Wholesale Change

The Londis and Budgens head offices were united under one roof just over a year ago, and both brands are seeing the benefits, according to MBL managing director Mike Taylor, but he foresees further gains as the integration continues through its distribution depots. In addition the company’s transition from a mixed retail/wholesale business into a strictly wholesale business which does not own any retail stores is on target, with its store divestment programme having already lined up prospective owners for 65% of the remaining 130 stores.

Taylor says that a year on from the unification suppliers are getting a clearer understanding of how the business operates. “What we do is a bit different, but I think the supplier base get that it is very much focused around the retailers. We have a relationship with our retailers and we support them through this, whereas a lot of the wholesale sector is transactional, and is about selling at the cheapest price.

“Price is important, but with the level of competition in the market, it needs to be more than that. Our retailers get support on refitting, merchandising, training, technical matters and much more.”

The biggest test of that relationship came this summer when the second and final payment was made to Londis retailers as part of MBL’s takeover of the group. It had been expected that any retailer unhappy with the service from MBL would wait for the payment and then leave, but Taylor says only about 60 did so out of more than 2,100 members.

The group has also come up with revised positioning for its two retail brands. It envisages the optimum size for Londis stores will be 1,000-2,000sq ft, with Budgens stores from 2,000-10,000sq ft, although Taylor points out that there are some very successful Londis stores of less than 1,000sq ft and some owners of Londis stores above 2,000sq ft may choose to remain in Londis rather than move across to Budgens. One of the larger Londis stores has already converted, however, and several other conversions are in the pipeline.

In addition, some of the smaller Budgens stores, mainly a legacy of Budgens takeover of 7-Eleven, will be rebadged as Londis stores when they are divested.

Other aspects of the revised brand positioning are that Budgens stores will be expected to have a minimum turnover of £30,000 and an average of £60,000, they should purchase 95% of their stock from MBL, and more than 25% of the sales mix will be fresh. Londis stores will have a minimum turnover of £10,000 and an average of £15,000, and the sales mix should comprise 20-25% fresh. Taylor says one of MBL’s key targets is to increase the amount of stock Londis retailers buy from the group from 60% to 80%.

Taylor says he is pleased with the way the divestment of the Budgens stores owned by the company is going. However, he emphasises that in some cases it will be a slow process because MBL will only sell a store to an independent owner who lives locally, and he adds: “If we have to wait two years for the right local person, or family, to emerge, then we will.”

While head office integration has been completed for some time, another of MBL’s goals is unlikely to be achieved until next year. It intends that all of its distribution depots, the Budgens one at Wellingborough, and the Londis ones at Thamesmead, Andover and South Elmsall should be able to service both brands. Such a move would make deliveries far more efficient, and open up Budgens territory which is currently constrained by a four-hour drive time from Wellingborough. Former Safeway board member Mark Aylwin was recruited last summer to oversee the integration and Taylor says it will start this year and roll through into 2007.

Another change at the Londis depots will be their capability to handle fresh produce. Andover is now delivering it and this will be rolled out to the other two depots early this year.

All the activity is paying off with latest sales figures for Londis and Budgens independent stores showing strong like-for-like growth, and Taylor says there is potential to significantly add to this. He points out that with Londis supplying 60% of its members’ stock its wholesale turnover is £500m, so achieving its target of 80% and expanding Budgens into a nationwide brand could provide a considerable boost for the business.

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