A good day at the offie: Majestic survives the high-street hangover

They've called time on Unwins, Oddbins could go the same way and the glass is half-empty for retailers across the board. But the wine store is expanding and diversifying, as its chief tells Simon Evans

Tim How, chief executive of Majestic Wine, is laughing. We meet on an unfashionable trading estate on the outskirts of Watford where Majestic is based. One imagines a glitzy London HQ wouldn't sit comfortably with How.

As we talk, shares in Marks & Spencer, led by the newly knigh-ted Stuart Rose, are in freefall, shedding nearly a quarter of their value after a disastrous Christmas trading update sent investors fleeing. "Not good numbers, were they?" says How, trying not to let his smirk break out into much more. "Rose opened the Stock Exchange this morning. I'd like to do that – maybe I could smash a bottle of wine to kick trading off? But I haven't been asked yet."

Around a week before we meet, How unveiled a satisfactory set of Christmas trading numbers but ones that warned of tougher times ahead in 2008 for Majestic. That the share price hardly moves shows the high regard in which the firm is now held by the City after years of consistent growth.

"Look, the overall picture for the high street looks tough, barring quite a few interest rate cuts, which don't seem likely," remarks How. "There are challenges for us, not least the value of the euro against the pound. But you've got to remember that we still operate in a growing wine market. The latest ACNielsen [research] data predicts the market will grow another 6 per cent this year and there is still a huge oversupply of wine in the world, so there are plenty of reasons for us to be cheerful."

He adds: "Price is always an issue but it will be even more pertinent this year. Spotting where in the world good value is coming from is the key. Last year it was New Zealand Sauvignon – it was our single- biggest growth product. But we know that its popularity and a poor harvest mean prices will have to increase this year – maybe a pound more expensive."

How picks Spain as the region of choice in 2008, closely followed by Italy, with Argentinian wines also putting in a strong showing. Aussie wines will continue to suffer.

How has been at the helm of Majestic for 16 years, growing it into a company worth nearly £160m. And, as he edges towards 60, he has no intention of passing on the baton but is keen to see through the challenge of opening 200 stores in Britain over the next five years. "We are looking for old pubs with plenty of open floor space, so if you know of any, give me a shout," he says.

Majestic has prospered in a drinks industry that has largely floundered in recent times, illustrated by the collapse of the Unwins chain two years ago and the seemingly inexorable decline of the French-owned chain Oddbins. "Retailing out of a small high-street store must be very challenging," says How, who pulls back from predicting the total demise of the once vibrant off-licence. "Look, it's a matter of record that none of them are making money."

The Majestic approach is a simple one: buy cheap properties, often in unfashionable parts of town, with plenty of space for stock. Employ a graduate workforce to sell the wine to individual customers in bulk – a minimum of 12 bottles – while also targeting a smaller on-trade corporate clientele.

But as with all successful entrepreneurs, How has seen the need to move with the times, not least in embracing the internet and creating a fine-wine operation within the company. Taking the brand to foreign fields is also a possibility.

Internet sales now account for around 8 per cent of total revenue at Majestic – a figure in line with How's expectations at the turn of the millennium.

"We launched our site in 2000 and there were plenty of people lining up to tell us we had missed the boat. "Before then, I remember, we were being quoted hundreds of thousands to create a website that eventually cost in the tens of thousands. I think we're on target to reach 10 per cent of total sales in 18 months."

Sales of fine wines, those in the £20-plus bracket, have powered on, enjoying a 30 per cent leap over Christmas, with lofty ambitions pencilled in for 2008.

"We have 38 stores selling fine wines at the moment and we should reach 44 by the end of March," says How. "I think we'll be up to about 55 in a year or so. The most expensive bottle we sell is worth £8,400 and the costliest we sold over Christmas was about £2,500. It was in South Kensington or Mayfair, I think."

Foreign expansion has, so far, only gone as far as Calais – a play to cash in on the "booze cruise" brigade, which is slowing ebbing away. Profits from the three stores in the region are holding up but sales continue to fall as travel tastes change. So how about further continental expansion? "The Majestic proposition doesn't really work in Europe because the wines people drink are very much dictated by their locality," says How. "People buy off their next-door neighbour rather than going to a shop."

But a venture to Ireland, shelved in the past because of booming property prices in Dublin, could be revived. Meanwhile, the prospect of a franchise operation in the US also remains on the table. "We certainly wouldn't opt for a direct operation – it's too far away to retain control," says How. "But we have talked about franchise opportunities though nothing has happened yet."

Away from Majestic, he is a vocal defender of the drinks industry and his eyes blaze when it comes to the attitude of politicians. "What we are striving for is more consistency from the Government, because we aren't getting that at the moment. Britons already suffer some of the highest drinks prices in Europe, and in a year when the economy is expected to slow further, the Government should be very cautious about the industry's ability to pass on duty increases."

He also mocks proposals from the Scottish National Party, the largest in Edinburgh's Parliament, to ban the so-called "multibuys", forcing people to purchase individual bottles or cans.

"There's little or no evidence to suggest that individual prices will rise – they could actually fall," says How. "We've just opened a store in Carlisle so we could have the absurd situation of Scots coming across the border to pay different prices."

Tonight Majestic holds its belated annual Christmas party at the Grosvenor Hotel in central London – an evening that is in effect paid for by the company's suppliers, who make "voluntary contributions".

"It's always an enjoyable evening but I never hang about too long," says How. "I think some of the staff are happier when I leave and can relax a little more."

But after a stellar 16 years as the boss, investors will hope he hangs around for a while yet.

CV: Tim How, Chief executive, Majestic Wine

Age: 57

Education: MA in natural sciences, Churchill College, Cambridge; MSc, London Business School.

Career history: graduate trainee, Rugby Cement; production manager, Angus Fire Armour; marketing and later general manager, Polaroid; marketing and then managing director, Bejam; bought Wizard Wine from Iceland in 1989 and added Majestic Wine in 1991; has run the group ever since.

Family: Married, four daughters. Two of his daughters are trainee medics and one is a budding physiologist.

Hobbies: sailing.