Kerry Foods' chilled distribution is motoring, and the bumpy ride ahead in the c-store arena doesn't worry the boss, as Rod Addy reports
Kerry Foods' Direct to Store is on a roll, but industry consolidation means the future route for a company which depends on the c-store sector is far from mapped out. It has big contracts with T&S and Alldays, for example, but they have been snapped up by Tesco and the Co-operative Group respectively.
However, managing director Michael Bassett doesn't appear worried by the T&S acquisition. "The contract is set to last until 2004. Tesco could terminate it before then, but where else would it go? In any case, the integration of the T&S estate into its operations will be a slow process and will only involve 450 stores."
He believes it would prove inconvenient and costly for Tesco to take on distribution for T&S. "Tesco has tackled the out of stocks issue well with much larger stores, but it would find the cost of daily deliveries to T&S outlets sizeable."
He says the multiples tend to deal in bulk deliveries, which are not made on a daily basis. This approach would not work for stores in the T&S chain, which require daily deliveries of chilled products, often in small quantities, to keep shelves stocked. But he admits that this argument applies less to Alldays the Co-operative Group is more used to catering for small c-stores. Ultimately, he says, it's hard to predict the future of either contract at this stage. "Our real strength lies in our ability to supply wholesale product for six days a week with no minimum delivery restrictions," Bassett says. Products are carried on spec and purchases can be made on the day, without pre-ordering.
These features help keep Direct to Store ahead of its nearest rivals, Nisa and Palmer & Harvey, says Bassett.
The company delivers brands such as Müller, Sunny Delight and Pork Farms to 17,500 UK shops from 33 depots and the network of routes is growing rapidly. It has proved to be a lucrative part of Kerry Foods' business, pulling in £200m in annual sales.
This expansion of Direct to Store formerly Kerry Foods Direct Sales has allowed it to nail contract after contract with other suppliers and retailers during the past five years. For example it revamped and expanded its £45m sandwich portfolio one of its core ranges last August through supply deals with brands such as Mattessons, Wall's and Heinz.
£35m supply agreement
Bassett says it decided to move into delivering brands outside its portfolio to strengthen the relationship with customers. Says Bassett: "We offer a total package. Many independents used to visit cash and carries to meet their chilled food requirements."
Retail customers now include Londis, T&S Stores and Sainsbury's Local outlets. But one of the biggest moves a £35m supply agreement with TM Retail came just two months ago. Another deal kicks off today (Saturday) with Jacksons Stores. And Bassett hints at other developments around the corner: "There are one or two things in the pipeline involving major high street and forecourt operators," he says, leaning back in his chair with a grin. "Hopefully, they'll come off within the next two months."
Like the avid poker player he is, Bassett keeps his cards close to his chest when it comes to discussing future deals with manufacturers. "We're constantly looking at new product groups that will sustain long term sales growth for ourselves and our customers. Although sausages, bacon and pastries are all big business for us, they do not fall into that profile. We have been researching category opportunities and have identified a core weakness in the distribution of key snacking and impulse cake products. We're in negotiation with potential suppliers and hope to launch into that area soon."
Kerry Foods' van sales business began to blossom with the acquisition of Millers & Roebirch in 1990 and was further strengthened four years later when the Mattessons and Wall's van sales operation was bought from Unilever.
The fleet has grown every year, more than doubling in size from 189 to 425 in 2002, with the acquisition of Pork Farms Bowyers' van sales operations from Northern Foods last March contributing significantly to that total.
An in-house software system was crucial in achieving expansion and one recent development was the introduction of EPoS-based auto-replenishment.
"We have rolled out the system to all T&S and One Stop sites and we are in talks to extend the system."
Bassett points out that success for everyone depends on manufacturers' and retailers' co-operation. He believes suppliers could be more realistic about c-stores needs, for example, by reducing case sizes: "This is a major issue for the kind of store we deliver to. They only have to throw away one unit to make a loss. Suppliers need a longer-term strategy. They have paid lip service to smaller shops and expected them to support high rates of distribution."
The future of chilled food delivery in the c-store arena may be uncertain as the pace of consolidation increases, but in a tough market, Direct to Store looks set to fare better than most.
{{ANALYSIS }}
Kerry Foods' Direct to Store is on a roll, but industry consolidation means the future route for a company which depends on the c-store sector is far from mapped out. It has big contracts with T&S and Alldays, for example, but they have been snapped up by Tesco and the Co-operative Group respectively.
However, managing director Michael Bassett doesn't appear worried by the T&S acquisition. "The contract is set to last until 2004. Tesco could terminate it before then, but where else would it go? In any case, the integration of the T&S estate into its operations will be a slow process and will only involve 450 stores."
He believes it would prove inconvenient and costly for Tesco to take on distribution for T&S. "Tesco has tackled the out of stocks issue well with much larger stores, but it would find the cost of daily deliveries to T&S outlets sizeable."
He says the multiples tend to deal in bulk deliveries, which are not made on a daily basis. This approach would not work for stores in the T&S chain, which require daily deliveries of chilled products, often in small quantities, to keep shelves stocked. But he admits that this argument applies less to Alldays the Co-operative Group is more used to catering for small c-stores. Ultimately, he says, it's hard to predict the future of either contract at this stage. "Our real strength lies in our ability to supply wholesale product for six days a week with no minimum delivery restrictions," Bassett says. Products are carried on spec and purchases can be made on the day, without pre-ordering.
These features help keep Direct to Store ahead of its nearest rivals, Nisa and Palmer & Harvey, says Bassett.
The company delivers brands such as Müller, Sunny Delight and Pork Farms to 17,500 UK shops from 33 depots and the network of routes is growing rapidly. It has proved to be a lucrative part of Kerry Foods' business, pulling in £200m in annual sales.
This expansion of Direct to Store formerly Kerry Foods Direct Sales has allowed it to nail contract after contract with other suppliers and retailers during the past five years. For example it revamped and expanded its £45m sandwich portfolio one of its core ranges last August through supply deals with brands such as Mattessons, Wall's and Heinz.
£35m supply agreement
Bassett says it decided to move into delivering brands outside its portfolio to strengthen the relationship with customers. Says Bassett: "We offer a total package. Many independents used to visit cash and carries to meet their chilled food requirements."
Retail customers now include Londis, T&S Stores and Sainsbury's Local outlets. But one of the biggest moves a £35m supply agreement with TM Retail came just two months ago. Another deal kicks off today (Saturday) with Jacksons Stores. And Bassett hints at other developments around the corner: "There are one or two things in the pipeline involving major high street and forecourt operators," he says, leaning back in his chair with a grin. "Hopefully, they'll come off within the next two months."
Like the avid poker player he is, Bassett keeps his cards close to his chest when it comes to discussing future deals with manufacturers. "We're constantly looking at new product groups that will sustain long term sales growth for ourselves and our customers. Although sausages, bacon and pastries are all big business for us, they do not fall into that profile. We have been researching category opportunities and have identified a core weakness in the distribution of key snacking and impulse cake products. We're in negotiation with potential suppliers and hope to launch into that area soon."
Kerry Foods' van sales business began to blossom with the acquisition of Millers & Roebirch in 1990 and was further strengthened four years later when the Mattessons and Wall's van sales operation was bought from Unilever.
The fleet has grown every year, more than doubling in size from 189 to 425 in 2002, with the acquisition of Pork Farms Bowyers' van sales operations from Northern Foods last March contributing significantly to that total.
An in-house software system was crucial in achieving expansion and one recent development was the introduction of EPoS-based auto-replenishment.
"We have rolled out the system to all T&S and One Stop sites and we are in talks to extend the system."
Bassett points out that success for everyone depends on manufacturers' and retailers' co-operation. He believes suppliers could be more realistic about c-stores needs, for example, by reducing case sizes: "This is a major issue for the kind of store we deliver to. They only have to throw away one unit to make a loss. Suppliers need a longer-term strategy. They have paid lip service to smaller shops and expected them to support high rates of distribution."
The future of chilled food delivery in the c-store arena may be uncertain as the pace of consolidation increases, but in a tough market, Direct to Store looks set to fare better than most.
{{ANALYSIS }}
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