Steve Lewis is cradling a bottle of red wine as if its his firstborn child.

Dont drop this, Steve, the chief executive of Majestic Wine (LSE: MJW.L[1] – news[2]) tells himself, as he rather anxiously carries the most expensive bottle in the room, setting it down well away from any objects that might cause an expensive accident.

At 1,600, its understandable why he is treating the bottle as if it contained liquid gold.

Lewis, who has been at the helm of Majestic since 2008, has been in the wine trade for all of his 27-year career, yet he still betrays a boyish wonderment at wines such as the one in question a 1982 Chteau Mouton Rothschild.

The son of a butcher, Lewis didnt drink a drop of wine until he was a student reading history at University College London.

I would drink something like this very rarely, he says, laughing, barely daring to touch the Chteau Mouton in case he knocks it off the shelf.

Were sitting in the St Johns Wood branch of Majestic in North London, a stones throw from the exclusive American School and surrounded by the homes of diplomats. This is Majestics highest-turnover store out of its 181 in the UK.

A separate Fine Wine room houses bottles such as the Chteau Mouton but also slightly more accessible vintages including Lewiss personal favourite, the 2004 Rioja Prado Enea, produced at the foot of the Obarenses mountains in northern Spain.

At 30 a pop, the Prado Enea isnt inexpensive but its more typical of the kind of bottle that is drawing oenophiles to Majestic in greater numbers than ever before, despite the double-dip recession.

On Monday, the wine retailer, which saw its profits halve in 2009 as businesses brought down the shutters on champagne-fuelled corporate jollies, is expected to report record profits of about 22.5m.

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The results are the fruit of a revitalised strategy, introduced in 2009, which has seen Majestic buck the wider trend among most consumer businesses. The chain, whose average bottle is priced at 7.80, compared with 4.80 in a supermarket, is booming as a result of Britons growing interest in wines priced at more than 20.

In the same way that food retailers, such as M&S (LSE: MKS.L[3] – news[4]) , reported in the first recession that the squeezed middle were treating themselves to lavish dinners at home instead of eating out, so Majestic is benefiting from a similar trend in wine, according to Lewis.

People know that in a restaurant 30 to 40 is not a lot of money to spend on wine, so they are treating themselves when it comes to buying wine to take home, he says. There is some real evidence of people eating at home. Thats a definite trend.

The business is faring so well during the downturn that last year Lewis, a Majestic Wine lifer, who started out as a graduate trainee in 1985, unveiled a target to double the number of stores to 330 over a decade.

In the financial year that just closed, 16 stores were added, in places such as Esher in Surrey and Queensferry Road in Edinburgh. The chain is eyeing another 16 openings over the next 12 months.

Majestics expansion is fairly modest by normal retail standards, but when its growth is compared with the off-licence sector, its survival, let alone expansion, is remarkable.

Just a few weeks after Lewis took over the reins from Majestics former chief executive, Tim How, in 2008, Lehman Brothers collapsed.

The meltdown in the City sounded the death knell for corporate entertaining of the kind that kept many wine merchants, particularly champagne specialists, in business.

Even before 2008, the off-licence trade was struggling against the rising tide of supermarket competition. Buy one, get one free deals became more attractive to cash-strapped Britons as the recession took hold.

The result was that some of the best-known names in the wine trade collapsed, unable to deal with the potent cocktail of an economic downturn and fierce competition from the likes of Tesco (LSE: TSCO.L[5] – news[6]) and Sainsburys.

The first to go in 2009 was First Quench, the parent company of Threshers and Wine Rack, taking 6,000 jobs with it.

Oddbins followed two years later, weighed down by debts of 25m.

Lewis can remember those times well. During his first full-year results presentation, in June 2009, he had to tell investors that profits had collapsed by more than half, from 16.7m to 7.38m, ending more than a decade of earnings growth.

However, far from being a harrowing experience, Lewis remembers the depths of the first recession in a positive light.

I actually quite enjoyed it, to be honest, he says. I had seen two recessions before and it gave you a licence to do exactly what you wanted to do because you could say to everyone, Dont you realise theres a recession on?

When you become a chief executive, you come with a box of ideas, and it allowed us to implement those ideas really quickly.

Within weeks of taking over in August 2008, Lewis started trialling what would turn out to be a game-changer for the chain of wine warehouses: reducing the minimum purchase from 12 bottles to six.

That policy was rolled out across the company in September 2009 and has proved so effective that, last Tuesday, Majestic introduced the same strategy for the web, which currently accounts for a 10th of group sales.

Since we moved the minimum purchase to six bottles, it has opened up Majestic to a much wider demographic, says Lewis.

What we were finding was customers were trying us out once and werent coming back. When we did research into it, we found it was the 12-bottle minimum that was putting them off. Twelve bottles was just too much of a purchase for some people.

Lewis hopes the new online policy will see online income grow to about 15pc of total sales.

Over the past three years, Majestic has also homed in on the gap in the market that Lewis believed existed between the supermarkets and the upper echelons of the wine trade, where real collectors buy direct from the en primeur, or futures, market.

Majestic does not sell any of the UKs most popular wine brands, such as Blossom Hill, Hardys and Echo Falls, because our customers dont ask for it, Lewis says.

Instead, it has ruthlessly targeted middle-class drinkers with enough knowledge of wine that they dont want to buy the mass-produced brands often sold in supermarkets.

Since we moved to six bottles, we are attracting a lot more people who were shopping at the supermarkets but who are attracted to Majestic because of the range, Lewis says.

While the stores may be very simple in format bottles stacked on top of cases stacked on concrete floors middle-class drinkers seem to like out-of-town locations and basic designs, which allow Majestic to keep its costs low compared with high-street off-licences.

Lewis believes they are also lured by Majestics 1,000-strong range and its young, graduate employees, all of whom are required to sit testing diplomas in wine.

We have a philosophy of employing people who look and sound like the sons and daughters of our customers, he says.

While Majestic is hardly going to cause the likes of Tescos CEO Philip Clarke sleepless nights, it has increased its market share over the past 12 months from 3.6pc to 4pc. By comparison, the big multiples still dominate 80pc of all UK wine sales. But Lewis believes Majestic can still exist alongside the supermarkets which, he says, have served their purpose by opening up wine to the masses over the past 10 years.

Supermarkets have done a brilliant job of democratising wine in this country, he concedes. All credit to them.

About a third of wines sold at Majestic are French, but sauvignon blanc and sparkling wine from New Zealand have also been flying off the shelves, particularly around Christmas, Easter and the Diamond Jubilee.

If you take the combination of New Zealand sparkling wine and New Zealand sauvignon blanc, Id like to connect a pipeline to New Zealand, Lewis jokes.

New Zealand sauvignon blanc is extraordinary. Its very nearly 20pc of our still wine sales, whereas in the [wider] market its only about 5.5pc.

While Majestic investors are expected to raise a toast to Mondays figures, Lewis is careful to stress that it is not all plain sailing.

Since the economy slid into a double-dip recession earlier this year, Majestic has had to fight harder for sales during the shoulder months in other words, the periods that come in between big events. This has forced it to ramp up activities, such as free wine-tastings and education evenings.

Despite obviously enjoying the challenge of the downturn, Lewis makes no bones about the fact that he is looking forward to the day when he can lead the wine merchant through an upturn.

Its not easy at the moment, he says. Were having to work pretty damn hard and its much more difficult than it was even two years ago. Obviously Id prefer to grow without a recession.

Perhaps then hell finally allow himself to crack open a bottle of Chteau Mouton Rothschild.

= Facts =

1980 Majestic Wine launched as Majestic Vintners with one shop in north London

181 Number of stores it now runs

330 Number of stores Majestic plans to have by 2021

1996 Majestic floats on AIM

1,000 Number of employees

250 University graduates taken on each year

= Steve Lewis CV =

Age 48

Home Hampshire and Marylebone, London

Family Married with three daughters

Current job Chief executive, Majestic Wine

First (OTC BB: FSTC.OB[7] – news[8]) job Trainee manager, Majestic Wine, Clapham

Not a lot of people know that Steve has installed a zip wire in the disused railway cutting that runs along the back of the paddock at his Hampshire home

References

  1. ^ MJW.L (uk.finance.yahoo.com)
  2. ^ news (uk.finance.yahoo.com)
  3. ^ MKS.L (uk.finance.yahoo.com)
  4. ^ news (uk.finance.yahoo.com)
  5. ^ TSCO.L (uk.finance.yahoo.com)
  6. ^ news (uk.finance.yahoo.com)
  7. ^ FSTC.OB (uk.finance.yahoo.com)
  8. ^ news (uk.finance.yahoo.com)

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