How the mighty have fallen.
Conviviality was – rather like the Titanic – meant to be so big, so integrated, so ‘of the moment’ that there was no way it could fail.
And yet here we are, just a few weeks after the first ‘straw in the wind’ profit warnings, staring down the barrel of the disintegration of the UK’s biggest wine company. The company is to call in the administrators in the next couple of weeks.
It’s terrible news for the 2,500 people who face the possibility of returning from the Easter break to find their jobs at risk.
It’s awful news for shareholders whose investment is now, essentially, worthless.
But it’s bad news for the on-trade as well. It’s hard enough for most in hospitality to get the right products delivered at the right time even when things are running smoothly.
Now, for over 20,000 pubs and restaurants across the country, supplies could be disrupted for weeks, maybe months. At a time of economic uncertainty and shaky consumer confidence, to have half your wine list out of stock is the last thing any venue needs.
So what went wrong? The company is continuing to blame the failure on an accounting error that left a large hole in the company’s finances, and meant it was unable to pay a £30m tax bill.
It’s possible, I suppose, though I find it hard to believe that any company could fail to budget for tax. It’s equally likely that the underlying economics of the business weren’t stacking up anywhere near as well as was hoped. We will know more about the whys and wherefores with time.
As for what happens next, the various businesses will be put up for sale, I would imagine. Ten, even five years ago it was possible to see potential buyers for large wine businesses like this. But the market has changed – and not for the better. Bibendum and Matthew Clark – both of which were making money, as far as I can gather – may go back to operating on their own.
Either way, the fact that financiers didn’t fancy stumping up the £125m required to keep the company afloat is a terrible verdict on Conviviality, but it’s also a bleak warning about the overall health of the UK wine market.
The business that was too big to fail is heading for the seabed, but we’re all in the same chilly ocean.