Cut-price deals at the multiples have hit Elbrook Cash & Carry's alcohol sales hard - which is why it has bitten the bullet and diversified into catering. Peter Cripps reports
It's not easy being an alcohol wholesaler these days. Tax hikes and duty fraud are a major headache. But the biggest problem is the impact supermarket booze deals are having on sales.
It wasn't always that way. When Fukhera Khalid took over the Elbrook Cash & Carry 25 years ago, there was a niche in the market. For years, the company enjoyed steady growth. Turnover and pre-tax profits hit £112m and £2.4m respectively in the year ending July 2007. The depot, in Mitcham, South London, had one of the highest ratios of sales per square foot in the wholesale industry.
But over the past few years consumers started abandoning Elbrook Cash & Carry's independent retailer customers in favour of out-of-town superstores. As Elbrook's customers demanded lower prices to compete with the multiples, Elbrook's margins took a hit. Pre-tax profits slumped by 27% to £1.9m in the year ending July 2008 (though turnover was up 6%) and have since plummeted further.
"It's a sign of the times," says MD Khalid. "Competition has got much harder."
Fortunately, Khalid had already begun to diversify the business. In 2003 he opened a banqueting hall and Indian restaurant on top of the depot, naming it Chak89 after the Pakistani village from which his family originates. Earlier this year, on the back of that venture's success, he launched an events catering business.
With help from a tuk-tuk and three new delivery vans, Khalid's mobile curry team has already hosted two events in the weeks since the venture began, serving dishes including his 'Chak' chicken curry and karahi gosht. Going into the hotel and function catering business was the only way to ensure business growth, says Khalid. "The business can't survive in its current form," he admits. "I don't know how long independent retailers and wholesalers can survive. Some have started to go into delivered wholesaling and are now extending credit to their customers, but I don't think it's the way forward."
Khalid is investing £100,000 in marketing his latest venture, which he sees as a way of propping up Elbrook's flagging profit margins. "Catering has much higher margins than wholesale," he explains. "We have created this business at very little cost because we built the restaurant on top of our depot - so it's a double earner."
Khalid now plans to push deeper into food service. He hopes to turn a 104sq ft film studio that Elbrook owns in Hayes, West London, into a second banqueting venue.
Despite the diversification into catering, however, alcohol wholesaling remains at the heart of Khalid's business. "We still offer a better range than anyone else and availability is also one of our main strengths," he adds. "We just have to keep on doing what we do best and hope that the wholesaling side picks up again soon."
In the meantime Khalid has added another profitable arm to his business, which should help to see Elbrook through the current slump - a welcome cause for celebration in sobering times.
It's not easy being an alcohol wholesaler these days. Tax hikes and duty fraud are a major headache. But the biggest problem is the impact supermarket booze deals are having on sales.
It wasn't always that way. When Fukhera Khalid took over the Elbrook Cash & Carry 25 years ago, there was a niche in the market. For years, the company enjoyed steady growth. Turnover and pre-tax profits hit £112m and £2.4m respectively in the year ending July 2007. The depot, in Mitcham, South London, had one of the highest ratios of sales per square foot in the wholesale industry.
But over the past few years consumers started abandoning Elbrook Cash & Carry's independent retailer customers in favour of out-of-town superstores. As Elbrook's customers demanded lower prices to compete with the multiples, Elbrook's margins took a hit. Pre-tax profits slumped by 27% to £1.9m in the year ending July 2008 (though turnover was up 6%) and have since plummeted further.
"It's a sign of the times," says MD Khalid. "Competition has got much harder."
Fortunately, Khalid had already begun to diversify the business. In 2003 he opened a banqueting hall and Indian restaurant on top of the depot, naming it Chak89 after the Pakistani village from which his family originates. Earlier this year, on the back of that venture's success, he launched an events catering business.
With help from a tuk-tuk and three new delivery vans, Khalid's mobile curry team has already hosted two events in the weeks since the venture began, serving dishes including his 'Chak' chicken curry and karahi gosht. Going into the hotel and function catering business was the only way to ensure business growth, says Khalid. "The business can't survive in its current form," he admits. "I don't know how long independent retailers and wholesalers can survive. Some have started to go into delivered wholesaling and are now extending credit to their customers, but I don't think it's the way forward."
Khalid is investing £100,000 in marketing his latest venture, which he sees as a way of propping up Elbrook's flagging profit margins. "Catering has much higher margins than wholesale," he explains. "We have created this business at very little cost because we built the restaurant on top of our depot - so it's a double earner."
Khalid now plans to push deeper into food service. He hopes to turn a 104sq ft film studio that Elbrook owns in Hayes, West London, into a second banqueting venue.
Despite the diversification into catering, however, alcohol wholesaling remains at the heart of Khalid's business. "We still offer a better range than anyone else and availability is also one of our main strengths," he adds. "We just have to keep on doing what we do best and hope that the wholesaling side picks up again soon."
In the meantime Khalid has added another profitable arm to his business, which should help to see Elbrook through the current slump - a welcome cause for celebration in sobering times.
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