This is despite Asda meeting a vigorous response from the Federation of Wholesale Distributors when it asserted that the wholesale sector was growing and profitable in its submission to the Competition Commission last month (The Grocer 28 October p10). FWD director general John Murphy claimed the retailer's figures were related to 2004 and that growth had slowed markedly since then.
But responses to this week's reader panel show many players in the market to be positive about growth this year. Some 86% of those Big 30 wholesalers that responded said they expected their company turnover for the first half of 2006/2007 to be higher than that of last year.
While these wholesalers were not so buoyant about first half profitability, with 57% anticipating it would be higher than last year, readers were confident about full year profit, with 86% expecting it be to be higher than in 2005/2006.
No doubt Christmas is key to this but the picture on the ground looks to be varied when it comes to the performance of different categories. Confectionery, for example - important at this time of the year - has poorly performed in some wholesalers.
One says: “We have seen extreme pressure falling on the confectionery category directly as a result of what we would describe as a lack of innovation within the market along with a general lack of direction from some manufacturers and logistical and operational difficulties from others.”
However, despite the government's health message crisps, snacks and soft drinks performed well in this same wholesaler, who predicts a good year in these categories.
Healthier products are showing good growth, however, while many in the poll pointed to decreasing margins on tobacco. Yet again the picture is varied, with one wholesaler saying cigarettes are performing “amazingly well”, another saying wine is up while another says margins in BWS are down.
Margin pressure does appear to be hitting wholesalers across the board, with nearly six in ten saying they do not expect gross margins to be higher than last year.
The questions we asked:
1) Do you expect your turnover for the first half of 2006/2007 to be higher than the previous year?
Yes - 86%
No - 14%
2) Do you expect profitability to be higher than last year?
Yes - 57%
No - 43%
3) Do you expect your company's gross margins to be higher than last year?
Yes - 43%
No - 57%
4) Do you expect total profit for the full-year 2006/2007 o be higher than 2005/2006?
Yes - 86%
No - 14%