Can Wilson Charles Wilson is determined that the wholesaler will become great again, as he tells Siân Harrington

You know your business is in trouble when you discover your shelves are still carrying Millennium spirits even though it is 2006. It’s no wonder that retail tycoon Philip Green said of Charles Wilson’s decision to move from M&S to head cash and carry business Booker: It’s like moving from AC Milan to Scunthorpe United. There’s no doubt that when Wilson joined in his first chief executive role in November last year the business was in dire straits. It was saddled with £400m debt; EBITDA was going the wrong way; range,price and service were worse than a decade previously and the promotional and pricing programmes were too complicated.Turnover was down 7.5% to £3.23bn in 2005.Booker was a lumbering,bureaucratic giant.
But four months into the job Wilson is already showing the Midas touch that has worked its magic in ten successful turnarounds.Debt is now running at less than £140m as a result of a financial restructuring.Much of the first few months has been spent clearing underperforming stock and the business is now carrying £35m less stock than a year ago. Better availability reports, sales forecasting,increased delivery frequency and stock getting on floor quicker have resulted in availability rising 2.5 points to close to 99%,the best for four years.
In December a depot in Kidderminster was closed,although Wilson says that there are no plans for wholesale closures of branches.
We are getting back in the game.
Booker was not doing as good a job as it should have done.We are now thinking like a cash and carry. It had forgotten the cash part of cash and carry, says Wilson in his first major interview since taking the helm.
A year since Icelandic owner Baugur bought Big Food Group and decoupled Booker from Iceland on February 11 2005,it is clear that Wilson is relishing the challenge of making great again the UK’s number two wholesaler,according to The Grocer’s The Big 30 ranking. The good thing is that we can fix it all.We are the only national player and have a fantastic customer base,with 270,000 caterers and 120,000 retailers, he says.
Wilson has set his sights high: I will be chuffed to achieve what I have set out to do make Booker the biggest and best supplier to small business and suppliers’ preferred route to market. But it’s no easy task.As well as addressing the immediate financial and operational issues that,with Wilson’s reputation for cost savings and efficiency,are far from insurmountable, there is the bigger problem of driving sales when one third of your market, namely independents,is declining.
One City analyst says: Once the business is stable,Wilson will have to look at how the market is changing in terms of demand growth by category. It will not be easy. Wilson concedes: The outlook is challenging.The two-tier definition of the market has forced Tesco and Sainsbury to compete in convenience and they have channelled a massive amount of capital into it.The independent needs to be nimbler.
“But while it is a tough market it is not as gloomy as the recent APPSSG report shows.There are areas of vibrancy such as farmers’ shops.We can serve people like this better and do a better job in helping neighbourhood stores develop a sustainable model. To address this Wilson is employing a three-pronged strategy, in fact the very strategy used to turn around Arcadia and M&S.Part one is to focus the business by March 31.This entails refinancing,work on cost ratios,a review of the management structure (which has seen the departure of highprofile marketing director Mark Collier and services director Steve Hogan, among others),and conversations with suppliers over terms.All of these have now been achieved. We have beaten our own deadline here it is a big tick, Wilson declares.
However,it has not been without problems.Supplier terms have been something of a moot point,with some angered that Booker has asked for cuts in invoice costs to cover the costs of central distribution.
Wilson defends this,pointing out that the vast majority of the 600 suppliers with which the company has spoken understand the rationale behind this thinking and have been supportive.
Booker has 173 depots of which 95 are in small towns serving outlets that suppliers wouldn’t otherwise reach easily,such as shops on holiday parks and caravan sites (see box above). This is part of the strength of our estate branches in areas such as Aberystwyth, Carlisle,Torquay and Yeovil.These are too remote for other cash and carries and too small for delivered wholesalers, explains Wilson.
But they are expensive to serve and, Wilson says, the most cost-effective way to do so is through Booker’s central distribution network.He is looking to Continued on page 34>> promotional and pricing programmes were too complicated.Turnover was down 7.5% to £3.23bn in 2005.Booker was a lumbering,bureaucratic giant.
But four months into the job Wilson is already showing the Midas touch that has worked its magic in ten successful turnarounds.Debt is now running at less than £140m as a result of a financial restructuring.Much of the first few months has been spent clearing underperforming stock and the business is now carrying £35m less stock than a year ago. Better availability reports, sales forecasting,increased delivery frequency and stock getting on floor quicker have resulted in availability rising 2.5 points to close to 99%,the best for four years.
In December a depot in Kidderminster was closed,although Wilson says that there are no plans for wholesale closures of branches.
“We are getting back in the game.
Booker was not doing as good a job as it should have done.We are now thinking like a cash and carry. It had forgotten the cash part of cash and carry, says Wilson in his first major interview since taking the helm.
A year since Icelandic owner Baugur bought Big Food Group and decoupled Booker from Iceland on February 11 2005,it is clear that Wilson is relishing the challenge of making great again the UK’s number two wholesaler,according to The Grocer’s The Big 30 ranking. The good thing is that we can fix it all.We recover the full costs of this and,where suppliers now deliver direct, he is discussing central delivery.
If we have a 120,000 sq ft branch it might make sense for suppliers to take a trunkload,but if it is 40,000 sq ft the logistics costs are prohibitive.
I could close central distribution but suppliers would have to pay more to get to these branches. Another bone of contention has been comparison with the 30,000 sq ft Hub depot in Cheltenham,which Wilson founded with former Booker regional director Tony Overton and former finance director Bryan Drew before joining Marks and Spencer,and which Booker acquired in October.Hub has been buying some items cheaper than Booker and making a 21% margin compared with Booker’s 9.5%.
It amazes me that one wholesaler could have been getting better terms than Booker, one supplier said last month.Wilson responds: The scale gap didn’t reflect what I was expecting. But he stresses that he is not pursuing an across-the-board policy.
We have talked to individual suppliers and where we have a full understanding of their terms structure, there has not been any change. Lessons from Hub are filtering back into the business. It helps you think like a small business.Booker thinks big.
Smaller businesses have faster discussions,observe customers better and think more about generating cash. From next month,Booker embarks on part two of its turnaround plan driving the business forward.Key to this will be increased choice, lower prices and better service.Wilson is reluctant to give much more away at this stage,only saying: We will be talking more about price and choice later this year. When it comes to service Wilson says availability is the most important issue.
As one customer said to me, if you screw up you lose your job but if you screw up I could lose my business. From March 2008, in part three of the recovery strategy, the plan is to broaden the business and attract new customers.
Wilson is reticent,but it is clear Booker will broaden its products and services, with potential areas being health and beauty and internet services.
Key to Booker’s weakness to date has been the fact that it has not achieved economies of scale,but neither has it gained the benefits of being local.This will change. Are we testing Polish beers? Absolutely. In Brighton we are selling organic ranges and fair trade.This is what the independent needs,not to be straitjacketed into the wrong choice. Plans for the 1,900-strong Premier fascia are also under wraps but Wilson concedes that this is one area that has last in the business.The fascia now generates sales of £805m. It is much more professional and helps Booker think more like a retailer and how to sell through to final consumers, he says.
Catering will also be taken more seriously.Under BFG,catering was focused on Woodward Foodservice, despite it contributing only a tenth of Booker’s revenue in this area.In November the Booker Basics range for caterers was launched with keen prices on products,such as 75p for 2.5kg of chips and £9.29 for 20 litres of vegetable oil.The range is already achieving £200,000 a week.
So once phase three has been accomplished,what then? Wilson says that he is not spending time thinking about the end game,such as the possibility of re-floating the business.