Naked under Majestic Wine

Why was Naked growing relatively slowly, under Majestic?

That’s an interesting question and it probably points to the reason that, ultimately, the two were separated, which was just a management time thing. Taking on two very different organizations, with very different cultures and very different approaches to their business and different challenges, is just a bit of a distraction. One of the reasons that the Majestic deal happened when it did was that, essentially, the realization was that Naked Wines USA, as led by the current CEO of the group, Nick Devlin, was just absolutely flying. They realized that was the big opportunity here and, if we’re going to go after that, then you need the focus on it and you need all your resources to be put towards that.

That was really part of the reason that Naked grew slower than it could have done, under the Majestic ownership and has boomed since. Obviously, it has been helped very much by coronavirus, as being a pure, online business. But yes, that is probably one of the reasons.

Obviously, there is the million-dollar question as to what would have happened if we hadn’t had Covid, but would you have expected a product market fit in the US, even without coronavirus, for Naked?

I think the main impact of coronavirus has been to accelerate a bunch of trends that were already happening. Working from home and doing Zoom calls like this was always something that was happening and, for a proportion of the population, it just happened a lot quicker and became a new thing, very quickly. Once we get past the vaccine stage, we’ll be back to a point where it will settle down at a much higher level. I think you have seen the same in internet retailing, in the UK. One of the most advanced markets and it was sitting at about 25% penetration, ex-grocery. The word on the street now is that it has jumped to 40%. It was always increasing, but you’ve just seen that jump come a lot quicker.

I think that applies to Naked, as well. It was already making nice, solid, strong progress in the US. It had a really good business model. It sat in a regulatory environment, which could exploit the three-tier distribution system quite well, in the US, and had an advantage there that gave it a real gross margin advantage. But at the same time, the trend was just towards online wine and towards provenance of goods and authenticity of experience and Naked had all those things, in advance.