The Secret Cellar is the retail strand of Milton Sandford Wines, which bought the Kent-based indie in 2016. Being part of a bigger entity has changed the way the company sources most of its wines, thanks to its new owner’s relationships with producers. Graham Holter reports
Maybe a funnier name would have been Degustation of Tunbridge Wells, but what The Secret Cellar lacks in Franglais wordplay it makes up for in alliteration.
In reality, the business, founded by Mike Watson in 2003, needs no gimmicks. Now with four branches – in Wadhurst and Forest Row in East Sussex, and Oxted in Surrey, as well as the famously disgusted Kent town – the company can justifiably stake a claim as one of the independent trade’s big names.
It was a founder member of Vindependents, with Watson playing a key role in transforming the group from loose association of merchants into an agency business in its own right.
In the autumn of 2016, Watson sold up to concentrate on property development. The new owner, Milton Sandford Wines, was an established importer and wholesaler, based in Berkshire, that had been bought by telecoms entrepreneur John Winchester five or so years earlier.
The other company he considered purchasing at that time was a surf business in Newquay. By his own admission, he had no experience as either a wine merchant or as a surfer. He was just looking for a way out of a rather early retirement.
“I think there’s a tremendous difference between all the segments in the UK wine market,” says Winchester, seated at a table in an area of the spacious Tunbridge Wells branch that was briefly used as a wine bar.
“There are agencies out there, there are retail companies out there and there are the supermarket suppliers as well. I just thought, I wouldn’t mind being in retail – it just adds a different element to the Milton Sandford mix. Let’s be in two markets. That’s when I started looking for companies on the retail side and came across The Secret Cellar.”
Our meeting, also involving Wadhurst store manager Adam Clarke, took place in mid-February, at a time when coronavirus was certainly on the company’s radar (it had recently forced the cancellation of a winemaker event) but its full implications were yet to become clear.
What appealed to you about The Secret Cellar?
John: As with Milton Sandford, it needed to be a business that had a sustainable model, margins that worked, IPR in your own-label creations and a segmentation in the market that worked.
This was adding another element to it and ultimately, I can see an agency model. We have developed many, many direct supplier relationships. The way Milton Sandford worked was always directly with wineries; 1% would have been sourced from a UK agent.
When we acquired The Secret Cellar, a lot of the business was through those agencies and over the last three years we have been flipping them to family producers that Milton Sandford has had a relationship with for 20 years.
At the time of the takeover, how much of the Secret Cellar range was being supplied by UK agencies?
Adam: Probably about 65% to 70%, maybe even higher than that.
We still have about 40% through UK agents and we are trying to strike that balance of having wines that the customers recognise, without the ridiculously big names that you can buy everywhere.
A lot of our customers travel the world and they know their wine so it gives them confidence in us to see some of those brands they recognise from their trips to Australia or Italy, for example, but they are also alongside our producers from whom we buy directly.
John: If you carry just agency wines you become an extension of that business – a Boutinot shop or a Liberty shop. What’s the value in the country having all these independent retailers that look the same?
If you’ve got a customer who wants to buy a Sancerre and can name the producer that they want because they’ve been buying it from us for 10 years, then we keep working with that producer. At Milton Sandford we have a great Sancerre that’s sold to Buckingham Palace, so its credentials speak for itself, and that’s a producer that we’ve had a long-term relationship with.
I like to think that our shelves have the Chablis and the Sancerres that everybody wants but they are from partners that we’ve had long-term relationships with, and that does make us a bit different to others.
What would you say are the core strengths of your range?
John: We are customer driven, so for the last three years it’s been Adam and the guys saying, “we need this” and we go and find that wine. So rather being an agency that is stuffed full of wine from a producer because the contract says you have to buy seven containers from us this year, we have always cherry-picked and worked with producers on wines that we wish to carry.
For example, we work with a winery that has 27 wines but we only buy four because that’s what our customers have asked for.
Adam: There’s only about five miles between our shops in Tunbridge Wells and Wadhurst and often there’ll be similarities in what we sell, so lots of Bordeaux and Burgundy. But the demographic does differ slightly so here [in Tunbridge Wells] we sell more New World; more Australian and New Zealand.
Are Milton Sandford Wines and The Secret Cellar run as separate companies?
John: Yes. A good way of describing it is that we are sharing the back office between the companies but the front offices are separate, both very customer related, either to dazzle and delight a restaurant customer or a customer in the shops.
We’ve got 70-80,000sq ft of tunnels below the Berkshire countryside that’s a bonded warehouse, so there are some advantages to cash flow and portfolio management.
What’s the difference in margins if The Secret Cellar is buying a New Zealand Sauvignon Blanc, for example, from a major UK agency as opposed to buying it direct from Milton Sandford?
John: I think there can be a significant difference but I’m not sure if New Zealand Sauvignon Blanc is the right example, because you could see that we have a 10% advantage there but some of the Burgundian suppliers you might be up at 25%. So by having the direct relationships and being able to import pallets and containers, it does give you some advantages because you are fundamentally removing a stage in the distribution.
Have you cut back on the number of suppliers you were dealing with or are you buying fewer lines from all of them?
Adam: Some naturally just fell by the wayside, so we don’t deal with as many and the levels of wine we were bringing in we tweaked. We are still part of the Vindependents.
John: They are an important part of the portfolio, but they are more esoteric and they tend therefore to be the ones that we need smaller volumes of. They make our shop shelves more interesting.
Is every one of the shops a profit centre in its own right or do you judge performance over the whole group? How do you measure it?
Adam: Certainly we look at each shop and how it’s performing. We look at the data year-on-year; we look at customer growth and sales. I think 2019 was a challenge for most independent wine shops, and it was a challenge for us, but we were happy at the end of it.
John: We work with Vend on the tills and for the stock system at The Secret Cellar and the reporting of it is pretty useful. You can drop it down to every cost centre, shop and line – there’s an analysis you can do on a daily basis if you really want to.
We tend to do a deep dive on our data every six months and Christmas is a key part, as it is for most business, so we’ll look at what we did in the last six months of each year and it helps us develop the portfolio.
Adam: You can bring wines that you hope customers will like and sometimes the wines you think are going to be amazing don’t sell so quickly – that might be because there’s another wine at a similar price point – so it’s important to look at the data.
How democratic is the buying process?
John: Pretty much early on I decided not to buy wine under my own belt again because if the sales guys aren’t behind it, it can end up sitting in the cellars for two years. You can find wines, but you bring them back for the team to taste before you buy them. We do taste by committee, so you make sure everyone is behind it from day one.
Where do you stand on UK-bottled wines?
John: We do bottle some in the UK; we work with Greencroft. We bring in a South African Chenin and, apart from the obvious environmental benefits, there are also cost advantages to bottling in the UK, which is really why business has embraced it for the last few years. Those are truly the bread-and-butter wines that we sell to hotels and restaurants who look to market something below £20.
How much in this shop is UK-bottled?
John: Two per cent. Not much, but it gives us that entry point of £7.
Does it appeal to you going forward?
John: It has been an important part of Milton Sandford for the last 10 years and I don’t think that will change. At The Secret Cellar people are not coming to us for £7 wines.
What’s doing particularly well for you in the shop?
Adam: Certainly our range of Italian wines. We’ve always had a strong portfolio of Italian wines and customers will come to us for that and our reputation for Burgundy and Bordeaux.
Is this the older, moneyed customer?
Adam: We are finding a new market in the shops, and obviously the clientele over the years does change. We do tastings and dinners and we see there is a demand from customers aged from around 35 who are engaging with these wines. There is a slight difference between certain generations of customer, and I don’t think the younger ones drink as much.
Has natural wine caught on here? Do you sell orange wine?
Adam: Not so much in a couple of shops. We have a range of organic and biodynamic wines, but we haven’t really found a pick-up for natural wines. If we found one that would sit in the range and at the right price point, we would have it.
Is draught wine on the agenda for you?
Adam: Not yet, but it was something that we were recently considering. We’ll probably look at it again.
John: Milton Sandford has looked at draught wines and we’ve had bag-in-box for 15 years I guess. In the early days if you took it to a pub and it had its piping down into the cellar, the wine that sat in the pipe made it uneconomical.
So you then saw people withdraw from it and now, if you look at it, the economic metrics remain unattractive. But I think people are doing it now because of the theatre of it.
Some outlets will go with it for that element of theatre and you’ve got to make sure that draught wine is better than the customer expects it to be.
Adam: It’s like with Enomatics. It’s all about location. The shops where it works have the footfall and people coming in all the time.
Do you do wholesaling in your own right from this shop?
Adam: Yes. We’ve got a few little wholesale accounts – we do some local farm shops, restaurants and pubs. It is only a small part of the business and many people wouldn’t necessarily know that we’ve got access to a bonded warehouse. We’ve got a softly, softly approach to wholesale but I’m confident it’s part of the business that will grow.
How’s the website doing?
Adam: We have two different websites. It works for us – 8% of turnover comes from web sales – but any customer buying wine online, who they will buy it from comes down to pricing.
John: We find with the online business, around 70% is return. We play the ongoing Google AdWords game.
Adam: We use Vivino and that works for us. If someone is in a restaurant and they are enjoying a wine, they scan it and see we’re the retailer for it.
John: We have Deliveroo as well. The convenience factor for consumers is one of our sales channels.
Adam: It helps if you have a shop in a hilly town!
You’re in the heart of English wine country. How are your sales going?
Adam: We have a strong range of English wine and with four shops you can have wines local to each shop. We work directly with quite a few local producers. We don’t sell massive volumes. People will come in asking for it because they want it as a gift, or for themselves. But they very rarely walk away with six bottles or a case of 12 of English wine.
John: I think the metrics are still against it. If you offer someone an English Pinot Noir at £24 and they taste it against an £8 Chilean Pinot Noir and yet the Chilean has more characteristics – that’s a tricky one.
You can sell one case because everyone is willing to try it, but yet it still has to perform better. They are getting there, there is the goodwill and we would all buy British if we possibly could.
I think the English winemaker is a different beast to the French or Italians who have been farmers and growers for generations. Ours tend to have been very successful in other industries and have come to it from a different perspective.
I’m not sure it’s a mature enough industry for them to have worked out their go-to market models and the percentages they need to provide for the layers in the distribution channels.
Adam: There are so many more players in the market now. Every few months we are invited to taste a new English sparkling wine.
How about craft beer and spirits?
Adam: We did well with gin for many years, but I think our figures are telling us that we’ve reached peak gin.
People did such a fabulous job of getting their product to shops like ours, and we got behind so many of them. But eventually they started filtering through to the supermarkets, so for us there’s no point in continuing to stock those.
We dabble with craft beer – again because we have shops in four different locations, we can’t just put them in all the shops. It wouldn’t work.
We’re probably doing more [Scotch] whiskies … in the spirits portfolio we stick with the main categories – gins, vodkas, whiskies – but it’s not the main part of what we do.
You had a wine bar here, that you closed and incorporated within the shop. What happened there?
Adam: We experimented with that. It was crowdfunded in 2015-16. It was a wine bar and we looked at it and thought it was better as a private tasting room and we now use it for winemaker dinners. In this section we can accommodate 20 to 26 people and sometimes we can extend that into the shop.
John: I think we learned early on that it was not going to be a wine bar open every day that was going to help us, it was an event space. We have a monthly wine club that we run and we host dinners with winemakers.
Adam: It’s great for us when we get the winemakers here for an event. We use a local company to provide a four-course meal. Usually we charge about £65 a ticket.
We’re not hard-sell on the night, but there are order forms and case deals available. The most recent one we did with Chateau Musar was really successful, and the sales off the back of that were fantastic.
We’ve got our regular mailing lists so customers who have signed up over the years will get a newsletter including information on those kinds of deals and events. We use Instagram.
John: We do two big tastings a year, in June and December, and we do that in all four shops.
The dinners are more shop specific. When referring to a hybrid model, lots of independents think that is their future – but I say location, location, location. You have to be in the right place for it to work for you.
You promote a fine wine scheme called The Cellective. How does that work?
Adam: It’s a wine scheme for people who are stocking their cellar, so it’s wine that is designed to be laid down. Some customers who have been part of the scheme for the past six or seven years have a hell of a lot of wine!
How do you keep the team spirit going in a business spread across different locations?
Adam: We’re not a big team. There’s only about nine or 10 of us across all four shops so it is hard to get together regularly.
I go and visit the other shops. The guys who have been running the shops for a while do have autonomy.
The shops are all different – this is the main one. The Forest Row shop is great because it has a big space and we do lots of events there too.
John: We try and manage the portfolio – you don’t want unauthorised additions of, say, 25 Australian wines just because one person likes it. We attempt to buy by committee so that everyone is behind the wines.
Are you keeping your eyes open to expand the brand? Open some more shops?
John: I don’t see we need to have 50 shops but ultimately having a dozen shops will be a good thing. You’d then get the economies of scale to buy a pallet and move it through efficiently. It’s about finding and selecting the right towns around the M25.
Adam: This is a very good example of a town where four or five years ago, there would have been an Unwins, several Wine Racks, Oddbins and now none of those guys are here, but we are still here. There’s a couple of wine bars locally.
John: You certainly see the town struggling. There are many empty units, just like any town in England. We are fortunate that we have a good long-standing reputation in a town like Tunbridge Wells.
Stores close for Covid-19, but sales rise by 60%
Coronavirus is, not surprisingly, making life difficult for wholesale businesses like Milton Sandford. In the current circumstances, the company’s acquisition of a retail arm looks more and more like a masterstroke.
All four Secret Cellar branches have closed during lockdown, concentrating on local deliveries organised from each store. Stock is being sourced from the Milton Sandford cellars, but Adam Clarke is keen to make the most of what’s already available in the shops, even if that sometimes means that customers have to settle for an alternative to first-choice items.
Sales in March and April were up 60% on the 2019 figure, Clarke reports.
“I made a decision when they first announced that we could stay open that, if it didn’t feel comfortable the week before, when people weren’t overly respectful of the social distancing guidance, then it wouldn’t be right now,” he says. “Customers were reaching over the tills to get stuff.”
Local deliveries are free for all orders of £100 and above, and the company will typically organise 30 or so drops each day.
The business is seeing a flow of orders from new customers, while many existing clients are buying more during the lockdown period.
“A lot of people in their 20s and 30s moved back to their parents’ home – they’re buying alcohol, and lots of it,” says Clarke.
“We’re obviously picking up people who are spending at the cheaper end and they’re buying mixed cases and the like. They’ll ask for 12 bottles of our cheapest wine and things like that.”
Once the stores reopen, Clarke expects significant changes to the shopping environment. “We’re going to have to limit the number of people in the shops and having markings on the floor … we don’t want to go through all this for nothing.”