Noel Keeley tells Elit Rowland how he saved his business €500,000 a year.
ER: You started out at Musgrave in 2005 as the group HR director – that’s quite different to your role now
NK: Yes, I’ve had a mixed career. I’ve always been interested in the commercial side of the business – I definitely have an entrepreneur in me. But my job in HR gave me a sense of the importance of people in a business. The best strategy won’t work if you don’t have the people with the right skills to implement it.
What’s the most challenging part of your job?
Fast Musgrave Facts
45,000 customers in Republic of Ireland
15,000 customers in Northern Ireland
10 total depots; 3 delivered serviced depots
55% foodservice; 35% retail; 5% on trade
Availability: 98% retail; 99% foodservice
Competition is fierce and a lot of people think that good wholesaling is about how well you sell. But I think that how you buy is just as important. If you can’t buy at the right price you can’t sell at the right price – this is a real a challenge for wholesale as a sector.
So what’s the secret of good buying?
It’s about having a good trading department – all roads lead back to trading! We once had a buyer on the retail side who thought he did well after taking 40% off the price of bacon; but pork belly was under-trading by 65% at the time. A good buyer will understand the end-to-end supply chain of products and the materials that suppliers are using – from packaging to labels. They should be able to tell them what they should be selling at.
What’s the most enjoyable part of your job?
Wandering around the cash & carry, learning from colleagues and customers – we value the insight gained from being at the coalface so last year we started a campaign called ‘Mail the MD’. Every employee was invited to email me directly with ideas to improve the business. Of more than 100 suggestions, 85 were implemented.
What was the best idea?
Our margins are wafer-thin – my return on sales is 1.5% – so reducing damaged stock is really important. Someone came up with an idea to prevent trolleys crashing into bags of rice and flour and damaging products: stocking the bags on three pallets instead of one. This saved us about €12,000 a year, which is worth €500,000 in sales – it had a phenomenal impact.
What’s the most popular method of shopping at Musgrave Wholesale?
All three channels [delivered, cash & carry and online] are growing but delivered and online ordering are growing in particular. More people are going into the depot, but it is lots of smaller foodservice operators who are shopping little and often, so the transaction size is lower – it’s not growing in real terms.
You’ve been trialling a new transactional app for retail customers. How’s that going?
The app will replace our existing scanner technology – we are the only wholesaler in Ireland that’s doing it. Retailers that have used the app are saving six hours a week in labour costs and are also saving the cost of buying a scanner. We have been trialling it over the past few months with 20 retailers – our business with them has increased by 14% on average year on year. We will launch the app in the next few weeks.
How do you expect the app to affect sales? Do you have a goal in mind?
We want to increase online sales by 10% a year and we’ve invested hundreds of thousands into our omnichannel strategy over the past four years. We expect some of the online growth to come from existing customers and the rest from new business. We’re encouraging our customers to move online, instead of ordering by fax, telephone or the back of a fag packet!
You’re clearly on the ball when it comes to technology – what’s your advice to others?
[pull_quote_right] Some suppliers are servicing me at 95% and that’s costing me money. It also means that I’m potentially losing sales[/pull_quote_right]
We are only at the tip of the iceberg in terms of how technology will affect the wholesale channel. You can’t ignore it. Look at Kodak – they developed digital photography but didn’t tell anyone about it because they thought it would damage their film business. Now they are gone. You ignore technology at your peril. But also remember that while technology can be a huge enabler, it can also destroy a business. If you do something which results in a bad experience, customers will vote with their feet.
But some wholesalers have managed to do well without even a website, like those on Shetland
They are dealing with a captive market. But technology has helped businesses cross borders. Look at Amazon: it used to be a book company and now it’s a huge distribution network for consumer products. The wholesalers on small islands may be okay for now but technology will allow competitors to move across borders and potentially into their markets.
Is there an opportunity for wholesalers to do more with Amazon?
Yes, businesses that are 100% online don’t have distribution points so they need wholesalers. There’s an opportunity for wholesalers to think about how they can work with these companies because they already have the physical infrastructure in place and might be able to take advantage of some of the sales share and growth by driving it through their business.
How are you further improving service to customers?
In foodservice, we measure a ‘perfect order’, which is about every single element of the customer experience being right, from telesales to delivery and availability. At the moment, we have a score of 92% compared with 86% when I first started. We’ve set ourselves a target of 94% for the end of the year.
We’ve seen a lot of diversification in the wholesale channel lately. Do you have any plans to expand into new customer bases?
It’s seven times easier to sell something to an existing customer than it is to sell something to a new customer. But we do still think that there are opportunities for wholesalers to look at different categories of wholesaling, such as health shops, pharmacies and hairdressers. Who’s wholesaling into these businesses and what are they selling – could we be selling it What additional support do you need from suppliers?
Some suppliers don’t look at or measure their own service levels. I don’t understand this. Our availability rate to foodservice customers is 99% and for retailers it’s 98%. I have to maintain these service levels. I can tell you now that some suppliers are servicing me at 95% and that’s costing me money. It also means that I’m potentially losing sales.
My message to suppliers is continue to innovate but above all, please deliver the product on time and do it consistently.
What does the future of wholesale look like?
How long will it be until we see wholesalers moving bulky goods to consumers directly? It’s a chore for consumers to go shopping for things like washing detergent. Someone will see an opportunity to drop certain products directly to the consumer, who will then only need to shop for fresh.
Is that something you have on the cards?
Well, never say never. As a business, we’d look at whether there was a commercial opportunity in it. One move that has worked well for us was the acquisition of Allied Foods earlier this year. There are other businesses we are looking at that will add to our growth over the coming years.
Are there any more acquisitions planned for 2014?
You’ll have to wait and see.