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Wholesale: The route to the market

06 June 2014 by
Wholesale: The route to the market

How is the wholesale market responding to a changing hospitality sector? This is the question Lisa Jenkins put to a roundtable debate on the key issues facing wholesalers

Andy Weir (AW) Being able to demonstrate that there's latent demand within our customer base is really important. Establish that there's a need for the product by coming armed with some research, and even identify a handful of potential customers.

Nicky Philp (NP) There needs to be a point of difference, not just another copycat product. We tend to find that there are a lot of the same things offered, just coming from different regions.

Nicholas Weber (NW) Understand how wholesale is different from retail. For a lot of How is the wholesale market responding to a changing hospitality sector?
This is the question Lisa Jenkins put to a roundtable debate on the key issues facing wholesalers suppliers, their first port of call will be to bang on the supermarkets' doors. Wholesale is acompletely different animal, and understanding the route to market is crucial if you're going to get a distributor to list your products. The support needed to go out and drum up demand from [ foodservice] customers is very different to just sticking it on a shelf. You have to create a market plan, understand who you're going to target and where that product is going to go - is it for schools, hotels, pubs or another part of hospitality?

NP You also need to give clear guidance on the price point you need to hit. If you're not clear about which market you're going for and which other suppliers are in there, and you go in at some ridiculously high price, you're never going to crack it.

How has the wholesale landscape changed?
NP
In our area, I'd say there is now less competition because there's been considerable consolidation over the past few years. Some companies are a lot bigger, some are much smaller.

Darren Broad (DB) It's really now a question of 'get big, get niche or get out', and I don't think that's unique to this sector.

AW The market has polarised between those operators who are looking for the consolidated one-size-fits-all solution, and those that like to use specialist suppliers because they offer a point of difference, or a particular product range. We're happy to serve both.

NW Hospitality is a very fragmented industry when you compare it with food retail, and it's still fragmented even after the recession, when a number of wholesalers went out of business. No one's got a very dominant market share, and that means there's an opportunity for everybody. There's no sense that we've run out of headroom for growth, so for us as distributors there's still a lot of opportunity to go after.

DB It's about understanding your value proposition. What is it you do that adds and creates value for customers? That's unique to the individual customer, so the real secret is lever-aging scale while at the same time personalising it to a client.

How does wholesale fit in with the trend for local sourcing?
NP
We've taken on more regional products as we've opened up into new regional areas, but unless the product is exceptional it doesn't tend to go out of that area. A cheese like Stinking Bishop is an exception - it's something anyone across the country would want, although you can't necessarily get hold of it.

AWLocally sourced means different things to different people. We buy a lot of produce grown in the UK, so by definition it's local to someone. Most of our customers are looking for Britishness.

NWIt depends how you define a region. If it's Yorkshire or the South West, that's one thing, if it's Scotland or Wales, where there are devolved governments and different requirements for public sector contracts, that's another.

DB In disposables, it's more about the environmental impact. Universities in particular are more aware of using biodegradable, and more so recyclable, products. Generally, though there's still a lot of education needed.

AW For example, we're seeing more schools going for Food for Life accreditation, while in the restaurant sector the Sustainable Restaurant Association seems to be gathering momentum. More of our customers are asking us to help them achieve the next star, or the next level of award.

NW This will become even more important with legislative changes such as the Food Information Regulations. That requires help from us in order for operators to understand what they need to do. It's complicated, and it's changing all the time. When you're running a catering business and trying to conform to laws that are not always as well defined as they could be, it makes it quite difficult, so they need our help.

How much competition do supermarkets pose? What do wholesalers offer over and above a traditional supermarket?
DB
My cups are considerably cheaper than the one's you'd buy at a supermarket, as are my napkins! But I think shopping at supermarkets has been a feature of the market for a long time. Pub groups, for example, have a lot of off-contract spend that is likely to go to a supermarket.

NWCertain customers do top up, and look around at the offers at supermarkets. The next week there might be a promotion on at a distributor, and they'll buy it there. Equally, when you've sold out and your next delivery isn't for a day or so, it can be just as easy to go to Tesco as to a cash and carry. But your supermarket isn't going to give you the same generous credit terms that we do.

AWAs well as the different pack sizes we offer, there are things like marketing support and food development expertise that you can't get from a traditional retailer.

How big a threat is Amazon and what are the other threats?
NW
We actually trade with Amazon, so they're another sales channel. A large chunk of our 3663 own brand is available through them. We do get quite a few consumers who come to us who've tried a product in a hotel, for example. We don't deliver to consumers, so we can direct them to Amazon.

DB The key to Amazon is the economic density of the product. A case of cups, high volume but economic density quite low, is not all that attractive. They sell high margin, low shipping cost books, CDs and games for a reason.

NWOur catering equipment business sells via eBay. When you try these new distribution channels, it's amazing how much business is out there.

NP Where you can use an existing website like that, you haven't got the setup or development costs. While we don't sell B2C currently, we have looked at it as a potential sales channel although not at Amazon specifically.

DB It's not just Amazon. There are others, such as suppliers in the stationery sector, who want to come into our space. They want to sell disposables, and they want a catalogue with 100,000 SKUs, so they'll want to supply direct from supplier. All they'll be is the middleman. Booker, as it expands its product range, is also one for us to watch.

Are operators more engaged with wholesalers now? Do they understand what wholesalers do?
NP
I'd say they certainly don't realise how many different suppliers we work with - more than 300 - and how many different products we offer.

AW We really like to invite customers to have a look around the warehouse, and see how many products there are. Every customer who does that is taken aback by the enormity of the operation. At different times of day there'll be product coming in, being moved around, picked and going out on vehicles. They get a much better feel for what goes into delivering the product to their back door.

DB There is really only a handful of suppliers who can deal with the largest accounts, say a Sodexo or an Aramark, so the competition's quite thin. When you come down to the "mom and pop" operating unit, your competition multiplies because the barriers to entry are negligible.

NP There's a vast difference between customers, and that's where foodservice wholesale is so complex, because you're trying to please so many different markets.

Trend spotting - how do you do it and why is it important?
DB
For us, it's what our suppliers are bringing to us in terms of innovation. We're probably a bit slower moving in terms of trends than you see in food. Trends in packaging do change, though.

NP It falls into two areas. Customers come to us with specific briefs, which we develop, too. On the other side we're continually looking at our range of new products that come onto the market. That's a combination of things that people in the business have seen - we have a product bank where people put ideas - and ideas from customers, from shows, or just from walking around farm shops. Obviously, suppliers also develop new ideas and put forward new products.

AW We've got a broad mix of customers from Michelin-starred chefs right down. These trends tend to start with the more elite chefs and filter down. Microherbs, for example, are now used by all manner of customers, quite a lot of universities use them, and in sandwich bars. We get innovation coming from our growers; we're currently looking at white sprouting broccoli and coloured Chantenay carrots. There are a lot of growers out there producing trial varieties.

NW It's a range of things. We subscribe to reports and look at trade press to see what's new, what restaurants are opening; we have food tours to see how operators are using different ingredients; and some of it is what customers ask us to source.

People on the panel Representatives from a range of wholesale specialists met at Caterer and Hotelkeeper's offices to debate the key issues facing the wholesale sector. The discussion was led by Lisa Jenkins, Caterer products and suppliers editor, and taking part were:
•Darren Broad, managing director of catering disposables specialist Bunzl Catering Supplies
•Nicky Philp, director of purchasing at speciality foods wholesaler Cheese Cellar
•Nicholas Weber, head of e-commerce at foodservice wholesaler 3663
•Andy Weir, head of marketing with fresh fruit and vegetables supplier Reynolds Creating demand NW Get a couple of customers to want the product. If there's guaranteed volume it's a much easier sell into the buying team.
NP There's a lot of work involved in setting up a new supplier, so there's got to be real justification for it.
DB Really, they're vying for face time with your sales team. A buyer will list a product, but if the sales team are excited by it, they'll sell it.
AW Do something different. It's easy to send out a blanket email, but it's also easy to delete it. Have the research and the marketing support and it's almost a no-brainer.

What influences pricing?
NW There are lots of different factors that go into pricing - eg, how often are you having a delivery? The fewer the drops and the larger the drops, the more efficient that is.
DB The complexity of the pick [in the warehouse] in terms of the assembly of an order is a big cost driver.

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