A step up or Brake down?

brakes
Chris Binge considers whether Brakes’ move into cash & carry is an act of desperation or genius

Just as all the mature foodservice cash & carry businesses have moved into delivery and have begun to use online extensively, the biggest delivered foodservice supplier, Brakes, has opened a cash & carry in Croydon.

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70% of Booker’s online sales are collect orders

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Delivered and online are the two key areas for foodservice in the immediate future, so why is Brakes opening a cash & carry? Should delivered wholesalers even be considering a similar move?

Brakes isn’t the largest UK delivered foodservice wholesaler by chance. It has to have considered this investment and the benefits carefully. This cannot simply be a response to Booker, Bestway, Costco, et al trying to ‘eat Brakes’ lunch’ by moving into delivered foodservice, can it?

Growth of online ordering

  • 15% growth in Brakes’ profits from online in 2013
  • £700m of Bookers’ sales (all delivered) were placed online, out of a total turnover of £4bn
  • Almost 70% or 40% of JJ Food Service’s total sales are placed online. Roughly half is click & collect, half is delivered.

Certainly, if this operation is to be a traditional cash & carry dedicated to professional caterers, there would appear to be many flaws in the business logic:

a)
Professional caterers generally require sizeable quantities of goods and usually don’t have goods vehicles to collect them from cash & carries.

b)
Professional caterers need to have records and assurance about the temperature history of many of the products they use – most will not have temperature-controlled environments and temperature recorders in the backs of their Volvo Estates.

c)
Is it an efficient use of a professional caterer’s time to ‘go shopping’ at a store, when the vast proportion of goods needed will be the same, week after week?

[pull_quote_right]Is Brakes envious of the growth of JJ Food Service and the cash business it has in Greater London?[/pull_quote_right]

Perhaps the tag cash & carry is a misnomer for this venture. According to one trade magazine, Brakes calls the venture a ‘professional food market’, so I think it is important if we want to try to understand why Brakes has done this to forget our existing ideas of ‘traditional’ cash & carries.

Next, Brakes has successfully managed physical stores and online – or, as their chairman calls it, “clicks and bricks”. Its online side grew profits by 15% in 2013 while the ‘bricks’ side was relatively static.

Meanwhile, Booker is doing around £700m (all delivered) of their £4bn+ sales online, with collection being around 70% and delivered 30%. JJ Food Service has £70m+ sales – almost 40% of their total sales – through online, with roughly half click & collect, half delivered.

Online ordering and home delivery is growing significantly for the big retailers and some of this is to caterers, so all accepted wisdom would indicate online and delivery are key trends likely to continue in foodservice as well as retail. So why has Brakes opened this ‘professional food market’?

The company’s strategy has to be more subtle. It is difficult to make a straightforward argument for investing in a cash & carry for foodservice customers. Is it simply that Brakes is envious of the growth of JJ Food Service and the cash business it has in Greater London? Or is the move more about education, demonstrations, product support, chef training and so on, and the ‘cash & carry’ will act as a showroom for Brakes’ products, which can then be ordered for delivery?

Perhaps Brakes thinks the move is a route into independent caterers, since they tend to be the principal foodservice cash & carry users. But their rationales for using cash & carries are complex and often dominated by the desire to purchase anonymously.

From the outside looking in, it is difficult to see the strategic thinking behind this venture in Croydon, but maybe it will become clearer in time.

Will other foodservice wholesalers be investing in cash & carry shops for caterers? It’s extremely unlikely and I will be surprised if Brakes extends this venture, too. But I am prepared to be surprised.

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Chris Binge is the chief executive of Fairway Foodservice, a buying group working on behalf of 17 foodservice wholesalers. The members' collective turnover in 2012 was £494m

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