Sales and profits in the wholesale sector were up in 2008, according to The Grocer's Big 30 survey. But 2009 is set to be different altogether, experts warn.

Despite the continuing expansion of the multiples into the convenience sector, a worsening outlook and declining cigarette sales in the course of 2008, leading wholesalers did surprisingly well.

Turnover in 2008 increased by 3%, and pre-tax profit was up 3.8%, boosting profit margins marginally, from 1.58% to 1.6%.

But the first signs were already emerging of a slowdown in the foodservice sector, The Big 30 can reveal, and in 2009, the so-called 'profit sector' of restaurants, pubs and cafés looks set to be hit harder still, with the smoking ban and the recession forcing people to eat out less while cash & carries also seek to poach catering customers.

Foodservice giants 3663 and Brakes are already taking steps to drive down their costs.

3663 shed nearly 250 jobs in the year to June 2008, The Grocer can reveal, and though its turnover increased by 7% to £2.3bn, the wholesaler refused to give pre-tax profit figures, while those for the previous year showed a profit decrease of 12% to £43.4m.

Chief executive Fred Barnes expects the year to June 2009 to be "flat" at best.

In the meantime, major rival Brakes, the fifth-biggest wholesaler in our ranking, is also in the process of shedding 200 jobs. Its turnover increased 11% to £1.8bn in the year ending December 2007 and it made £59m in profit, the highest in the table.

But Brakes' profits were down £10m, although it blamed this on an exceptional charge of £33m incurred when the company was sold to Bain Capital.

Analysts believe Brakes and 3663 are well placed to ride out the recession, using their economies of scale to drive efficiencies and improve their value offering. It is the smaller players in foodservice that are most at risk, they warn.

"The big players such as Brakes and 3663 are better positioned - they have more flexibility. They have cut their costs to the bone, but there's more to be squeezed out," said Peter Backman, foodservice analyst for Horizons.

JJ Food Service also had a good year, nearly doubling its pre-tax profits to £8.6m through the use of new technology that has driven efficiency.

The Big 30 was topped by Palmer & Harvey McLane for the fourth time in succession. Turnover rose 1% to £4bn and pre-tax profit was up 19% to £32.5m. CEO Chris Etherington called it "a solid performance" and promised to recruit more c-stores in 2009.

Second-placed Booker's turnover was up 2% to £3.08bn, with pre-tax profit soaring 36% to £36.2m.
Will blumenthal help dbc?
DBC is hoping sales of Little Chef’s new Olympic Breakfast will take off, after celebrity chef Heston Blumenthal trialled a new menu at one of the roadside diner’s eateries in Popham. If the new menu is successful, it will be rolled out nationwide. Heston’s blueprint was documented this week in a three-part TV series, Big Chef Takes On Little Chef.

DBC, which split last year from Woodward Foodservice, increased pre-tax profits by 133% to £0.7m.