Back to the drawing board: Arthur Rackham

To safeguard his father’s 15-strong off-licence chain, James Rackham took the rather courageous step of closing every store bar one. Fortunately business has since thrived.

‘I’ve taken two big gambles in my life,’ asserts James Rackham. ‘The first was deciding to join the family business [the Arthur Rackham off-licence chain, founded by his father in the late 1950s] and the second was to take charge in the 1990s and transform it.’

Neither of these risks came easily to James, who had to give up an earlier, promising career as an economist in Australia.

‘My father kept on pleading with me to come back. His prime motivation was to build an empire that he could pass on to his family and his employees. His was a very persuasive ambition.’

Resisting change
Buying into this dream, James joined Arthur Rackham in the mid-1970s. At that point, the operation had expanded from one to 15 stores and the number of employees had mushroomed to around fifty.

But there were many warning signs that the sector was about to undergo tectonic changes. ‘Sales of spirits were in decline because of increased taxation, whilst wine was taking off,’ he says. But the biggest change was that ‘supermarkets were encroaching on market share’.

Reacting to the changes, James instigated a much-needed re-branding exercise to capture new customers and retain and extract more from existing ones. Among the novel ideas (for the time) was the creation of a Rackham wine club with wine-tasting evenings, alongside innovative investment in staff – he introduced a graduate training scheme with the aim of developing professional and motivated staff, something of a first for the independent off-licence trade.

By the early 80s, over 10,000 customers had joined this club, generating £400,000 in revenue and contributing to total annual sales of £2 million.

Nevertheless, despite his best efforts, there were weaknesses in the business that no new marketing drive would be able to solve.

‘We were facing a declining market – and the competition from multiple retailers was more fierce than many had anticipated. It didn’t seem to make financial sense to run a 15-shop operation. We had rising labour costs, no increase in margins or turnover and shops with too much of a diverse demographic.’

However, while the corporate ills were correctly diagnosed, he faced one big problem in delivering the medicine – ‘my dad did not want to make alterations,’ he recalls.

With no middle management in place and Rackham senior in an intransigent frame of mind, James recognised that a real transformation of the enterprise was impossible.

Pastures new once again
‘I wanted to get out – the environment at Arthur Rackham was smothering. The only solution was to make a break and further my experience in the drinks industry.’

Striking a deal with his father, he was able to use a proportion of the cashflow of the original business to set up a wine agency called Winefare.

With this, James aimed to source drinks from various producers around the world, and sell these into supermarkets. Within six months, he had arranged a national distribution agreement with Sainsbury’s for French cider. Calvados, a spirit distilled from cider, followed next. The concept and business model was successful and a thriving Winefare has subsequently this year changed its name to Emporia Brands.

By the 1990s, James had put together a business plan to become the leading UK specialist in French brandy (as part of his drive to establish Emporia as Britain’s leading specialist spirit agency). Ironically, it was at the moment that his own business was flourishing that he was tempted to return full-time to the Arthur Rackham chain.

Fifteen to one
‘I had a serious conversation with my father about the business, where I made it clear I did not want to run off-licences,’ he says.

To move the business forward, James gambled on radically reducing its scale by returning it back to its original concept of just one store.

‘My father had been motivated to build a business that would grow and grow. But I wanted to change this and go from 15 to four stores and then to just one. I worked out, for instance, that just four stores would give us 80 per cent of our turnover at the time.’

To make the one-store idea viable, it was transformed into a concept shop catering to the higher end of the drinks market.

Convincing his father of all of this was one thing – explaining it to staff, suppliers and customers was something else entirely.

‘Everyone was nervous at the first internal presentation. Over the years that we shut the stores, we empowered people within the branches, and shuffled them round to positions they felt suited to. Everyone knew the bottom line – if we wanted to survive, this was what we had to do.’ Interestingly, only one person was made redundant during the entire project.

As for the suppliers, the business had built up a good reputation, which was a valuable currency during the changes. The real issue, though, was in sustaining past volumes – if these were not kept up, Rackham would not be able to negotiate discounts, and thus margins would suffer badly. To get round this, he joined forces with a trading partner, leveraging the latter’s buying power to ensure volumes were maintained.

A niche business
All in all, it proved to be a winning strategy and now the Arthur Rackham Emporia is a flourishing, high quality, niche spirits and wine retailer. Emporia Brands is a leading agency sourcing specialist spirits from around the world for the big multiples – it has found a product to take on Bacardi in the premium white rum market. In addition, James has launched The Vintner, which aims to build up a national wine agency to complement his reputation in the spirits world, by forging relationships with estates in South Africa and Australia.

‘I knew that when I downsized we would have to evolve into a destination for discerning wine and spirit lovers. One of my father’s sayings was, “don’t reinvent the wheel, just make it more efficient and beautiful.” I think that is what we have done,’ he says with pride.

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

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