Brands lead way

The roots of the cash and carry market may lie in the retail sector, but its future growth will almost certainly be built on the catering business. The sharp fall in the number of corner stores and newsagents - once the bedrock of the business - combined with the shrinking potential of the survivors which battle with the mighty multiples, has forced cash and carry operators to compete for the hand of the small independent caterer.

But cash and carry users can be notoriously fickle. Until recently, selection of a supplier has been based on little more than finding one with the lowest prices. Nowadays, faced with stiff competition and customers with greater expectations than hitherto, caterers demand a measure of quality along with a keen price - a tough proposition for operators in a market with wafer-thin margins.

A valuable lesson has been learnt from the grocery trade, however: the importance of building a strong own-label range that combines quality and competitive pricing. Hence the remarkable growth of labels such as Nurdin & Peacock's (N&P) Happy Chef, Booker's Chefs Larder and Landmark's Caterers Kitchen. All three operators see the brands as a platform for building a base of loyal customers.

According to Malcolm Carter, N&P's assistant managing director: "We have more than 500 own-label lines and will add 50 more next year." Giving Happy Chef lines a price advantage over the branded equivalents by an average 30%, and in some instances by 60%, has undoubtedly boosted N&P's own-label business. Over four years it has grown to account for 10% of N&P's turnover.

Booker has more than 600 Chefs Larder lines. In some product categories the own label accounts for 50% of sales and in some areas less than 10%, says Simon Harris, Booker's controller of catering marketing. The policy amounts to keen pricing, though the Chefs Larder is not always the cheapest choice in the depot - it can often be more expensive than some tertiary brands.

Ferocious competition

Steve Mayes, Landmark's senior catering trading manager, claims a year-on-year growth of about 10% for Caterers Kitchen: "Aside from the obvious leaders such as Nescafé and Knorr, our own label enjoys a high degree of brand awareness."

While N&P and Booker have national pricing policies, Landmark, the smallest of the trio, has a local policy set by the individual members of the group who buy locally if the price is right.

Booker's response in a "ferocious" marketplace, where the toughest opposition comes from the local cash and carry and not from national competitors, is to have a pricing structure that allows the depot manager to promote special offers.

N&P Caterers Club is designed to provide a degree of local flexibility on price and to give customers stability. According to David Hunter, N&P's marketing manager, merchandise: "We fix the price of a certain number of products for a fixed period, sometimes up to six months, so that the caterer can devise menus with a degree of confidence and with a fairly accurate fix on costs and profits."

As one would expect, customers give a variety of reasons for choosing a particular operator. All things being equal, convenience will be the deciding factor and the nearest depot will get the business. But good service coupled with friendliness counts for a great deal.

On the face of it, Margaret and Ian Horn of the But & Ben, a seafood restaurant in Arbroath, Tayside, use a Martex cash and carry - a member of the Landmark Group - because there is nothing nearer. But Margaret Horn looks forward to her visits: "It gets me away from the restaurant and the Martex staff are very friendly and helpful, the quality is good and the products relatively cheap."

Following in-store tastings, Horn switched from the brand leaders in mayonnaise and rice to Caterers Kitchen products: "They were much cheaper and tasted fine. But it will always have to be Heinz ketchup."

Quick and efficient service at the Booker depot in Blackpool won the business from Ray Carter, owner of the 32-bedroom Colwyn Hotel. "It is like going to a corner shop," says Carter. "We know everybody and they are very helpful. They have a butchery department that is second to none. And paying at the checkout is a quick and uncomplicated transaction."

Lorna Dunhill, proprietor and managing director of Above the Salt, an operation catering for both events and private parties, has used the N&P depot in Wimbledon, south-west London for the last four years: "I think the beef is excellent and I find the large Happy Chef packs convenient and good value for money. And the depot is open on Sunday and late in the evening, which is a great help."

Booker's plans

Looking to the future, the market will be watching the performance of Booker's first two dedicated units supplying caterers, located in Blackpool and Bath, with considerable interest. Carter at N&P is sceptical and cannot see the advantages of duplicating a service under one roof that successfully caters for both retailers and caterers. Landmark's Steve Mayes sees the group "as a very strong mixed business and to preclude one category or another is not logical".

But with plans to open more outlets for caterers only, Simon Harris explains Booker's rationale. "The units at Blackpool and Bath have always had a predominantly catering customer base. The catering dedicated units, which have been branded as Chefs Larder Foodservice must be near an existing site to which the retail customers can be easily transferred with minimum inconvenience. We are convinced that this is the way forward."

He concedes that the dedicated outlets will have an element of retail product: "But not enough to blur the new identity. Caterers, after all, have always bought retail packs of products such as confectionery and snacks to name just two."

The virtues of a strong own-label operation is not the only lesson to be learned from the multiples. Landmark has realised that a more sophisticated approach is necessary if the analysis of its business is to make sense and provide the tools for planning. With sponsorship from a number of its suppliers, Landmark has commissioned Manchester Metropolitan University to design a model that will analyse important aspects such as customer demographics and purchasing habits, product mix and performance and promotional activity.

Steve Denny, Landmark's chief executive, says: "The amazing thing about the lack of facts is that we all have the data: we have every single transaction recorded. The real trick is to liberate the data and exploit it to gain a better understanding of our business."