The FWD has had some notable successes in its engagement with the government and more work is under way, according to chief executive James Bielby.
He told the Annual Conference one of the most tangible results of the FWD’s work was the recent reduction in the volume of duty fraud stock in the market. This was due to more effective action by HM Revenue amp; Customs after intense lobbying by the FWD.
Outlining changes that had been made, he said: “New powers for HMRC to confiscate, fine and claim for lost duty were introduced last year. Extra funding for tackling tax avoidance was put aside in the new Government’s spending review, at a time when public spending elsewhere was slashed. HMRC gained 200 extra enforcement officers. And the Government has also declared it will look at new legislation to combat alcohol duty fraud in next year’s Finance Bill. Having had a sneak preview of that legislation, let’s just say it is very robust indeed.”
But he also emphasised that FWD was also giving members a voice across a much wider range of issues such as transport, supply chain, sustainability and crime. “On transport, we are part of the Department of Transport’s logistics sounding group, looking at ways Government can remove barriers to growth for those involved in logistics, on issues like fuel duty, and road pricing, creating market conditions in which FWD members can thrive.”
He announced that the FWD has just published a briefing for MPs and officials called A Wholesale Commitment to Sustainability, which emphasises the sector’s work in reducing carbon emissions and its impact on the environment.
Bielby also highlighted the FWD’s work on developing links with MPs and revealed that the inaugural meeting of the All Party Wholesale Group had just been held (see News).
He said the My Shop is Your Shop campaign of MP visits to excellent community-centered stores has been highly successful with nearly 50 visits carried out or planned. He added: “We have made immensely valuable contacts through this scheme and the MPs have gained some insight into what makes independent retailers so deserving of their support. And if they want to extend that support to the distribution chain that supplies these vital community hubs … well that would be a very welcome outcome too.”
The Olympics should be treated as a three-month Christmas, said Natalie Chapman, head of policy London for Freight Transport Association (FTA).
She said the disruption would start from May 19 with the torch relay and continue until the end of the Paralympics on September 9 and companies needed to start thinking and planning for this now.
She suggested that there would be peak, but unpredictable footfall with visiting or holidaying consumers both from the UK and abroad. She added there would be short notice changes because of unpredictable issues such as the weather, British competitors doing well and safety and security threats.
Within London an Olympic Route Network (ORN/PRN) has been planned. “The core route will be in operation from 6am to midnight for the duration of the Olympics. It’s not going to stop vehicles accessing it. In fact if you want to travel along it then it’ll be a great journey with lots of green light phases, but God forbid you want to get across it. And the traffic around it is going to be very busy.
“If you have any premises situated on the network, the vehicles that are making deliveries to the premises will not be able to stop there unless it’s before 6am. So we will need to change the way that we do things.”
Another complication is Local Area Traffic Management Parking Plans around the Olympic park and Olympic venues which will increase parking restrictions but this has yet to be finalised in detail.
Chapman said that the logistic plans for London were still in development. She said that FTA is asking for a real-time information service during the day and visibility of proposed delivery and access restrictions by postcode, date and time of day.
In the conference’s keynote speech, Chuka Umunna, shadow minister for small business and enterprise, highlighted the importance of the businesses represented at the FWD conference.
He said: “I want to start by thanking you for what you do because all of you gathered here today are part of the lifeblood of the economy of this nation. Many of you are small and medium sized businesses and, if not, many of your customers are. As such, as businesses, you are responsible for six out of ten private sector jobs and almost half of private sector turnover in Britain today.
“I know bigger businesses are here too. Collectively, you are the motor which drives our economy.”
He said that local independent shops were struggling because of lack of consumer confidence, and that the Government was putting economic recovery at risk by trying to reduce the deficit too quickly.
“That is why we would be cutting the deficit in a tough but balanced way, halving the deficit over four years instead of looking to completely eliminate it. You would see a fair balance between promoting growth and jobs, some fair tax rises and some tough spending cuts under a Labour government.
“Second, looking at the specifics, I know VAT is a great cause of concern to you for many reasons, not least because of the impact of rising fuel prices on your businesses.”
He quoted British Retail Consortium research which predicted the rise in VAT to 20% would cost 163,000 jobs over four years and reduce consumer spending by £3.6bn. However, he said that when the Labour Government had cut the VAT rate it boosted the economy, and added: “This is why we are now arguing for a temporary cut in the VAT rate now from 20% to 17.5% to help you and your business. The government’s January VAT hike is costing the average family £450 a year temporarily cutting it in this way would increase consumer confidence, put more money back in their pockets and boost the High Street and your businesses.”
He concluded: “Everyone is this room you work hard, play by the rules, provide local employment for people and I recognise the role you play in the community in which you do business. I am incredibly ambitious for you nothing gives me more pleasure than to visit a business see it thrive and, where you want it to see it grow.
“We might disagree with the government on the deficit but we do agree that growth in this country will be private sector driven. We are asking one hell of a lot from you. The least we can do is help you meet the challenge.”
Consumer behaviour is showing an increase in shopping and buying locally, David Glennon, retail services manager for Nielsen reported.
“People are looking to shop local more often and to shop more often. They are looking for somewhere local that’s got value for money.”
He added that the majority of people consider convenience shopping to be within between five and 15 minutes walking.
Consumers want local products with over half saying they want local products from a local store and 47% saying they would change stores.
“If we look at the convenience stores, those under 300sq m, the sector has made a good recovery over the last 12 months and is now worth around £29bn a year contributing 23% of revenue. However much of this is being driven by the wholesaler driven or owned symbol sector retailers.”
He warned that over the last 10 years Tesco, Sainsbury and M amp;S have opened 1,800 small stores taking £4.5bn worth of trade out of the convenience market, and suggested that with Asda, Morrisons and Waitrose also opening c-stores this could rise to £9bn.
Glennon said: “Over 40% of product is now being bought on promotion through the main multiples. What we are beginning to see is that consumers are being programmed, like a self fulfilling prophecy, to look for promotions.”
He added that wholesalers and retailers need to understand how to promote within the small store environment to deliver value and the perception of value to consumers.
Glennon also highlighted the importance of events such as Christmas and Mother’s Day. It allows consumers to celebrate something during dire times. He said this is a key strategy that small operators and wholesalers can use and that the multiples are already doing it.
The first arrests made as a result of intelligence about thefts from FWD members being passed onto the police were announced by the FWD’s criminal intelligence data analyst Isabel Koppel.
She explained that she had been recruited in January to set up and run a central database to record crimes against FWD members.
She said there were three main aims when the project was launched in January. First, by sharing intelligence on incidents in depots, customer car parks and on the road, members would be better prepared to prevent such crimes taking place. Knowledge of the kind of tactics used to enter premises or attack vehicles was very valuable when shared across the country, she added.
The second aim was to gather evidence the type of vehicle used, a partial number plate, or a description of the criminal to help build a picture which could lead to prosecution. She said: “Limited police resources mean that the more evidence we can give them, the more likely they are to conduct an investigation and pursue a prosecution.”
The third aim was to be able to present the police and the Home Office with a clear picture of the scale of crime of this sort. Currently, theft from commercial properties is not considered a priority for allocating stretched police resources, and all crimes from vehicles, whether it’s a £100 sat nav or £25,000 of cigarettes, are given equal weight.
She added: “What we hope to do is to be able to demonstrate to ACPO and the relevant ministers that losses of this kind do not only affect our businesses. Cigarettes and alcohol taken from our members find their way to the black market where they are indiscriminately sold, depriving retailers of trade and in the case of alcohol, adding to anti-social behaviour. Therefore we believe that greater priority should be given to investigating and preventing these thefts, and to ensuring the deterrents are there to stop criminals attempting such crimes.”
Koppel said she had devised a template for reporting incidents that only required about two minutes work to complete, and once she received them she was able to send out an email alert to other FWD members in the area to be vigilant. She also analyses the reports to see if there are any patterns and passes on intelligence to the police
She concluded: “We have the basis of a very useful resource for wholesalers and the police, and we can make real inroads into reducing losses and cutting off the illegal supply.
“My request to wholesalers is please make sure every incident, however minor, is reported. We all need to work together to reach the end goal. Despite being commercial competitors, the fight against criminals attacking wholesalers’ vehicles and premises is the one clear thing that joins together all wholesalers in the industry.”
Fiona Dawson, president of Mars Chocolate UK, introduced the idea of a partnership between suppliers with help from the FWD.
“We’d like to create a forum that is across a broad spectrum of wholesalers and suppliers coming together under the FWD to act as a linchpin and a catalyst for creating the change we want. It’s the start of a journey. It won’t happen over night, but as with any journey you have to know where you’re going to and that will make the destination seem more and more real for us and get more people to come with us and not fight us as we more forward.”
Dawson spoke about Mars work with its sustainability partners the Rainforest Alliance and UTZ, saying this partnership benefits cocoa farmers and Mars. She drew comparisons between the cocoa supply chain the supply chain for independent retailers.
She added that Mars intended to use 100% certified cocoa in all of its products worldwide by 2020.
Details of a number of new initiatives planned by Booker were presented by Guy Farrant, managing director cash and carry.
He said that Booker was concentrating very hard on Fresh, and fruit and vegetables in particular, where sales had increased from £15m to £50m in 18 months, and he said that figure would be doubled in the next couple of years.
This autumn, he said, Booker would be demonstrating its best fruit and vegetable offer at its Brighton depot together with new initiatives for its Ritter-Courivaud fine food service for caterers and it Classic on-trade delivery service.
Farrant said: “What we, in the core chain, can do is learn a lot about food values and credentials from the Ritter business. We will be putting a Ritter section and a Ritter delivery service this autumn into our Brighton cash and carry.”
Since the acquisition of Classic last year, Farrant said Booker has been working to close its existing depots and fold the business into Booker cash and carries. He added that a Classic on trade delivery service would be put into Brighton.
Farrant also highlighted Booker’s strength on the internet, where its current annual sales were £526m and growing strongly and 105,000 customers had registered.
Sustainability is very important to Booker, said Farrant, and it is now seeking to help its customers be more sustainable with new recycling centres at 13 depots.
“Because we have national coverage with 172 branches and we are at the heart of most communities we think we can help our customers improve their sustainability credentials as well.”
We must consider the lessons of the past when planning for the future, said Pradip Dhamecha, chief executive of Dhamecha Cash amp; Carry.
Being prepared for the future means planning for bad times ahead during the good times, but also being willing to invest during bad times so businesses are prepared for the upturn which will inevitably follow. He said his company, like many other wholesalers, was free to invest even during difficult economic times, because it was a family run, independently owned business.
Such businesses also have an environment that encourages people who excel in customer service, he said, and this develops strong customer loyalty.
He said he was cautiously optimistic about the future, but there were two concerns that he wanted politicians to respond to the dominance of the multiples and their predatory tactics and the proposed tobacco display restrictions.
“The appointment of Mary Portas, if nothing else, helps brings the issue into sharper focus,” he said. “The FWD’s My Shop is Your Shop initiative with local MPs is another positive step in reinforcing that message and should be applauded by everyone in our industry.
“And then there’s the proposed tobacco display ban and the introduction of plain packs. Is it really the answer? Will it really stop people buying cigarettes? Who knows but what we do know is that it will encourage the growth of counterfeit packs. Duty fraud is a serious problem and will get much worse unless this government takes a more pragmatic approach to the current proposed legislation.”
Guest speaker Luke Johnson, former chairman of Channel 4 and current chairman of private equity house Risk Capital Partners, said his career had intersected with the wholesaling and distribution of food and drink over the past 25 years. He had experience as owner of many restaurant chains such as Pizza Express, he had been part owner of a seafood distribution business called Seafood Holdings which was sold to 3663, and was also involved in retailing with companies such as Whittards.
Johnson said that in London the catering trade was out of recession and was thriving, but he conceded that in the rest of the UK it was level at best and that there was less spending power and less willingness to experiment. However he still believed that in the long term the proportion of food eaten out of home in the UK would approach the US figure of 50% rather than the current 35%.
He praised wholesalers for helping to reduce the high skill levels and time required in kitchens. He said: “This has saved the eating out industry considerable sums. I know myself cooks are always hard to find and they are expensive … and the more that can be done to progress this trend will be gratefully received by the industry. This is an opportunity for you to add and capture more value, particularly in the prepared area which makes the restaurateurs life easier and allows you to protect your margins.”
He warned that focusing on price only was a race to the bottom and said that instead wholesalers needed to excel in the service they provide. “Restaurant owners’ customers expect great service from them and they in turn expect it from you. That means prompt delivery, friendly drivers, help with problems and so forth.”
Asked what trends were likely to take off in the UK he said “grazing” was growing with small plates such as tapas and meze. Also fast casual, especially Mexican, was catching on, and UK consumers were wanting spicier, stronger flavoured food. He added that pre-prepared ingredients for such meals would be very well received by the industry.
Wholesalers and suppliers need to work together, said Kate Fletcher, business unit director for Britvic Soft Drinks.
She said the number of independent stores was down 3.5% with 700 fewer than last year.
“We need to challenge our mindsets, both as suppliers and wholesalers in terms of the role we play in the future of this industry. To create a new picture of what the future holds.”
She said that there has been a lack of trust between wholesalers and supplier, but that this needed to change with them working together to create scale and return on investment.
She suggested that wholesalers and suppliers should work together to educate retailers. She said wholesalers and suppliers could offer retailers access to information that would benefit them and together they could support the independent retailer. “We all want the same outcome, although it doesn’t feel like it all the time. We need to remember that and harness all our resources and investments to equip the independent operator.”
The percentage of retailers buying a product in a cash and carry on impulse has exceeded the percentage who failed to make a planned purchase for the first time since him! began running its Cash and Carry Retailer Tracking Programme.
Since it set up the programme him! has been highlighting the scale of the problem, caused by poor availability or retailers being unable to find products in depots, and the resulting loss of sales to the sector.
Presenting the findings of the latest research, Tom Fender, him! sales and marketing director, said: There has been a lot of work and we are not there yet, there are still more improvements that could be made, but a huge amount of progress has been made.”
Another major change that has occurred over the lifespan of the programme has been in the popularity of price-marked packs (PMPs) with retailers. Fender said that even five years ago the vast majority of retailers shunned PMPs, but this year, after speaking to 3,500 retailers in cash and carry depots, they were second favourite form of promotion.
Fender said the prices did not need to be below RRP, but the price mark or the price flash gave customers looking for value for money in the tight financial climate reassurance that they were not paying over the odds in an independent store. He said: “When asked: ‘why do you like price marks?’, 75% of independent retailers say ‘it’s a good deal for me and a good deal for my customers’. It is an acceptance that price-marked packs can drive sales and convenience traffic.”
However there was a mis-match between depot managers beliefs and the facts when it came to their customers’ knowledge of top sellers.
When 300 depot managers were interviewed more than 90% believed retailers knew the top sellers in major categories but most retailers were unable to correctly identify them.
However retailers wanted to know the top sellers so Fender suggested there was an opportunity for wholesalers and suppliers to work together to help depot managers. He said: “Depot managers are absolutely pivotal in the relationship between wholesalers, suppliers and retailers so could we not find a way for them to pass on this information.”
In addition to reviewing him’s findings, Jonathan Kyle, senior sales director, PepsiCo, gave an insight into some his company’s research.
He showed interviews with retailers that backed up him’s findings that retailers wanted to know which brands were the best sellers. He said that a proliferation of brands in depots was making it hard for retailers to stock the appropriate ranges.
The retailers said they were keen to back winning innovation, but did not know which brands to back. Kyle said no one could predict for sure which introductions would work, but brands from big suppliers with strong support had a much better chance of succeeding, and retailers should be encouraged to stock them.
Retailers said they also wanted merchandising solutions that were simple to display, and Kyle said: “Expect to see proliferation of more ready to merchandise units.”
Kyle gave an example where he visited stores with his boss and peers working with the multiples to look at execution of Crinkles, Walkers biggest launch this year.
He said 20 out of 20 multiples had it on display, but only four independents did, making it more difficult for him to justify investment in the sector, although he emphasised Walkers would maintain its backing for the sector.
Bill Laird, managing director of the Today’s Group, began his analysis of the him! research by saying thank you to suppliers for listening.
He explained that at various events last year he had asked for suppliers to ensure that at a time of heavy going for the independent sector they were giving an adequate level of support. He continued: “We genuinely appreciate that you have stayed with this sector, despite the attractions and pressures elsewhere in the multiples arena.”
Laird highlighted the findings in the research that showed retailers were looking for education. For instance more than 50% of retailers wanted to know the top selling soft drinks, and commented: “That’s pretty basic information we should be giving them day in day out.”
He said promotions are key to achieving extra sales with twice as many retailers buying on impulse than planned to. “There is a huge opportunity there to inspire and motivate retailers.”
He summarised some of the other positive findings in him!’s research at the ending of his presentation including:
Retailers are spending almost £200 more in depots than a year ago
The level of failed purchase is considerably down
Nearly 80% of retailers believe NPD is critical to their stores
Retailers believe price-marked packs are critical for their consumers
The percentage of retailers who were purchasing from supermarkets had halved to 2%
Caterers are becoming increasing loyal to their cash and carry, Tara Benjamin, programmes director of him! reported, although there is still work to be done.
him! found that a high number of caterers said they were sourcing at ‘this’ cash and carry and they are sourcing more from ‘this’ cash and carry.
Benjamin said that most of caterers’ ratings for satisfaction were up, although they were down for fresh produce.
She said: “What caterers say is the most important thing about shopping in a cash and carry environment is value for money. Value for money isn’t just about price, it isn’t just about promotion, it’s about making sure that they are comfortable with the value they receive for the price that they pay.” The second most important issue is availability of products and the third is good prices.
She said that caterers are sourcing from number of different cash and carries to get a good price and the products they need and the reason they are doing this is they can’t get everything they need in one place.
Within delivered, more caterers are shopping around, sourcing from different places and are less satisfied.
Benjamin said that 40% of caterers haven’t bought a promotional item in the last five orders and that this highlights the importance of telesales staff upselling.
“Online ordering for delivered is up year-on-year, but a lot less than retailers, yet more caterers have internet access on premises than retailers. Seventy per cent of caterers said they haven’t ever looked at their main delivered wholesaler website. The main reason why is they find it difficult to use.”
She said that feedback included caterers asking for a usual items basket on the website and that it takes a long time to find the products.
Catherine Hinchcliff, national accounts marketing controller for 3663, explored three myths from within the business and how consumer research helped to address them.
The first myth was that 3663 were easy to do business with. She said that they had received customer feedback about excellent sales teams but were aloof at corporate levels and a little old fashioned. The response was a complete corporate reposition for 3663, a new brand image with a change to the logo, website and lorries.
Myth two was that customers wanted brands. Hinchcliff said: “Given the choice customers do like brands, but really what they want, actually, is choice. him! tells us that 60% of all caterers buy own brands, our own figures put that a little higher at 83%. But they are not just buying those own brands from us, they are buying them elsewhere as well.”
As a result of this 3663 is focusing on improving own brand to provide a greater choice. There has been a re-launch of key brands and products are blind tasted against the competition to match on quality.
Myth three was about delivering perfect service. Hinchcliff said that him! had reported they were above average on eight key measures, but there were some areas to improve. Information from each depot was shared and it helped people to understand what they needed to do to improve the way they support their customers.
She added that the interesting challenge that the insight threw up was: “where you have high standards you also have high customer expectations.
“As our service improves in certain areas so customer expectations increase. So it’s a bit like a vicious, or virtuous, circle.”
People are watching what they spend, everywhere, reported Andy Sellick, head of sales for Heinz Foodservice UK.
More people are eating in and there is an increase in big meals with a decrease in light meals. Health and wellbeing is a key agenda, but so is escapism and treating themselves. People aren’t going out as much, but when they are they are generally spending more.
He added that sustainability is a key area and this is something consumers now expect day in day out.
Sellick said: “Value is here to stay. But it means different things to different people. It will mean cheapest price to some people, and value for money to others.”
He added that it is important to work out which consumers businesses want to attract, pointing out that two polar opposites in growth are discounters and Waitrose. Both are doing well, but they have to know who they are targeting.