Being a wholesaler hasn’t changed much in the past few years, but being a great wholesaler – one that will be around for the next decade – certainly has. Elit Rowland speaks to leading operators that have endured tight margins to achieve solid sales and profits.
Today, the best wholesalers are adapting quickly to change, moving with the times and satisfying the ever-changing demands of the customer. These are the operations securing growth in even the most challenging trading environments. As another financial year closes and sales results are announced, we can see which wholesalers are truly getting it right.
One business that stormed ahead last year to become the UK’s leading delivered foodservice specialist is 3663. It reported sales of £1,976m in the past year, up almost 10% from the previous year, and an impressive 139% increase in profit.
Last year, the business embarked on a multi-million pound infrastructure investment, which kicked off with a 121,000sq ft multi-temperature depot in Wakefield. It plans to develop similar depots in Chepstow in Monmouthshire, Hoddesdon in Herts and Bicester in Oxon.
Alex Fisher, managing director of 3663, says: “We’ve had £40m of recent new account wins and additional category supply agreements with major regional and national customers, including Subway, TGI, Rank Group and David Lloyd Leisure.”
Expand your empire But don’t cannibalise
But even for smaller wholesalers, investment is proving to be a key route to growth. “The really good operators keep investing in their businesses, refurbishing, expanding, diversifying but most importantly, staying relevant to their customers in an ever-evolving marketplace,” says Bill Laird, MD of the UK’s largest buying group, Today’s Group.
One Today’s wholesaler that hasn’t shied away from positioning its business for long-term growth is Dhamecha Cash & Carry, which reported a turnover of £585m last year, up 3.6% from the previous year.
The business, which has seven sites dotted around London and greater London, has developed its business by continuing to refurbish existing depots, as well as opening new ones.
MD Pradip Dhamecha says: “The opening of the Lewisham branch in November 2012 has helped us to grow market share and we have plans to open an eighth depot over the next year.”
But opening a new depot is no easy feat, particularly when all your business is in London. “You need to be where your customers are, but it’s still a balancing act for us. We need to be careful that when we open a new depot, it doesn’t cannibalise the others.”
The wholesaler’s Enfield depot was only 40,000sq ft and sold just beers, wines and spirits when it first opened. But organic growth made it necessary a few years ago to expand the depot to 55,000sq ft to include toiletries, soft drinks, confectionery and other key lines.
Bill Laird believes that Dhamecha has hit a winning formula: “They have a real knack for choosing great locations each time they expand their estate and they don’t shrink away from making the kinds of investment required for long-term success.”
Refurbish and serve Cost-saving and improving the customer experience
At Stockport-based Parfetts, a focus on refurbishment and depot layout has helped the business to secure steady sales of £304m last year, up 1.7% from the previous year.
“Classic business school philosophy says that if you can afford to keep investing in hard times, then it’s a great platform for when the better times come,” says Steve Parfett, chairman of AG Parfett & Sons.
The wholesaler, a member of Landmark, has been “cautious” with spending and while there are no new depots on the cards, the development of existing sites continues. “We’ve invested in lights that take less power and switch themselves off automatically when people aren’t around – it helps us to save on energy costs.”
Protecting the business from criminal activity has also been an area of continuous investment. “Criminals are getting more and more sophisticated so you have to keep one step ahead to stop them from getting in at night.”
Last year, the Stockport site underwent a refurbishment to turn the depot into an educational hub for retailers, including the introduction of 3m x 1m drop-down light boxes on the wall at till point and LCD TV screens playing a mixture of promotional and educational materials from key suppliers.
More recently, the wholesaler has redesigned the layout of the depot to help promote better customer service. “Some of our team used to be based upstairs in offices, but we’ve moved them down to the shop floor to be more accessible to customers,” says Steve. “It’s absolutely crucial that the customers feel that they can walk into the office and query any aspect of the operation.”
Managing director of Landmark Martin Williams says that Parfetts is just one of a number of its members that are continually investing in their businesses. “At least 16 of our wholesalers are performing over and above market growth, including some of our smaller foodservice members, such as Turners and Brook Street, which have seen as much as 30-40% growth in the past year.”
But better sales won’t be entirely organic, he adds. “Some of our bigger members are growing as a result of purchasing other businesses, such as Hyperama’s recent acquisition of Derby-based Sohal Foods.”
Dhamecha also places a lot of emphasis on customer satisfaction and while the business continues to expand its empire, Pradip Dhamecha insists that much of its growth has come from great service.
“We encourage our staff to spend as much time as possible on the depot floor talking to customers – we’ve had great feedback about this.”
The combination of investment and service has helped the business to grow steadily without having to broaden its interests outside retail and cash & carry.
Bill Laird says: “Industry experts warned a few years ago that the rise of the delivered wholesaler would see the demise of the cash & carry, but Dhamecha and others have proved the experts wrong. The business has grown by understanding then meeting its customers’ needs and making this a priority at all levels in the organisation.”
Broaden your interests: diversifying into foodservice can drive growth
For other wholesalers, diversifying into new categories or customers groups has been an important avenue for growth. Both Bestway and Palmer and Harvey moved into foodservice last year – no surprise, given more than half of Booker’s £3.9bn turnover comes from caterers.
East End Foods, a Landmark member, moved into foodservice two years ago with the launch of its Aston Cross depot, designed specifically for caterers. Today, the wholesaler has reported sales of £160m, up almost 9% compared with the previous year.
Director Jason Wouhra says: “Much of this growth has come from foodservice. We’ve won some great high-end contracts – customers come in for our herbs and spices, but once they’re through the door, the rest is an easy sell.”
Meanwhile, at Parfetts, the plan is to stick predominantly to retail, although the business is eyeing a delivered business model for the top tier of its Go Local fascia (see our exclusive story on page 10).
For Dhamecha, the plan is similar. “We trialled a delivery service but due to the high levels of traffic in London, it wasn’t successful. We are still looking to launch a click & collect service by the end of the year,” says Pradip.
Omnichannel retailing Blurring of lines could create ‘super wholesalers’
The question facing many businesses is whether to broaden interests beyond their expertise.
According to Pradip, the blurring of lines between wholesale and retail will mean that ultimately, all wholesalers will need to find new ways to grow.
“A period of consolidation will take place when some wholesalers may need to serve other cash & carries, as well as their usual customers. They will become ‘super wholesalers’.”
In a recent report on omnichannel retailing, IGD’s chief economist James Walton wrote about the implications of blurring previously distinct retail formats: ‘In this scenario, a pizza delivery company might deliver groceries supplied by an associate business as well as hot pizzas from its own range.’
But there are also interesting opportunities for wholesale. ‘It could mean making use of wholesaler vehicles to make small deliveries directly to customers.’ This could create cost savings for the businesses involved, and offer responsiveness for the shopper, he added.
Even for Dhamecha, this could mean keeping options open: “While we’re not currently looking at foodservice, there may come a time in the future when that will change. Similarly, the time will come for us to expand our business outside of London,” says Pradip.