Challenges remain but firms say there are reasons to be cheerful
THE challenges facing Scottish pubs brought by the wider economic conditions are continuing to impact on wholesale companies – but there might just be light at the end of the tunnel.
Wholesalers told SLTN last week that the worst trading conditions seen on the high street for years have had a knock-on effect on their businesses as they battle for share in an increasingly competitive marketplace.
“The biggest challenge for our customers, which has a direct impact on us, is footfall,” said Donald Campbell, operations director at Inverarity Morton.
“Weekend trade has always been vital to the on-trade, but these days it’s make or break.
“Ensuring a high percentage of turnover on a Friday, Saturday and Sunday is absolutely vital.
“This means customers don’t buy as much [at wholesale] because it puts greater pressure on cash flow.”
Customers would buy one month ahead. Now they buy one week ahead.
Campbell said it is now more important than ever that wholesalers offer their trade customers the best product range at the best prices.
“There is certainly a big move towards buying just as much as you need; traditionally customers would buy one month ahead,” he said.
“We’re now seeing far more regularly that they’ll buy one week ahead to ease cash flow.”
Yet for all the challenges there are some in the sector who are hopeful that things are starting to look up.
Brian Calder, managing director of Wallaces Express, also noted that customers are buying less, saying that “bulk purchases are a thing of the past”, but he is adamant that things are improving in the trade.
“Although it has been a very challenging couple of years, I can finally see some positive signs returning to the on-trade sector,” he said. “I hope and believe that in 2013 we will, at last, see the trade start to pick up again. We need to have a positive attitude and a belief that things will improve.”
However, Calder also believes that the wholesale sector needs to learn a lesson from the demise of Waverley TBS last year. Primarily, he said, the sector must not devalue itself.
“We are a service industry and good service has a cost,” he said.
“Too many wholesalers are failing to realise that if the sector sells for no profit then they will not survive.”
Also looking to the future with optimism is George Benson, president of the Scottish Wholesale Association.
“There is never a time in the wholesale industry when there are no challenges to face or hurdles to overcome,” he said.
“However, it is my belief that, in Scotland, the industry is holding up well at the moment with wholesalers embracing many of these challenges by adapting the way they do business – for example budgeting carefully and planning ahead.”
Benson noted the fact that several wholesalers are now operating across different areas, such as foodservice, drinks and retail, as an example of how the sector is adapting.
As for specific areas of opportunity, Campbell at Inverarity said premium drinks are showing growth in pubs.
“I would definitely say that there’s evidence that consumers are opting more and more to trade up on a night out,” he said.
“In the main, people will choose premium but a brand that they recognise, unless they’re in an outlet that specialises in any one spirit where the range will span both mainstream and lesser-known boutique brands.”
In fact, some wholesalers believe that premium products could provide a major point of difference for the trade moving forward.
“I think the Scottish on-trade will continue to polarise, with the lower end of the market continuing to be squeezed by rising costs and competitive pressure,” said Michael Lovedale, director at Hotsauce Drinks.
“By contrast premium, independent units will continue to thrive as they are in a position to offer a more robust value proposition.
More traditional operators are increasing their premium offering.
“We have seen an increasing number of more traditional operators increasing their premium offering, investing more time in educating and motivating staff, and I think that for most operators this will become more and more crucial to running a competitive business.”
And Lovedale was keen to point out that premium is not purely about price point, but offering customers a higher quality service and product range.
“Creating a quality offering is the key to thriving in the current climate, and innovative bars are going from strength to strength.
“While it is of course important to minimise costs, creating value for customers needs to be every operator’s number one priority.”
Image – The boss of Wallaces Express said the sector must learn from the collapse of WaverleyTBS last year.