When Fresh Direct turned up to last May’s Re:fresh awards, the team was on a mission. Having missed out on the JP Fresh Foodservice Supplier of the Year award the year before, the company was more determined than ever to take home the prize in 2008.
So managing director David Burns was understandably delighted when the business picked up the JP Fresh National Foodservice Supplier of the Year accolade. “Having felt we could have won it the year before, we were determined to take the prize in 2008,” he says. “We would be being totally dishonest with you if we tried to use that old cliché of being surprised to have won it.
“I know how much work, energy and enthusiasm went into 2008 generally and our submission is testament to that. So of course we were thrilled, relieved and honoured to take the award.”
However, scooping the Tesco Overall Produce Trader of the Year gong on top of that rounded off an incredible evening. “To take the prize as overall trader was a complete surprise to all of us at Fresh Direct,” says Burns. “It completely put the icing on an incredible evening. I would like to think that the overall award was vindication, and indeed recognition, for the contribution made by foodservice produce operators in general.
“We have some outstanding competitors in our sector and at least one of the other finalists would have been worthy winners of both awards.”
What made the evening even more remarkable was that Fresh Direct’s then recent acquisition, Parkfresh, picked up the JP Fresh Regional Foodservice Supplier of the Year award.
“The whole evening suddenly took on the proportions of an Oscar ceremony for us, as we had now walked away with the industry equivalent of Best Film, Best Actor and Best Newcomer,” says Burns.
Parkfresh was delighted to join in the evening’s triumph. “Winning the Re:fresh award was one of the best moments of my career,” says Boyd Park, who was chairman of the smaller firm at the time and is now an important part of the Fresh Direct UK executive board. “Only a couple of weeks before the award was announced, Parkfresh had been acquired by Fresh Direct Ltd. It was the final icing on the cake for Parkfresh and was so rewarding for all the Parkfresh team who had made Parkfresh the profitable and highly professional business it had become over its 20-year history. With Fresh Direct winning the national award and the overall award, it seemed right that two highly professional fresh produce businesses had joined together.”
What was even more amazing, continues Park, was the reason that Fresh Direct and Parkfresh had joined forces in the first place. The previous year, both companies were finalists in the Bank of Scotland Entrepreneurial Challenge, Parkfresh for the north of England and Fresh Direct for the south of the country. “It was the then managing director of the Bank of Scotland who noticed that in this enormous competition, two of the finalists were in fresh produce. He then introduced us to one another and, as they say, the rest is history,” says Park.
At the start of last year, Bicester-based Fresh Direct announced a restructure of its management team and business. The core business of Fresh Direct and its subsidiaries Fresh Direct Local (FD Local), Fresh Direct Academy and specific teams such as Fresh Direct Gourmet, now reside under an overall executive board, namely Fresh Direct Holdings.
The FD Local brand was unveiled in 2007, with the aim of opening a series of regional hubs throughout the UK to procure and provide locally grown product for a targeted, local customer network. Parkfresh has now become Fresh Direct Local (North West), and the acquisition has gone far better than expected.
Park explains: “Parkfresh, now FD Local (North West), is fully incorporated within Fresh Direct and we have integrated and synchronised many aspects of the business, such as the way we treat our employees, customers and suppliers, technology, operational procedures, financial functions, logistics and new product development.
“The one aspect that we are passionate about not fully synchronising is the procurement of our produce. On imported produce, itmakes sense to buy as one business purely through economies of scale, but on local produce we still source from all our original suppliers. Although our national buying power on imported produce makes for competitive pricing, our local sourcing initiative not only demonstrates backing for local growers and farmers, but also provides our customers withassurance on provenance andthe ability to grow true, local produce. This is what Fresh Direct Local is about - local produce.”
So what synergies did the merger bring for the two companies? “The synergies within the merger work both ways,” says Park. “Fresh Direct has been able to give us savings in terms of imported produce through sheer buying power - we can then share these savings with our customers. Also, we have embraced many of their systems and procedures where they are superior and many of the other benefits of a larger company.
“In the other direction, the Parkfresh model is to be used in all the Local branches we have or have planned to open. Fresh Direct as a business traditionally served national customers. The Fresh Direct Local branches will serve independent and regional customers, giving them local produce at very competitive prices.”
Park will be responsible for implementing the Parkfresh model in all the FD Local sites. At the Parkfresh site in Skelmersdale, the procurement team has not changed since the merger and that will remain the case, Park adds. “The way the business runs on a daily basis is similar now to how it was when it was Parkfresh,” he explains. “The staff and customers were apprehensive during the early days when the two companies came together. Now, nearly a year later, almost all the staff are still with the business doing similar roles to before and feedback from customers is telling us that we are still reaching, and hopefully exceeding, their expectations. At no stage has either business dictated to each other - we have simply learnt through working together and listening.
“I have taken a seat on the main board of Fresh Direct as business development director. When I was chairman of Parkfresh, the managing director was Abigail Rycraft and the procurement director was Carl Park. Both Abby and Carl are still doing the same roles now at the Skelmersdale site.
“Abby and Carl have both worked with me since I started Parkfresh more than 20 years ago and were both directors and shareholders of the business. Now, Abby is managing director of this site for Fresh Direct and Carl heads procurement at Skelmersdale. This again ensures that the site is run as it was historically, albeit with improvements as we develop, and just as important is that Carl keeps buying the local produce off the contacts he has developed in the north-west of England.”
Since scooping its plethora of awards, Fresh Direct has not rested on its laurels.“We have never been a business that stands around waiting for opportunities to find us and so you will not be surprised to hear we have made another acquisition and also started a new business venture since winning the awards,” says Burns.
The development of FD Local is now advanced and well ahead of the firm’s five-year plan. Just two years and four months in, FD Local has operations in Cambridge, Manchester, Skelmersdale, Glasgow and Evesham, which provide support to its central function at Bicester. The latest acquisition was James Mackie Foodservice in Scotland in October 2008.
“We are hoping to add a further development to our geographical strategy shortly, so watch this space,” says Burns. “The end game is to be able to provide a national service from locations that are no further than 75 miles from our customers’ locations. Then we can provide a flexible and commercially viable solution for day one for day two direct delivery. In addition to that, we will have the infrastructure to provide local and seasonal products on a national scale.”
Local sourcing is one of the most important principles of the Fresh Direct business strategy, according to Park. “I truly believe that this is what makes Fresh Direct special,” he says. “As far as I’m aware, no other national company procures as much local produce to each of their sites as we do. With the current focus on provenance, food miles, environmental impact and obviously freshness and price, our local sourcing is one of the main reasons for our success and popularity.”
However, Fresh Direct has now taken its first steps overseas as well. During 2008, the firm established a joint venture in Dubai with a company called Wet Fish - an English couple, former fishmongers in the UK, who moved to Dubai a few years ago. “Mark and Jackie Allan provide quality fresh fish to the Dubai and Abu Dhabi hotel and restaurant trade,” says Burns. “Having been asked by our own clients in the UK to look at their interests in Dubai, we have joined forces with Mark and Jackie to provide quality imported produce and specialist fungi and fine foods. It’s early days, but Dubai almost seems recession-proof, as the sheikh continues with his dream to create the holiday destination capital of the world. We have high expectations.”
In January, Fresh Direct also embarked on a new project base in Bicester, to fully prepare, cook and char-grill fruit and vegetables. “The latter venture was born out of a request from a national sandwich retailer for that product,” says Burns. “Having struggled to source the right quality and consistency, we decided to do it ourselves, hence Chilli Pepper was launched.”
But despite the abundance of new ventures and plans in the pipeline for Fresh Direct, the question on everyone’s lips at the moment is whether the foodservice sector will come out the other side of the recession in one piece.
Burns admits that the industry has been affected bythe economic downturn, and predicts that things could get a whole lot worse before they get better. “There has been a sort of delayed reaction I think,” he says. “Initially, Christmas provided a boost, but I think more recently, as people’s credit card bills hit the mat, we have noticed a slowdown. Also, I believe there is a sense of guilt among those of us who as yet have been relatively unaffected by the recession - the feeling that, despite being unaffected, we should cut back in some way simply because we know someone who has been affected or made redundant. I genuinely believe the worst is yet to come for the foodservice sector.
“Pubs are closing at an alarming rate, and those who remain are offering unsustainable promotional offers.
“The pressures on operators are all upwards, with little news to encourage. Most of us are being forced to go back to cupboards we have already visited twice or three times in order to try and extract cost to service savings for our clients.”
The premium end of the restaurant sector is finding things more difficult in the recession, explains Burns, while the snacking, takeaway and fast food end is coping better. “I think the key thing in these situations is not to be caught in the middle,” he says. “If you are offering true value and no frills, then deliver exactly that and your client will recognise that; the same at the top end. For example, I recently tried to book a favourite restaurant of mine in London for a surprise birthday, only to be told two weeks ahead that it was fully booked for all sessions.
“I think the real issue is for brands caught in that middle market - not cheap, not expensive - it’s here where I see real problems, competition and subsequent further losses.”
Burns predicts further rationalisation in the sector, both on the high street and in terms of suppliers. “Cash for investment will only be given to those with a proven and sound track record, which may accelerate the pace of rationalisation further,” he says. “All in all, those who survive will come out of this terrible situation with a leaner and, importantly, more nimble business.”
And Park clearly believes Fresh Direct is one such business with the mettle to see it through safely to the other side of the rocky ride ahead.“As the economy is now declining, we have to work hard to increase our market share, and this is working,” he says. “Even though conditions are tough, the business is still growing both organically and through acquisitions. We are also aware of tight credit control as the failure rate of businesses increases.
“On a positive note, recessions can produce opportunities, capital assets cost less, employees tend to stayloyal to good businesses and other companies can be acquired for little cost.”
Fresh Direct has always been keen to deliver an optimum cost to serve on a client-by-client basis, says Burns. “However, one of the key initiatives that we have always backed is to rip out all unnecessary product costs under our ‘fit-for-purpose’ campaign,” he explains. “We are well advanced with this programme in conjunction with our growing partners and customers. It may be shape, it may be size, it may be packaging or all three, but we have challenged all of our long-standing customer specifications in line with work we have conducted in house and in the kitchen environment. We believe many of the specifications we were being asked to comply with were outdated, originated from retail and had no correlation to end-use.
“In this way, we are able to present ourselves to growers in a much more attractive way than perhaps the multiple retailers. Having been the cause of all of this to begin with, it is ironic that the retailers are now changing their tune. Their value ranges are now gathering pace.”
This year and beyond, Fresh Direct has simple aims, says Burns: “We aim to survive by being aggressive, when all the signs say we should do the opposite.”
Plans include completing the strategy for the Local brand and pushing on at pace with the FreshGro initiative, which involves working directly with smaller producers to grow less commonly found varieties of fruit and vegetables.
“It is pointless having a network of FD Locals only to find we don’t have quality growers to support the initiative,” say Burns. “The FreshGro partnership will provide a fantastic opportunity for growers to add foodservice to their plans for the future.”
Other plans also include the establishment of several more FD local sites over the next 12 months, in addition to the plethora of activity over the last year. “Many other initiatives are also planned, so we can always be a few steps ahead of the competition,” adds Park.
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