Recession raising wholesale bar


THIS month’s collapse of WaverleyTBS brought into focus the challenges facing the wholesale sector.

With the country having been mired in the economic doldrums for several years now, this won’t have come as news to companies engaged in the drinks supply business.
But the shock created by the collapse of one of the sector’s biggest – and most established – players has arguably increased the pressure on the remaining wholesalers to be even more flexible and competitive.
“The situation at Waverley only further highlights that the on-trade is an extremely challenging market,” said Des Gallagher, regional managing director in Scotland at Matthew Clark, which had been linked with making a bid for Waverley.
“Many drinks producers and brand owners may lose confidence, to some extent, following this failure.
“Our objective is to listen to our customers at all times, and try to constantly deliver the best combination of price, support and service.”
While there exists a view that the removal of one major supplier could “ease” the market for others, Gallagher said the difficulties facing on-trade businesses at present (rising costs, pressure on disposable income) means the pressure is on wholesalers like Matthew Clark to continue to adapt “services, product range and support”.
Ian Cumming, commercial director at Forth Wines, also rejected the view that life will become any more straightforward for Waverley’s rivals.
“I don’t think the WTBS situation will make the market any less competitive – there are still plenty of very good wholesale businesses in Scotland which will be fighting for business,” he said.
“It will maybe be a reality check in that we must make sure that the offer works for both customer and supplier.
“There are also plenty of new wine, spirit and beer companies appearing and also some of the brewers are turning more to wholesale, so there’s no shortage of choice.
“In the current economic climate, good wholesalers have to be better than ever – we are an entire business support offer and we must get every aspect right.
“Our customers are more demanding than ever and the end consumer is more demanding than ever so we have to get the entire package right.
“A good price is not enough anymore – it’s about how we help our customers to sell the products.”
Many wholesalers have already enhanced the service they provide the trade as the wider economic conditions have put pressure on the industry.
Jim Rowan, MD of Dunns Food and Drinks, said his firm has responded to the difficulties its customers are facing by offering more flexible trading terms, backed by “the right support, range and service”; he also said it had continued to “invest in our people, our systems and our product offering because ultimately we want to exceed our customers’ expectations”.
Flexibility is also the name of the game at Wine Importers, the West Lothian-based wine wholesaler.
As well as striving to offer competitive prices to its customers, promotional support and bespoke wine lists, MD Billy Bell said it had broadened its range since the recession took hold.
“With other wholesalers paring back their offering we have increased our customers’ choice to some 1500 lines with an average stockholding of £1 million at our warehouse in Livingston,” he said.
“We also believe this level of duty paid stockholding offers customers reassurance as their wine supplier.”
While wholesalers have it in their gift to improve the service and flexibility they offer, there are some factors beyond their control.
As the continuing recession takes its toll on the on-trade, Stephen Russell, MD of wholesaler Inverarity Morton, told SLTN “the risk of bad debt is greater than it has been for many years”.
“Banks are far more severe on borrowing facilities, which causes potential cash flow problems,” he said.
“There has been no significant change in our relationship with customers, but to secure cash flow we have had to be less tolerant on late payments.”
Russell’s assessment was echoed by Brian Calder, MD of Wallaces Express, who reckons conditions in the on-trade – for pubs and in turn wholesalers – are the most challenging he has encountered in his 38 years in the business.
“Cash flow is probably the biggest challenge – banks are not being supportive of the sector and without good cash flow, some businesses will not survive,” he said.

Image – Des Gallagher: Waverley story crystallises challenges facing the on-trade.