The traders at the North East Fruit and Vegetable Market are upbeat about the future of the business. The four main names on the market, JR Holland and Thomas Baty Ltd, both regional firms, national company Redbridge and multi-national The Greenery, have grown steadily.
But while several smaller firms have continued to hold their own on a competitive market, countless others have gone out of business. So what is the future for Gateshead market? And what are the secrets to success?
Trading in a wholesale environment poses constant challenges, according to Jimmy McDermott, a manager at Redbridge. “This trade is more difficult than the stock market and you have to take risks, take chances,” he says. “Sometimes you make money, and sometimes you don’t. But you can’t sit on your stock, or it goes to waste.”
The dominant firms on the market are in a good position and will continue to thrive, according to Patrick Spoors, assistant managing director at The Greenery. “The four major players are all very strong,” he says. “I think they will continue to do well, and they will be alright in the long term.”
John Holland, owner of the JR Holland group, says the outlook is bright. “As a group of businesses, we are very positive about moving forward,” he says. “We are ahead of the game on the market. We are the biggest in foodservice, the biggest in flowers by a country mile, and the biggest wholesalers.” The group has a turnover of around £40 million and owns a third of the Gateshead site. “I like to think that we are innovators, a progressive business,” he adds. “We are committed to making changes for the better.”
But the gradual scaling down in the number of companies trading at Gateshead has had a knock-on effect on the market, says Spoors. “The atmosphere has changed a lot over the years, and the market has become much quieter,” he says. “But it is still a vibrant market and, when it gets busy, there is a buzz.”
The 38-year-old market, which is situated on a 22-acre patch land in the Team Valley, is privately-owned and run. But how do the major market players come together on the committee in order to run the market? Holland is adamant that fierce business competitors are capable of reaching decisions that will benefit the whole market. “When we sit on the board we have to put on a different hat and focus on the interests of the entire market,” he says. “There have been some sparkling board meetings, but it is getting to the point where everybody has to get on and, whilst we are competitors, there is also a lot of mutual respect,” he adds.
The number of traditional wholesalers on the market has declined in recent years and, although the market is technically fully occupied, many lease-holders do not trade from their pitch, according to Spoors. “So much of the market has been closed permanently and it doesn’t look like [the units] will ever open again for traditional wholesalers,” he says.
Spoors adds that the management of credit is one of the main catalysts for closure. “The collection of money is a continuing issue and we are always having to chase some customers for payment,” he says. “The market operates on a kind of chain in which we are waiting for payments to come in. Some hotel and restaurant chains can take up to eight-12 weeks to pay for their goods, but we need the money within three weeks.
“The problem of credit control takes up a lot of time and we can spend a significant part of the week chasing and collecting debts. The board has put up measures to stop this happening, or at least reduce the problem, but it is an ongoing problem.”
The competition on the market has contributed to the accumulation of debt, adds Paul Holford at R Holford & Son Ltd. “If one firm stops serving the culprits, there will always be another company that will, and no one wants to lose out so everyone has to wait for their payments,” he says.
Michael Warren, a buyer at Elite Valley Vegetables, insists that the debt will only unravel when firms start to cut off customers that allow payment to become overdue. “I have got a list of people to chase this morning about the money they owe,” he says. “We cut people off if they don’t pay up, and if someone else wants to take on their debt, they can do. They have to pay their bills because we have to pay ours.
“You have to control the debt side and this is a very important part of staying in business. One hotel chain still owes us £10,000 from September, others as good as gold, but sometimes it just takes one or two to cause a problem.”
The attempts to control debt made by both the board and the traders at Gateshead have as yet been unsuccessful, says Graham Parker at Peelings and Pips. “The board is trying to put a stop to this happening with a 28-day rule and what have you, but it isn’t working, and you literally have to strangle some companies to get what’s owed to you. In the end you have to give them the credit that they want,” he says. “Some firms have started to set up contracts which state that after seven days there will be a 2.5 per cent base rate per day, but this only works if there is a contract, and I’m not sure if it will work even then,” he adds.
The difficult trading conditions mean that wholesalers have been pushed out of the market, says Spoors. “When a firm closes down, you tend not to get a traditional wholesaler in its place,” he says. “The units are often bought up by one of the existing companies and leased out.
“Each unit can be split into three and leased out to separate independent retailers. Leasing out a third of a unit will cost you about £100 a month, and small-scale retailers have found that it is worth their while to rent a small space to gain access to the market before it is officially open to the public,” he adds.
Holland owns 53 units of the 168 on the Gateshead site and leases out the majority as cheap warehouse facilities with 24-hour security. He has recently spent £650,000 redeveloping a site on the market and signed a 15-year lease over to Bell Truck Sales that kicked off last week.
But not all the traders support this move. “This is supposed to be a fruit and vegetable market, and the fact that there are companies here which don’t have anything to do with that, like Bell Truck Sales, is totally wrong,” says Parker.
Other traders say non-wholesale lease-holders are a better option that empty units. “There are no wholesalers stepping in to take the units when they are vacated, and this is why some independent retailers started to lease stands, or parts of a stand, just so they can get into the market before it opens to the public,” says McDermott. “But there will always be demand for a wholesale market in this area, even if the multiples have taken over. There is still money to be made in this trade if you can do things properly.
“The fruit and vegetables you see here are 10 times better than what you get in the supermarket, and people don’t realise that,” he adds.
The second income created when unoccupied units are leased out provides an essential boost for the existing firms, according to Holford, who owns eight units on the Gateshead site and, following the trend in the market, occupies four units and leases out the other half to retailers. “The land is worth quite a lot of money and the major stand-holders are holding onto their units because of the value of the land,” he says. “The independent retailers pay us good rent and, if you offset that against the market costs, this makes a difference to us.”
Tommy Conway, an independent retailer, has leased out a third of a unit at the Gateshead site for the last four years in order to gain access to the market before 6am without having pay the £5 daily entry fee. “The rent payment is worth it as you have to get into the market early to get the best produce and to give enough time to get the gear to my two shops in Scotland,” he says. “The other traders do not object to my being here, I used to work here myself so I know how it works,” he adds.
But how does Holland respond to criticism for leasing out space in the market to companies that have little or nothing to do with the wholesale trade? “The only complaints that people have about this are petty jealousies you would expect from a market community,” he says.
“The fact that I have bought the units in this way has underpinned the value of the market.
“The addition of wholesalers or catering companies to the market would not make it more vibrant, and I don’t think we need any more traders in the market. If additional traders come into the market, all they would do is water down the existing market share.
“As the cake has gotten smaller, the existing companies have taken a bigger slice, and I don’t want to cut up the cake again.”
Baty insists that the drop in the number of firms trading at Gateshead and the influx of non-wholesale occupants is inevitable and will not affect business for the remaining companies. “You have to look at where this space has come from,” he says. “It has come up for sale because companies have gone bust, either because of a downturn in the trade or bad management skills and, while at one point there would have been more wholesalers on the market and companies to step in, this is not the case now.”
“Having retailers leasing the vacant units makes no difference to us,” he adds. “But I am in the business of trading fruit and vegetables, not leasing out property, and that is what I will continue to focus on.”
The fact that fewer wholesalers have entered the market in recent years has granted the remaining firms opportunities for growth by minimising the number of firms competing on the same site. “Twenty years ago the market was occupied by many different firms,” says Gary Johnson at The Flower Pot Men. “But that has completely changed now and, although many of the pitches look like they have been closed down, the space is still owned by the major companies here and let out to independent retailers looking to have free access to the market,” he adds.
Other traders are concerned that the limited number of wholesalers on the site will eventually choke the market.
But is Gateshead market really in any danger of becoming a monopoly? Holland dismisses the concerns of the other traders. “How can there be a monopoly in a market where there are four major competitors?” he asks.
And there are still opportunities for brand-new companies to set up on the market. The Flower Pot Men celebrated its first birthday on November 21. “Some people round here thought we would last three to six months, and here we are a year later,” says Johnson. “The business is going well now but, I admit, it was a struggle in the beginning, as it can be with all brand-new businesses.”
The firm, which occupies six units at the Gateshead site, included sundry lines in its range only 11 weeks ago - and Johnson is upbeat about the potential for growth.
But what are the secrets to competing in a market environment? Alan Shield, branch managing director at Redbridge, puts an emphasis on innovation as a means of staying ahead of the competition. “I have an old saying, ‘If we do business today as we did yesterday, the chance is that we won’t be in business tomorrow’, and that is how I manage the business,” he says.
Shield has commissioned a redesign of the Redbridge logo and staff uniforms which will be completed this month.
The company launched a Making a Difference (MAD) development programme at the Gateshead branch in February 2003 and Shield says staff training has continued to be a priority in order to develop the business. “When people say, ‘I’m not important, I’m just the driver’, I tell them that this isn’t the case, as they are the last person that a client sees,” he says.
Holland has introduced an Investors in People scheme which will give all employees the opportunity to receive training up to NVQ levels two or three. “This is our way of taking the business into the twenty-first century,” he says. The group will also see a re-brand completed within the coming months.
The Gateshead market giant has also embarked on a number of initiatives that take the business out into the wider community. Holland has become involved with a Great North East Growers initiative aimed at encouraging growers to showcase their locally grown fruit and vegetables as an alternative to imported produce. “The idea is for local growers to get local produce into local schools so that Yorkshire children eat Yorkshire produce,” says Holland. “We are working with local education authorities to develop relationships with growers and we want British growers to show us their produce.”
Baty says the secret to operating successfully is the growth of the supplier base and the efficiency of transport and delivery. “We grow a little bit bigger every year and this has been one of our better years as we have had a strong management team and a great and enthusiastic sales and operational team” he says.
“We have focused on distribution as a way of offering an extra service and, over the last one or two years, I have concentrated on telling our customers that this service is available in order to stay ahead of the competition,” he adds.
“We are trying not to go down the catering route as this is in conflict with our customers, and there are other companies on the market which have moved into the catering trade,” he notes. “But Thomas Baty Ltd would be extremely interested in graduating to a composite market.”
The diversification of services and an increase in the range of products on offer are central to thriving in the wholesale market environment, says Spoors.
The move into pre-packed fruit and vegetables, bread, dairy products and cooking oil, as an accompaniment to traditional fresh produce, has helped to expand the businesses, according to Paul Clarke at C&S Supplies. “We see ourselves continuing to diversify and getting into more specialist products, as more chefs are coming up from London, and demand in this area is increasing,” he says. “We try to focus on the needs of the customer and that is all we have ever done.”
The family-run catering supplier has been based at the Gateshead site for around 12 years. But Clarke admits that C&S Supplies, like the other small firms based in Gateshead, cannot compete with the main companies on the market. “A lot of the firms have gone belly up in the last year and it means that the main players have more of a monopoly,” he says.
Holford agrees that diversification is the way forward. “The trend is that you diversify or you don’t get the business, but I don’t necessarily think that is right - I believe everyone should have their own trade,” he says.
“But we need more people in the market, even if it has to be selling meat or fish or whatever,” he adds. “This is not going to be a fruit-and-vegetable-only market forever.”
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