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| Review of operations – Bidvest Europe continued |
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| Innovation |
A new premium brand, Whites, has been successfully launched. Fourteen menu items were introduced in October followed by a further 16 in April. The range was further extended in July. The aspirational brand has been exceptionally well received after achieving a 75% liking score in pre-launch research. 3663 First for Foodservice is known for good value rather than premium positioning. Whites has therefore created a promising bridgehead into an important growth area – the best product category.
An industry lead has been given by the integration into our ranges of fresh produce and premium deli items from Swithenbank and quality portion-controlled meats from The Barton Meat Company. The breadth of this service offering puts us at the cutting edge of the range consolidation trend.
In 2007, we researched market demand for the introduction of fresh and frozen fish. We sourced and secured quality supplies of 500 new lines ahead of the range extension, which became effective in July. We demonstrated our sensitivity to environmental concerns by incorporating some Marine Stewardship Council products in the development of this new offering. The council’s mission is to ensure global sustainability of fish stocks.
In the Netherlands, our own brand coffee, Reuser & Smulders was launched as an authentic, pure, high quality, best taste brand. The brand concept includes coffee, tea, cups, cookies, sugar, milk, machines and Barista training to build a wider appreciation of the total coffee concept. |
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| New structures |
The position of Deli XL Belgium as the country’s leading foodservice company was further strengthened by the acquisition of Kruidenier, the number three player in the local industry. Deli XL Belgium has a strong presence in the Walloon areas in the south of the country while Kruidenier has its home base in Flanders. Consolidation of the number one and number three market players was well timed as it came as another company in the industry’s top five was wound up, creating the potential for future gains in market share.
The focus in the Netherlands has remained on further organic growth from its revitalised structure, particularly in the non-institutional catering market.
There were no acquisitions by the British business. The accent was on expansion of key operations such as the London base of the fresh produce business while making continual improvements to operational infrastructure. |
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| New investment |
In the United Kingdom, the Basingstoke operation (previously a depot dedicated to supplying the Ministry of Defence contract) was converted into a multi-temperature site. Another dedicated MoD site at Dundonald has been taken over by the Ministry’s new supplier. These arrangements ensured job losses were minimised following the loss of this contract.
The catering equipment facility in Bristol is being modernised and expanded. In October, we opened a new Edinburgh depot while our Manchester site has been expanded.
Investment in training is continual and rose to R17,2 million. |
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| Business risks |
Legislative risk is well controlled as these processes are predictable and well understood, though the extension of the smoking ban across Scotland, Wales and England was a reminder that business has to be flexible and responsive to changes in the policy landscape.
Sustainability has become a risk area in view of the priority given to these issues within the institutional market. This risk has been addressed by making this a focus area for management. Our record of sustained investment in quality systems, training and commitment to the environment cushions the risk of tender failure through sustainability shortcomings, but proactive management of all areas is essential.
Credit risk is a given in any trading environment, but the magnitude of the exposure can be affected by new corporate trends such as aggressive use of debt in leveraged buy-outs. “Value” that appears to be locked within a company can be stripped out at a rapid rate, suddenly changing the risk profile of a customer.
Bad debt levels have risen sharply as a result of some business failures, but vigorous corrective action has been taken. Greater use is being made of insurance tools to guard against the catastrophic failure of any single customer’s business.
Customer expectations have also emerged as a risk area following the change from food deflation to food inflation. Operational management become skilled at dealing with day-to-day challenges. Over several years, managing lower prices became a core competence. The shift to persistent food inflation creates new challenges as customers resist price increases no matter how well the increases are motivated. Better management of customer expectations has become a priority. |
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| Sensitivity analysis |
| The business is sensitive to upward pressure on food prices, labour and distribution costs and any constraints on the consumer’s level of disposable income. Sensitivity is controlled by the continued GDP growth in the United Kingdom, Belgium and the Netherlands and the high income enjoyed by consumers in all markets. The net effect of the chief economic variables is regarded as mildly positive. |
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