Vagabond, the London-based wine bar business led by Stephen Finch, is set for further growth after receiving £3.5m in new funding from sector investor Imbiba, MCA understands.

It is thought that Imbiba, which also backs the likes of Temper and Darwin & Wallace, has taken a significant minority stake in Vagabond, with its investment valuing the five-strong business at c£10m. It is believed that Imbiba, which previously backed Drake & Morgan, beat off competition from a number of private equity groups, including Livingbridge, to invest in Vagabond.

MCA understands that Vagabond, which Finch founded in 2010, will look to open three sites a year going forward, with further locations in London set to be the main priority over the next 12-18 months. A sixth site is set to open this October, in Sheldon Square, Paddington Central.

The group also thought to have run the rule over a site in Devonshire Square.

It is understood that the company will eventually look at expansion opportunities outside of the capital and internationally, especially in Europe.

Vagabond is believed to have reported full-year turnover of £5.2m for the year to the end of March 2018. It is thought that trading in April and May was particularly strong. The heatwave and the World Cup impacted trading in June and July, but has since bounced back.

The group, which is also part retailer and wholesaler, launched its first site in Fulham in September 2010, and has since opened sites in Charlotte Street, Northcote Road, Victoria and Battersea. The site at Battersea Power Station also includes the company’s urban winery, which launched its first wines earlier this year.

The investment in Vagabond by Imbiba is the second from its 10-year £50m Growth Fund, which it closed earlier this year. It is thought that a chairperson for Vagabond will be appointed soon.

AlixPartners is understood to have advised Vagabond on the deal.

Comment by MCA’s Mark Wingett

With its differentiated model, which allows wine amateurs and experts alike to sample wines before buying, Vagabond, the award-winning wine bar and deli concept founded by Stephen Finch in 2010, has carved out its own part of the market for those consumers wanting something more than the usual pubs, bars and restaurants in the capital.

Throw in sessions on various wine varieties and beginner workshops on how to taste wine, pair it with food and understand the different wine regions, and you can see why Imbiba and a number of other private equity groups were interested in the five-strong business. It touches on the experiential trend but also challenges consumers to “go home interested” about the offer they have just interacted with.

Wine remains the fastest growing drinks sector in the UK, with consumers aged between 18 and 35 with higher incomes and a growing interest in wine now accounting for almost a third of the total spend on wine in the UK, according to the UK Alcohol Industry Report 2017. The growing millennial market views wine as a social drink and are most likely to buy wine in the on-trade, accounting for 29% of its volume and 40% of its value.

Vagabond sources the majority of its wines direct from producers, enabling customers to “taste and experience some of the best wines in the UK market”. Its bespoke self-serve wine dispensers enable customers to trial 100+ wines by the sample or the glass, making it easy and fun to discover new wines and create a great in-venue experience. This is backed by highly trained and passionate “wine advisors”, providing an impressive interactive wine experience.

It’s sale mix currently stands at 80% wet to 20% food, and although it would like to push more into the lunchtime market, it is understood that Finch doesn’t see food becoming more than 30% of the group’s business. Not that the food is not treated with the same attention as the wine, with the company working with chef and food consultant Jay Morjaria to recently refresh its menu.

Average weekly sales across the group range between £20k to £25k, although the group’s largest site to date at the Nova scheme in Victoria pushes up towards the £35k to £40k mark. The latter store saw the company expanding the selection of wines available, with around 140 wines to sample – a 40% increase from its other sites, which are chosen in rotation from the 250-300 wines the company imports.

It’s opening last year at Battersea Power Station comprised a bar, restaurant and a first for the capital, an urban winery. The winery, which launched its first wines earlier this year, allows customers to see how wine is made, and drink wines on-site that have been made on-site. Finch says it helps bring customers closer to wine in a “fun and educational way that had not really been done before in the capital”. As he said around the time of opening: “We’re always thinking of ways to make wine more exciting and accessible for our customers so instead of simply bringing great wine to London, why not make great wine in London?”. It has also provided the group more buy in with its staff, through training and through taking pride in products the company itself has produced.

It also allows the company another point of difference to its supposed peer group, with Vinoteca, perceived more as restaurant concept that does great wine, and Veeno is in danger of diluting its offer through over franchising.

Aside from the impressive Finch, the strong sales growth and differentiated model, I’m sure Imbiba would also have been attracted to Vagabond because, unlike most of the rest of the hospitality sector, its sits in a part that has not seen a huge amount of innovation. Vagabond has been at the forefront of what innovation there has been and with Imbiba’s investment can continue along that path.

Vagabond is now in a strong position to develop and grow their share of the market with this support and backing from Imbiba. This latest deal further underlines the recent renaissance in the wet-led sector. Looked on as poor cousin by the majority of the investment community as the casual dining boom happened, the last 18 months has seen a turnaround in fortunes, further underlined by Stonegate’s recent acquisition of Be At One. It certainly feels like sector-focused investors, Imbiba included, are now looking to have a more balanced portfolio, as the winds of change blow though all parts of the hospitality sector.

Of course that isn’t a concern for Vagabond. Imbiba’s investment will only strengthen its founder’s vision of bringing “quality wines at accessible prices to Londoners”. If all goes well, he will just have to widen his gaze, so that accessibility goes beyond the capital. He certainly seems to have the right blend to make that a reality.