Foodservice

BIDVEST FOODSERVICE

Foodservice  
Foodservice
Bernard Berson
Bernard Berson
Chief executive, Bidvest Foodservice

Highlights and challenges

Arrow Rigorous regulation imposes more costs but represents more opportunities
Arrow Technology challenges receiving focused attention
Arrow Falling growth in China has raised concerns, however, opportunities have been identified in major urban centres
Arrow Development of house brands offers opportunities
Arrow Successful launch of Bidvest Procurement company

Material issues and risks

Arrow Lower consumer confidence has a material impact on performance
Arrow Integrity of supply chain questioned when products inaccurately labelled and original source unclear
Arrow Risk of business failure among customers remains a concern
Arrow Poor harvests and animal diseases impact supplies and pricing
Arrow Commoditisation with industry seeking low-cost options may erode margins

Comprises market leading foodservice product distributors in the United Kingdom, Belgium, the Netherlands, Czech Republic, Slovakia, Poland, the Baltic States, Saudi Arabia, the UAE, Australia, New Zealand, Singapore, Greater China, Hong Kong, Chile and southern Africa. Bidvest leads the foodservice industry in its chosen geographies operating through strategically located independent business units servicing the catering, hospitality, leisure, bakery, poultry, meat and food processing industries.

Financial performance

Revenue
(R’billion)
Revenue
 
Trading profit
(R’billion)
Trading profit

   

Non-financial performance

Foodservice people
Foodservice people
 
CSI spend
CSI spend

Environmental performance

Greenhouse gas emissions
Greenhou se gas emissions
 
Training spend
Training spend



QUICK LINK: Comparative sustainability data
http://www.bidvest.com/ar/bidvest_ar2013/006.php

Bidvest Foodservice Europe

Alex Fisher
3663 Wholesale UK

Alex Fisher
Managing director
  Andrew Selley
Bidvest Logistics UK

Andrew Selley
Managing director
  Dick Slootweg
Deli XL Netherlands

Dick Slootweg
Managing director
 

Revenue
R48,1 billion

Trading profit
R936,2 million

Contribution to Bidvest
Foodservice trading profit
37,6%

Employees
11 302

Full review here
 
Full review here
 
Full review here
 
             
Thierry Legat   Bohumil Volf   Stephen Oswald   Paweł S´ wiechowicz
Deli XL Belgium
Thierry Legat
Managing director
  Bidvest Czech Republic
and Slovakia

Bohumil Volf
Managing director
  Bidvest Fresh UK
Stephen Oswald
Managing director
  Farutex Poland
Paweł Swiechowicz
Director
Full review here
 
Full review here
 
Full review here
 
Full review here
             
Hisham Al Jamil   Ramunas Makutenas       Stephen Bender
Bidvest Foodservice
Middle East

Hisham Al Jamil
Regional managing director
  Bidvest Baltics
Ramunas Makutenas
Managing director
      Foodservice Europe
Stephen Bender
Chief financial officer
Full review here
 
Full review here
       

Rachel Ruggiero   Nigel Boswell   Johnny Kang  

Revenue
R28,6 billion

Trading profit
R1 211,4 million

Contribution to Bidvest
Foodservice trading profit
48,7%

Employees
4 954

Bidvest Australia
Rachel Ruggiero
Chief executive
  Bidvest New Zealand
Nigel Boswell
Managing director
  Angliss China
Johnny Kang
Regional managing director: Asia
 
Full review here
 
Full review here
 
Full review here
 
           
Gabriel Abramovicz       Barry Plit  
DeliMeals Chile
Gabriel Abramovicz
Chief executive
      Foodservice Asia Pacific
Barry Plit
Chief financial officer
 
Full review here
           

Revenue
R5,9 billion

Trading profit
R340,5 million

Contribution to Bidvest
Foodservice trading profit
13,7%

Employees
3 815

  Klaas Havenga
Food Southern Africa
Klaas Havenga
Chief executive

  Ryan Licht
Food Southern Africa
Ryan Licht
Financial director
 
Crown Food Group
John Morris
Managing director

Full review here
           
             
             
Brent Varcoe   Karel Meyer   Nigel Phillips   John MacKay
Foodservice
Brent Varcoe
Managing director
  Bidvest Food Exports
Karel Meyer
Managing director
  Bidvest Bakery Solutions
Nigel Phillips
Managing director
  Patleys
John MacKay
Managing director
Full review here
     
Full review here
 
Full review here

International perspective

The value of our decentralised business model was highlighted in a year when market conditions varied in almost every Bidvest Foodservice jurisdiction.

In Australia, the economy slowed as the resources boom came to an end and business uncertainty mounted ahead of national elections. In New Zealand, economic growth remained subdued, but some signs of an uptick came through late in the year.

The Chinese economy remained robust, but falling growth raised some concerns. It may be that the days of very high growth have come to an end, but opportunities still abound in the major urban centres in which Bidvest Foodservice is represented. Singapore is known for sending confusing signals as big swings in official statistics and projections often occur. However, the underlying economy is sound.

The UK’s economy spent most of the year “bumping along the bottom”, but in the fourth quarter indications emerged of better things to come. Prospects in western Europe were subdued while in eastern Europe trading conditions remained poor.

Market conditions in the United Arab Emirates and Saudi Arabia were relatively favourable.

Growth levels in South Africa continue to disappoint. Pressure on consumers can be severe and business confidence has declined. Food inflation is also cause for concern in South Africa, in contrast to all other Bidvest Foodservice markets. In other jurisdictions, food inflation is low and food deflation is even a risk in some countries.

Material issues

Consumer confidence: Pressure on disposable income has been severe in many markets for five years. Low consumer confidence and higher savings levels have material impact on performance and margins.

Supply chain management: Integrity of the supply chain can be called into question when food products are inaccurately labelled and the original source of supplies is unclear. Erosion of public confidence rapidly affects public trust in brands and sometimes entire categories of product.

Commoditisation: Focus by many industry players on low-cost options creates a risk that a race to the bottom will develop, eroding points of difference and margins.

Legislative risk: Regulation is stringent in both the food and distribution industries. New regulation imposes new costs, but rigorous regulation represents more opportunities than risks as well-resourced companies are better able to respond.

Credit risk: The risk of business failure among some customer groups remains a concern, especially in economies facing low or no growth.

Technology: Traditionally, foodservice was a low-tech industry. Online ordering, telematics and scanning technology are changing that. Foodservice operators are challenged to stay on top of new developments, extract benefits and efficiencies and avoid costly mistakes.

Climate and disease: Poor harvests and outbreaks of a wide range of animal diseases can have material effect on supplies and prices.

Financial performance

Results overall were pleasing, underpinned by solid performance by the Asia Pacific region. The weaker rand also had significant impact on results on translation of foreign earnings.

Revenue rose by 17,7% to R82,7 billion (2012: 2012: R70,3 billion), with trading profit 12,0% higher at R2,5 billion (2012: R2,2 billion). Gains were driven by organic growth and strong focus on expense management. No major acquisitions occurred, though small bolt-on acquisitions were made in several markets.

Capital expenditure rose. Investment in modern, value-adding infrastructure is a key component of our margin protection strategy. Margin contraction was minimised during the year.

We continually strive to take working capital out of our businesses and ROFE remained satisfactory.

Training investment was sustained.

Operational factors and strategy

Bidvest Foodservice is building a global business without applying a standard global template. There is no common thread except individual initiative. The “big picture” is a mosaic of small, but significant local successes.

Procurement synergies and best practice commonalities are coming to the fore without limiting the ability of local managers to identify their own opportunities and pursue them as they see fit. The appropriateness of this approach was confirmed by the achievement of business growth above national economic growth rates in most Bidvest Foodservice markets.

Three themes emerged at operational level:

  1. Selling a service rather than selling a commodity.
  2. Value differentiation through complementary offerings.
  3. Margin management.

The risk of commoditisation affects all national markets. To counteract the risk, teams in several countries launched efforts to add value through superior service. This strikes a receptive chord with customers, many of whom have cut internal staff in response to tough economic conditions. Customers with lean teams appreciate suppliers who offer smarter ordering and payment systems, better routing and complementary food ranges.

Range extension to create complementary offerings is a crucial element in the value differentiation strategy. Several of our businesses now offer fresh produce, speciality products, seafood, meat and processed meals, creating a one-stop platform with a value-for-money promise.

Bidvest Foodservice operates in all three major segments of the foodservice business, top-end speciality offerings (including seafood, cheeses and imported delicacies), the middle market (where value for money is essential) and the lower end of the market (where price is critical).

The best margins are found at the top end, but this is a niche market. Significant volume growth is difficult to achieve. The lower end of the market offers big volumes, but paper-thin margins make it difficult to achieve sustained profitability. The most potential is offered in the middle market, where our teams achieve differentiation through product and service quality at reasonable margins. Without neglecting opportunities in other segments, this is the major focus area for our business.

Teams in several countries are exploring the further development of house brands as a method of cementing relationships with customers while protecting margins and creating a value offering.

In some cases, it proved impossible to perform a quality service at the competitive prices on offer. In these circumstances, contracts were terminated or were not renewed when they lapsed.

Management teams focused less on the top line and more on the bottom line. The result was a return to more sustainable margins and better profitability.

Innovation

An important operational innovation in 2011, the launch of Bidvest Procurement company (BPC), proved successful. Procurement volumes at the Greater China-based company moved higher, enabling savings.

With proof of concept now established, we will cast the procurement net wider. Sources of supply in Brazil and Thailand, among others, are being investigated. Management will explore the possibility of setting up similar BPC operations in other regions.

Technology investment

Experience-sharing and international cooperation were stepped up, with strong focus on technology. Technology costs are already considerable and will rise in future. It is becoming standard practice across the business to request information on past technology experience in various markets before committing to new systems.

Where appropriate, proven platforms are rolled out. The BluePepper online ordering system – a success in both Australia and New Zealand – is being applied in many of our businesses, both in Foodservice and across the broader Bidvest Group.

Where roll-out of a well-proven system is not feasible, teams exchange information and ideas on possible solutions. Two years ago, IT implementation issues in the UK resulted in significant write-offs. In the past year, the Netherlands and Belgium experienced similar write-offs.

Important lessons have been learned. In future, the technology challenge will receive focused attention. Proactive information and sharing will characterise our approach.

Regions

Asia Pacific put in a pleasing performance.

Despite a faltering economy, Bidvest Australia maintained momentum. Sales were up strongly on the back of a robust contribution by the Foodservice division. The Fresh division contributed to profitability and, along with Meat, offers great future growth potential.

All divisions at Bidvest New Zealand performed well. Results were bolstered by the contribution of several small bolt-on acquisitions.

Operations in mainland China achieved pleasing growth. The roll-out to second-tier cities continued and by year-end Bidvest Foodservice was represented in 10 major metropolitan centres. Significant additions to the range were introduced. Initial indications are that the new Japanese range will be well accepted in the Chinese market.

Angliss Singapore, previously a commodity trader, is entering the final stages of its transition to a conventional foodservice business. Dislocation during the changeover impacted volumes and profits.

In the UK, 3663 Wholesale achieved strong growth. A fresh produce business was acquired in Bolton in the north-west of England. This was subsequently aligned with Seafood Holdings to create Bidvest Fresh UK. Bidvest Logistics secured strong volume growth and delivered a record number of cartons at a more sustainable level of profit, albeit very small.

Deli XL Netherlands faced a difficult year in all sectors – institutional eating, catering and restaurant business. Market contraction put the foodservice industry under pressure in both the Netherlands and neighbouring Belgium. In Belgium, the opportunity was taken to acquire several smaller HORECA operators to bulk up our business.

In eastern Europe, trading conditions remained difficult. Bidvest Czech Republic & Slovakia continued its strategic expansion into speciality meats. Farutex Poland faced market contraction. Bidvest Baltics secured market-share gains in the foodservice sector, but overall results were lacklustre.

Horeca Dubai expanded its infrastructure with the opening of a new distribution centre in Abu Dhabi. Sales gains were maintained in the Gulf and the Al Diyafa joint venture in Saudi Arabia performed very well.

Bidvest Food southern Africa put in a better performance in the face of continued margin pressure. Foodservice was impacted by low consumer spending and the need to maintain strict control of debtors in difficult trading conditions. Better overall performance was underpinned by clear focus on four business areas – Foodservice, the Crown Food Group of manufacturing and distribution businesses, Bakery Solutions and Patleys speciality foods and branded products into the retail market.

Investment in new infrastructure continued and Crown launched an Innovation, Design and Technology Centre in Cape Town to showcase its credentials as the developer of new solutions and an early adopter of the latest advances in food technology. By year-end Foodservice was approaching the end of its five-year migration to a full multi-temperature environment.

Operations were discontinued at the old NCP yeast factory in Durban and new yeast supply arrangements entered into.

Patleys returned to historical levels of performance, assisted by rationalisation of its brand bouquet and much greater focus on income-producing lines.

Societal issues

Public and media focus on the integrity of the food supply chain was highlighted in mid-year by the UK horsemeat scandal. Concerns over the mis-labelling of beef and processed foods were initially raised in Ireland and Britain, but ultimately spread to most of Europe. In a related development, it was later revealed that pork had found its way into halaal meals supplied by 3663 to British prisons.

UK management’s frank and open approach and full cooperation with the authorities ensured minimal impact on the 3663 brand. Our team reacted well to a difficult situation.

Step-by-step traceability of food products to the original supplier became a crucial issue as the scandal unfolded and the media focused public attention on the risk of food adulteration and the opaque nature of supply arrangements in many European countries. Thankfully, supply traceability is the central feature of 3663’s procurement system. There was a similar experience in our Czech business where certain meat products were found to include traces of horsemeat.

These developments were a reminder that foodservice businesses must maintain the highest standards; not only standards affecting their own processes, but standards applied by their suppliers.

Our businesses are industry leaders and work with the authorities on initiatives to build awareness of healthy food options and the benefits of a balanced diet. Where possible, we increasingly commit to local sourcing to reduce the carbon footprint. We use state-of-the-art telematics to reduce fuel usage and take strenuous steps to cut water and electricity usage.

Good corporate citizenship and good business practice are not mutually exclusive. Reputational factors can foster better performance and higher productivity. Our people are proud to work for a company that integrates good management and good housekeeping with good community relations and good environmental practice.

Future

Bidvest Foodservice is upbeat about prospects. The primary reason is attitudinal.

Internally, all teams recognise there can be no return to business on the pre-2008 pattern. We have entered a period in which management has to create its own momentum. Improvements in GDP and consumer confidence do not provide the only basis for growth. Growth must be driven by innovation, motivation and efficiencies.

Externally, customers have also adjusted to the new normal. They expect competitive prices, but increasingly recognise that low cost and high quality cannot be demanded at the same time. They have learned to value good relationships with reliable partners who provide services they can trust.

Our operations will remain energetic in the pursuit of sales, but at margins that are sustainable for our business.

Businesses in Asia Pacific are expected to maintain strong momentum. Bidvest Australia and New Zealand are industry leaders. They are well equipped to secure competitive advantage in a tough market.

Our Chinese footprint has been substantially widened, creating opportunities for continued growth. Singapore’s transition to a new business model is nearing completion, setting the scene for better performance.

We will benefit from the full-year effects of recent acquisitions in Britain and Belgium. Our UK business has proven resilient in the face of a prolonged downturn and is positioned to maintain its recent recovery. Operations in the Netherlands are under pressure, but have the potential to come back strongly. After recent acquisitions, Deli XL Belgium is also well placed. A positive rebound is projected.

Continued growth is expected in the Middle East.

Conditions will remain challenging in southern Africa, but we project further improvements, especially in the foodservice sector.

In June 2013 we acquired a controlling stake in a branded products distributor to the foodservice industry in Turkey. The Turkish economy has experienced significant growth in recent years. The acquisition affords an opportunity to gain experience of a new market with the potential for sustained growth.

Deli Meals, our acquisition in Chile, has made its first profits and we continue to explore further opportunities in South America.

We are committed to continued growth – both organic and acquisitive. We will not restrict ourselves to growth in national markets in which we have an established presence. Possibilities in several new geographies are being explored.

We expect competitive pressures to remain strong, but we also expect our management teams to do well in a highly competitive environment.

“Traditionally foodservice was a low-tech industry. Online ordering, telematics and scanning technology are changing that.

Bernard Berson

 
Registered office South Africa
Bidvest House
18 Crescent Drive
Melrose Arch
Melrose
Johannesburg
2196
South Africa
Website: www.bidvest.com
Telephone: +27 (11) 772 8700
Facsimile: +27 (11) 772 8970
Email: info@bidvest.co.za
 

 

 

 

 

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