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| Review of operations – Bidvest Europe continued |
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| Macro factors |
British inflation has become a concern and the Bank of England has begun to increase interest rates. The base-rate was 5,5% by the end of the period and in July rose to 5,8%.
GDP growth in Britain is 3,0%, but there are indications the consumer is being squeezed by higher housing costs and much bigger fuel and utility bills (which rose by nearly 30,0%). The prices of the food manufacturers are also under increasing pressure, with the cost of vegetable and food imports rising by more than 6,0%. Category inflation for food and non-alcoholic beverages is running between 4,0% and 5,0%. Food deflation has been replaced by food inflation.
The Dutch economy has the reputation of being the first into recession and one of the longest to recover. This proved to be the case when the guilder was replaced by the euro. However, the recession is now over, and the slow recovery gathered pace in 2006/7. Business and consumer confidence have improved as a result.
Belgium’s economy performed well in 2006 with 3,0% growth, but the gains moderated in 2007. However, wage settlements in the 5,0% range have kept consumer confidence levels relatively high. Stronger performance by Germany, engine of the EU economy, is also positive for “the neighbours” in Belgium and the Netherlands. |
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| Industry factors |
Hotel room occupancy levels remain high thanks to strong tourism industries in all national markets.
A ban on smoking in Scottish and Welsh pubs, restaurants and places where meals are served has further increased public awareness of hygiene, food safety and nutrition. The ban has since been extended to England. Assisting out-of-home eating establishments to build repeat business has become a focus area as these businesses adjust to the no-smoking challenge.
A smoking ban will be implemented in the Netherlands in July 2008.
Concern for the nutritional health of British children has led to the establishment of the School Funds Trust and widespread review of the standard of food served in schools. In 2007 new standards were enforced in primary schools. Further legislation is imminent. We are well placed to respond to stricter standards and achieve competitive advantage in view of our work to promote healthy eating via our “positive steps” campaign.
Sustainability has become a critical factor for public sector procurement initiatives.
High labour costs, healthy eating trends and sustainability scrutiny also affect industry dynamics in the Netherlands and Belgium.
The net effect for broadline food distributors is to underline the need to become a partner of the customer by anticipating legislative demands, providing superior quality and nutrition ahead of time and developing solutions that protect margins, create new menu options or foster kitchen efficiency. Business units in all national markets have responded well to this challenge. |
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| Business growth |
Remedial action in the United Kingdom following the loss of the Ministry of Defence contract entailed the vigorous pursuit of new business while fostering organic growth. Notable successes were achieved.
In the United Kingdom, we have won an additional contract to supply the Compass Group, one of the leading international catering operations. The new contract involves non-food items and complements our existing wholesale contract to supply Compass with ambient food products. We also landed the contract to supply the Hilton Hotel chain in the United Kingdom across the grocery, frozen and fresh ranges – an account gain that entrenches our position as a leading broadline supplier to the hospitality sector.
Winning a £16 million contract to supply fresh produce and groceries to HM Prison Service has major significance. Scrutiny of food quality and nutrition is intense when tenders are received by government agencies. Our success in satisfying the most rigorous investigation of our quality standards was a signal to our industry that our quality controls are unsurpassed.
Public sector contracts are not awarded without a simultaneous examination of a company’s record for hygiene, workplace safety, investment in systems and compliance procedures, environmental sensitivity and commitment to the workforce and the wider community. The tick in the box marked “Sustainability factors” constitutes a de facto endorsement of company culture and organisational health.
In addition, we have grown our business with the United Kingdom operations of Aramark, the US foodservices and facilities management leader. We now supply Aramark with frozen, ambient and chilled foods, a broad offering that enables significant logistic efficiencies. Our business in the Netherlands has grown its business with Sodexho, ISS and Compass while Belgian operations strengthened their relationship with Compass through increased sales of our Ultrafresh range.
A key driver of organic growth – in the United Kingdom and mainland Europe – is the trend for customers to consolidate their procurement. These developments were anticipated two years ago when efforts were stepped up to create a consolidated ambient, chilled and frozen offering backed by wine and beverages and non-food supplies.
This trend has been accelerated in the United Kingdom (and to a certain extent in the Netherlands and Belgium) by climate-change concerns and renewed efforts to reduce “food-miles” and the distribution sector’s carbon footprint. The preferred solution is range consolidation on a single truck from a single source – a proposition our marketeers have advocated for several years in view of our extensive service offering.
To secure a bigger basket of our customer’s business we also add value through administrative efficiencies, advice on various ranges and our ability to provide solutions that satisfy key needs (for example, the provision of high quality, easy-to-prepare menu items when skill levels vary in the customer’s kitchen). |
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