by sheer energy.

"We continued to recruit and train. We also changed our product range considerably as pricing had gone up in northern Europe. We moved our range to include more New Zealand wines. New Zealand sauvignon blanc has been incredibly successful for us."

In 2009 Lewis made his most dramatic strategic move – cutting the minimum customer purchase from 12 bottles to six.

"Moving to six bottles wasn’t actually a reaction to the recession," he says. "It was an idea I had a few years before in our Cheam store. It was Christmas, and a lady came in, picked up two bottles and headed to the counter. I thought I'd lead from the front, a classic CEO move, and explain to her why we had a minimum purchase amount of 12 bottles. She got frightfully embarrassed, dumped the two bottles and scurried out of the store. I thought, hang on, here I am, CEO of the company, and I can’t persuade somebody why they have to buy 12 bottles. How on earth can I expect a 23-year-old graduate to do that?"

The move down to six bottles proved popular with customers, who are now spending on average £1 per bottle more on six than they would on 12. "It's because they're now buying the wines they really want," says Lewis.

Majestic is a young company in the sense that the average age of its employees is 26, most of which are university graduates. Many directors and senior staff have worked their way up from the very same graduate trainee programme that Lewis entered in the 1980s, and this process has established a solid company culture.

"You can cut this organisation anywhere you like – in our commercial sales team, at store level, at director level – and we bleed green," says Lewis, referring to Majestic’s company colour.

"Our philosophy is to recruit people who look and sound like the sons and daughters of our customers," says Lewis. "We're looking for charming, articulate, motivated members of staff who know how to work in teams and are keen to continue learning. Graduates fulfil those criteria, and our customers really relate to them."

Has he noticed any recent change in what graduates want? "They're looking for employers who are willing to invest in their career. They’re coming out of university more realistic about the fact that they may need to start at the bottom and take opportunities as they arise."

Turnover at management level is low – just 11% a year – but at lower levels of the organisation this figure rises to 35%. "We're the training ground for the wine industry," says Lewis. "You have to accept that you will have reasonably high turnover. We just have to be grown-up about that. Wine attracts very high-quality people – but so does training."

A taste of training

Majestic is big on developing staff. All of its graduates must study to achieve the Wine & Spirit Education Trust advanced certificate, and they can take part in tastings every week. Each store also has its own tasting budget controlled by the store’s staff, who can open whatever wines they like within that budget.

"It's extremely important that they learn about wine, how to taste it, how to describe it, because that’s one of the key points that differentiates us from the competition."

With 3.7% of the market share, Majestic is by no means the biggest wine retailer around – that honour goes to the supermarkets, who sell around 70% of all wine in the UK. But Majestic attracts a different type of customer to those who buy their wine in Tesco or Asda.

"Our real market share of what we call 'our' market is more like 10%," says Lewis. "Majestic's market share of Bordeaux is 12%, of champagne is 10%, of Argentina 12%. With Provence it’s 35%, because it's dominated by £10-a-bottle, very fashionable rosé, and we hold a 35% share of that market."

At its heart, Majestic is a "people and product company", says Lewis. Customers come to Majestic because they know the staff will be able to talk to them knowledgeably, and can offer free delivery, glass hire and wine tasting. It's an entirely different experience to chucking a bottle of Pinot in with your weekly shop.

Silver service

"We've got this great product, wine, that attracts lovely customers who like shopping for it," says Lewis. He believes that companies should provide a high level of service in return for their custom, which means trained and engaged staff. "I think UK customer service standards in retail are very low," he says. "That’s not a criticism of retail staff, it's a criticism of management. Retail management, as a broad generalisation, doesn't put enough emphasis on customer service."

Majestic is continuing to grow and has opened 16 stores this year, compared with just six in 2009. "It's partly because there are more properties available on the market, and partly because the move to six bottles means we’ve grown much more quickly. Most new stores now make money in their first year."

The company is also rolling out fine wine – classified as still wine sold at over £20 a bottle – to more stores after some hugely successful trials. "Our fine wine sales grew by over 20% last year. You think, 'What on earth are we doing growing fine wine profits in the heat of a recession?' But we are."

 Further investment next year will mostly be made in the commercial arm of the business, which makes up about 20% of Majestic's total turnover, and into the growing e-commerce strategy and team. Online sales are now 10% of the company’s total sales and growing every year. "We're planning for online to be at least 25% of total sales in the future."

The e-commerce team are tasked with recreating the Majestic experience online through videos, food recommendations and editorial content. "It's about bringing the character of our staff to the website."

Selling online also allows Majestic to respond to trends and opportunities with lightning speed.

"In our management meeting a few days ago, we saw it was due to be hot all week so we decided to do some promotions on rosé wine. Within one hour we knew what margin we’d make, what stock we’d sell, and by the end of that day the email went out. Within one day we’d created and marketed an online promotion, and the sales occurred over two days. It’s very instant."

Through the grapevine

It also means the competition responds more quickly, too.

"We take it as a compliment that within 24 hours of launching that rosé promotion, one of our online competitors launched a very similar-looking deal," he smiles.

While competition is fierce, it's mostly friendly. "I know the head of beers, wines and spirits at all of the supermarket chains. I also know the MDs of most of our suppliers. It means that they understand our unique position in the market."

Getting to know people in the business has this year taken him to Chile, Argentina, South Africa and the south of France. This is not a job for people who don't like to travel, but thankfully Lewis seems to have the travel bug. "It's fun, and it’s a powerful way to send the message to suppliers that Majestic is growing, it’s ambitious and it's unique."

Personal relationships, whether with suppliers in South Africa or staff in the Clapham South store where Lewis started his Majestic career, are a real part of the Majestic culture. "The important thing for me is to act and behave every hour of every day in a way that’s real and true to this culture.

"If you can't make it fun, interesting and rewarding, it just becomes another job. And I'm not interested in just doing a job."