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Supermarket pricing leads to Oddbins administration


Wine retailer Oddbins is to enter administration on Monday April 4th after its company voluntary arrangement (CVA) was yesterday declined by its major creditor.

HM Revenue & Customs (HMRC) rejected a rescue package that would have saved the business, which employs 400 members of staff and runs 89 stores.

Insolvency lawyer at Faegre & Benson Richard Curtin told Retail Gazette that the cheap prices and convenience of supermarkets has made it almost impossible for specialist alcohol retailers to survive in the UK.

“Its very sad about Oddbins as they are a household name that has been around for many years, they tried to survive but unfortunately they could not compete with the supermarkets,” Curtin said.

“After the fall of Threshers and Wine Rack it is no big surprise. The root cause of it is massive bulk buying power of the supermarkets undercutting its prices and removing any place in the market for Oddbins.”

Oddbins is the second retailer to attempt a CVA in as many months, with sports retailer JJB Sports getting creditors to agree to its rescue plans during March.

JJB’s creditors were primarily landlords and voted overwhelmingly to receive reduced rents in a deal which will see a ‘sweetener’ paid out if the company recovers, but Oddbins failed to convince HMRC of its own strategy.

Curtin added: “Some people may choose to criticise the Crown for not supporting the CVA, but they will not have taken that decision lightly.

“The Crown is not responsible for Oddbins no longer having a place in the UK market.”

For a CVA to be successful the company needs to make a compelling business argument that the failures of the company can be eradicated, this is something JJB Sports achieved last month but Oddbins has failed to do.

The administrators will now try and sell the business but Curtin believes that a break-up sale is much more likely.

Curtin still anticipates retail insolvencies to rise in the second half of the year, with many apparently hanging on by their fingertips, but there will not be a “Tsunami” of cases in 2011.

A factor currently putting pressure on retailers, he believes, is that banks are beginning to think unfavourably towards commercial property as an investment, with one bank apparently considering withdrawing from property all together.

In a survey of investors conducted by global retail estate company Colliers this week, 71 per cent of respondents saw the rise in ten-year UK government gilt rates as a downside risk for property.

Published on Friday 01 April by Editorial Assistant

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