Naked Wines' new UK managing director outlines strategic priorities

Naked Wines announced that chief financial officer James Crawford will take over as managing director of its UK business when it delivered its full-year results this morning. We caught up with him to learn more about his plans for the business, the opportunities ahead and the challenges that must be overcome. 

What are your strategic priorities for the UK market?

Naked can still scale significantly from where it is in the UK. We remain innovative, we have a great portfolio of wines and my goal is to make sure that the US has a hot competitor in terms of who is going to be the biggest Naked market.

Who do you see as your key challengers and how can you outperform them?

There are a number of good businesses here in the UK. I have to give credit to Majestic for being a good business. I used to help run it. But we all play different roles. Majestic is a good business, but it’s a competitor now. It’s not part of the group. Laithwaite’s remains formidable in terms of scale and presence of mind in the UK market. And let’s be honest, the grocers are still the businesses who are doing a huge proportion of the wine trade in this market. There is still a lot of very credible competition out there, and we will prevail, we believe, by being somewhat different, by keeping people connected to winemakers, rather than being the face of wine. We fundamentally believe that by connecting engaged wine drinkers with the world’s best winemakers we can do something different to what everyone else is doing.

Majestic appears to be performing well during the pandemic. Is there any regret about selling when you did, or are you just pleased to now have a singular focus with the business?

I have no line of sight into their numbers other than what I see on social about them, running click and collect and now slowly reopening stores. We still believe we did the right thing. We have a business that is focused singularly on one opportunity. We have money in the bank that enables us to be opportunistic and agile around where we invest and how we invest. We announced that in the last two months we spend double on marketing and attracting new customers than what we did a year ago. Those are the kind of decisions that you can make very quickly when you’re focused on the data from one business, not working out what the trade offs are between them. I’m very pleased with the situation that we are in. As a pure, online focused business, it’s a good place.

Will you devote a significant chunk of the healthy cash balance you now have towards customer recruitment?

The priorities that we have laid out for our capital are to maintain a healthy balance sheet – never has it been more important to have a robust balance sheet than in this period of uncertainty – and the next priority is growth. In the UK, there is opportunity for growth. In the US, there is huge opportunity for growth. We see a range of ways that we can spend that money. We reported a small loss this morning. We are very happy making a small loss while we are delivering attractive paybacks on those investments and growing the customer base.

In April you had to stop accepting new customers due to a sharp uptick in demand. Do you now feel confident that you can handle another large upswing in customer numbers? Or do you expect demand to taper off now that the lockdown is being eased?

My crystal ball is not much better than anyone else’s. We’ve deliberately withdrawn guidance because of that. On the one hand, pubs and bars are starting reopening, so there’s a logical inference that you might expect people to stop drinking at home. On the other hand, they are clearly not reopening in the form that they used to be, and at the same time, you’ve got a lot of people not travelling abroad this year for holidays, whereas previously they would be, so there are some competing pressures that will lead to the end result as to what demand is, and I don’t know how those play out.

We did stop taking orders briefly. We did that at a time where we had a surge of orders, and we weren’t sure if we were even going to be allowed to keep warehousing open. Now that we know that we are considered food supply chain, we have put distancing in place and we have actually opened ancillary sites, we are better equipped to cope with those surges in demand, and ultimately any constraints we have had in the UK – we are still operating a limited range – will be mitigated when we move into a new facility that in aggregate is 10 times the size of our current facility in the next month or so.

Has it been more challenging and expensive logistically to get wines to customers from around the world, or has the supply chain been quite robust?

The supply chain has been pretty robust. As individuals we have been limited in our ability to go abroad, across borders, that hasn’t been the case for supplies of wine, similar to food. There was a temporary blip in South Africa, but that reopened after a few weeks. Almost perversely, at the customer-facing end of the supply chain, with everyone being home, it’s been easier than ever to get deliveries accepted and signed for, versus the history of people are out, where do they leave it, going back to the depot. The supply chain has held up well.

Do you believe this pandemic will mark a permanent shift towards online wine purchasing among consumers? Are you confident that you can maintain and grow market share when the on-trade reopens and brick and mortar stores become busier?

It has created a one-time reassessment for people of how they buy things. Not just wine, but across the board. I think in the UK that is true, and there will be a degree of continuity of that. The real part of that story is the US, which was 10 years behind the UK in terms of online wine penetration. It was about 5%, whereas the UK, because of the prevalence of online grocery, was about 25%. The US went from 5% to 25% in the space of eight weeks. That means that a huge population have changed their shopping habits and discovered that they can buy wine online, whereas a lot of them previously didn’t even realise they could, because of the way alcohol is regulated in the US. The answer is yes. Whereas the answer is yes with a little caution in the UK, it’s a resounding yes in the US. We have a pretty broad footprint across the US. We reach 95% of the population in less than 48 hours, which by US standards is a very high service level. We see the opportunity to grow the business.