Over the next three pages, The Grocer presents The Big 30, its first annual survey of the wholesale industry by turnover. The survey provides a snapshot of the entire wholesale sector - cash and carry, delivered wholesale and foodservice - and covers members of all the major buying groups, including the Today’s Group, Landmark, Spar and Key Lekkerland.
Topping our league table is Palmer & Harvey McLane. Despite what was in many ways a tough year for the delivered wholesaler, P&H is clocking up £3.53bn in sales from 15 depots - making it number one in our survey and the third largest private business in the country.
MD Graham McPherson says: “Despite fundamental changes in market structure, we have continued to grow our market share and are well-positioned to develop the business profitably into the future.”
It has achieved this position by being flexible enough to roll with the changes. Founded in 1925 as a tobacco and confectionery wholesaler, the company supplies more than half the supermarkets’ tobacco products. It has not been afraid to expand outside its core product areas, forging a comprehensive grocery offer, including alcohol, ambient, chilled and frozen food for independent and multiple retailers. Palmer & Harvey McLane’s purchase of symbol group Mace in 1999 was a significant leap forward.
The development of P&H Snacksdirect, a crisps and snacks delivery service, and third-party drop shipment scheme Ace have strengthened it further.
McPherson says: “Snacksdirect is profitable and growing. We have increased our capacity by 50% in the last year due to increased customer numbers in the independent retail sector.
“Ace is extremely buoyant year-on-year and provides our customers with a business solution to assist the efficiency of running an independent outlet.”
One of P&H’s biggest successes has been in alcohol. It delivers to 79% of all multiple off-licences. The acquisition of Winerite in 1999 as its specialist alcohol distributor, with customers including independent retailers, symbol groups and forecourts, enabled it to develop in this arena. P&H has made significant headway since 2002 when majority ownership of the business was extended to a broader base of staff, increasing their loyalty to the firm.
Paul Taylor, general manager for marketing at TM Retail, one of P&H’s key customers, is not surprised the business has done well. “Their availability is good and they are very good at scheduling deliveries for a tight window, which is vital for small stores, where staff availability is tight,” he says, adding that the wholesaler has done a superb job of accommodating distribution for the 180 Dillons stores that TM Retail integrated into its estate last year.
Of course, it hasn’t all been plain sailing. The wholesaler admits it has had to wrestle with some significant issues that have hampered sales growth. Rising labour and transport costs and price deflation driven by intense retailer competition have caused a few headaches. Other ongoing challenges include the consolidation of impulse customers, the low take-up of EpoS by
retailers and a declining tobacco market. But P&H hasn’t been the only one to suffer. Consolidation in both retail and wholesale sectors and rising national minimum wage costs may not have stopped cash and carry and delivered wholesale operator Booker running a close second to P&H in our survey, but they have posed a challenge, admits MD Gerry Johnson.
“The OFT needs to scrap the two-market definition and carry out a review of the grocery market to ensure a structure that gives consumers choice for the future,” he says. He also calls for the Low Pay Commission to strike a balance between business constraints and inflation levels when it sets minimum wage rates in the future. Tobacco and alcohol smuggling and increasing regulation are other concerns.
Booker is the UK’s largest C&C operator by turnover, serving 438,000 independent retailers and caterers. It has a third of the UK C&C market and 23% of the combined C&C and delivered wholesale market.
Recent boosts to growth have included the roll-out of its category business planning programme. The scheme gives independent retailers the same overview of purchasing habits as larger multiples.
And its continuing expansion in Asian and oriental food lines is increasing its appeal with restaurants.
Despite a tough trading environment, 24 out of The Big 30 report growth in the last year. Brakes, in third place, proves foodservice can be as lucrative as grocery. Its
latest sales figures show a double-digit increase over the previous year. However, fourth-placed 3663’s clinching of a £1bn contract to supply Kentucky Fried Chicken outlets could propel it past Brakes next year. And the proposed acquisition of Batleys by Bestway, reported last week, could also alter the wholesale map in the coming year.
Some of the largest growth in 2004, though, has been reported by players further down the table, highlighting their future potential. Online delivered operator Blueheath, a relative newcomer to the sector, has seen powerful double-digit growth in the last year, which means it now just scrapes into The Big 30 - not a bad achievement for a company only four years old.
Traditional confectionery and snacks wholesaler Hancock tops the best of the rest, with healthy annual sales growth just shy of double digits. The wholesaler is still reaping the rewards of a £500,000 depot refurbishment programme.
Key Lekkerland wholesaler AC Ward & Son received a massive boost when it bought the substantially larger Saxtons from BWG. And sales at T&A Symonds, another wholesaler from the same buying group, rocketed after it closed substantial contracts to supply RoadChef and Quix.
Latest figures reveal further high double-digit growth at Costco, United Wholesale (Scotland) and Hothi Cash & Carry.
Of the remainder, the star performer was CTM Wholesale, where sales climbed by a third in the last year. If the business grows by the same rate in the coming year, it will have a shot at breaking into the Big 30.