The wholesale sector in the UK is split into two distinct parts. The three major London markets, which are the largest sites in the UK, continue to operate with large numbers of companies able to maintain business from a wide network of varied customers around the capital city. The provincial markets, on the other hand, have dwindled in both number of sites and companies and their customer base has not increased at a similar rate. The consolidation of Fyffes and Redbridge as Total Produce at the beginning of the year reduced the number of firms still further.
But there remains a general mood of defiance. Wholesale markets have had a lot thrown at them in recent times, but they have stood their ground and to a large extent adapted to the conditions they face. Mike Caddy of supplier Agrexco says: “Wholesale markets are never going to be what they once were, but people have been too quick to write them off. They are continually evolving and have risen again like a phoenix from the ashes. There are lots of business owners out there looking for the way to take their businesses onto the next level. The investment made by Total Produce in its market business is very important and there are examples on a smaller scale, C&C in London for instance, of companies doing exactly the same across the country.”
There is still a long way to go to drag the standard of some of the market facilities into the 21st century, though.
Ronan Lennon, managing director of Capespan UK, which sells 10 per cent of its product through the markets and which along with Agrexco is one of the few to have stuck by the sector throughout its years of difficulty, says: “Some of the markets could definitely tidy up their act. There are without doubt some very good operators out there, but the state of some of the markets is quite shocking, to be frank. In that respect, a lot could be learnt from overseas sites, which are generally well-kept and clean.”
Jan Lloyd, general manager of the Covent Garden Market Authority, which is embarking on an ambitious redevelopment plan in south London, says: “A lot of markets were built around 30 years ago and I think we are now reaching another watershed in the evolution of wholesale markets in the UK. Food, healthy living and the social aspects of markets were off the public agenda for 20 years, but they are now firmly back in the spotlight. There is a lot of stiff competition, we do all have to work very hard, but now is the time to create a new vision for the future of markets in this country and we all have to take advantage of that.”
Western International, in west London, and Liverpool, are also considering different styles of redevelopment, with Western in particular well down the road to building the first all-new wholesale market in the UK since New Spitalfields in the early 1990s.
Tony Fraser, deputy chief executive of Geraud UK, which owns and runs Liverpool Market, has undertaken an evaluation of the market’s potential, with the aim of creating a foolproof market in the north west. A Rungis consultancy was brought on board to give a different perspective and the preliminary findings of the study should be made available soon.
Liverpool is perhaps the best example of the impact Total Produce has on a market. It is estimated that the company both brings in and sells more than 50 per cent of the produce in the market. “There is a dependency on this,” says Fraser. “And there is little doubt that the market would be an entirely different animal without Total Produce. But that’s not to say it would fail - it would evolve.”
The debate is largely hypothetical, as Fraser adds that TP is “committed very strongly to the future of Liverpool wholesale market. The company recognises that being in the market is as important to it as it is to the market. It acknowledges the many advantages and synergies of working in an environment with other, albeit it smaller, wholesalers.”
Total Produce’s chairman Denis Punter gives the group’s perspective. “[Our influence] can be over-exaggerated,” says Punter. “We are very significant in Liverpool and elsewhere and that’s what we set out to achieve. But if we do not provide the products or service that each market requires, the customers will go in a different direction, no matter how big we are.”
“I think the wholesale markets should see it as a major plus that a multi national company the size of Total Produce is ploughing so much money into the wholesale sector,” says Nick Matthews at Bristol Fruit Sales, which trades out of Bristol and Cardiff markets. “They wouldn’t be investing so much if they didn’t see a future in it, would they? I would be a lot more worried if all the major players were pulling out of the sector.
“At a time when increased numbers within our customer base are looking at national contracts, Total Produce offers a chance for traditional wholesalers to remain involved in such contracts but with the added benefit for the customer of using local depots supporting local growers to service their accounts.”
John Holland, managing director of wholesale group JR Holland, which won Capespan Wholesaler of the Year and Tesco Overall Produce Trader of the Year at the recent Re:fresh Awards, agrees with Punter. “Total Produce has stated its aim is to have at least 50 per cent of every wholesale market in which it operates. It can therefore make significant cost savings and it will undoubtedly be at the forefront of further consolidation in this industry. But it won’t be the bedfellow everyone will choose,” says Holland.
Both also share the opinion that critical mass is vital to the businesses that are chasing long-term viability. “The issues traditional wholesale operations face, such as reducing customer numbers, rising costs, aging facilities and workforce, were where we came from, and we decided that to overcome these issues and to be able to invest in the future, you need to be of a significant size,” Punter says. “We are dealing with low-value items - you need to ship a lot of boxes to make it all add up. Whether we have 40, 50 or 60 per cent of a market is not critical, but we believe we need to have the scale to invest in technology and infrastructure, in order to give the customers the service levels they need, which are understandably far greater than what we have done in the past.
“We do have to recognise that many of the markets around the country are well past their sell-by date. Independent companies have to be prepared to fund improvements and, again, this can only be possible if they are of a sufficient size. Customers want a situation in which they can get on with their job as a retailer or caterer back at the ranch, and rely on us to do our job for them. Just putting one lorry on the road can cost as much as £40,000 a year, once you’ve paid for the driver - you have to be extremely efficient to make it pay.”
“There are too many chasing too few at every level and the key word is still consolidation,” says Holland. “There are too many suppliers, too many wholesalers and too many customers and to a large extent, no loyalty.”
With this background, critical mass is essential for markets to retain a sense of perspective on the value of products, he says. “We don’t mind well-run, well-managed competition which controls its margins sensibly and is tight on credit control, but there are a lot of wholesalers working with relatively small volumes and they are reliant on cashflow to keep their businesses going. This inevitably leads to margins, and the understanding of value, being eroded.
“Margins are critical to wholesalers like everyone else. Importers and distributors need to be more realistic about our needs, but wholesalers also need to take a closer look at their overheads and exes and above all, control their bad debt. For too long, the markets have been treated like an unregulated bank. And when one company goes, as an independent retailer did in Gateshead recently taking the market for £140,000 and removing £25,000 of weekly business from the market, there is a knock-on effect for everyone.
“We are working harder, taking bigger risks and going further to deliver our products than five years ago. A lot of companies are doing that but not moving forward. We’ve diversified, into foodservice, flowers and a new market and if there is an opportunity to grow, we’ll take it. One of the biggest costs is distribution and the way forward is to fill trucks, rather than sending part-loads around the country. To do that, realistically you have to be a big operator.”
Without margin, as has been said, the opportunity to reinvest is lost, a problem that has seen the eventual demise of many firms. “Increased commitment to invest in the business and adapt what we do is crucial, says Richard Thompson, of Leeds wholesaler Gilbert Thompson. “You can’t do tomorrow what you did yesterday and expect it to be alright,” he says. “IT, coldstorage facilities, health and safety, anything that our customers want and our businesses need, we must be prepared to invest in it. We must also cut out bad practices. Our organic waste goes to landfill at the moment, for instance, in three years that will be like tearing up £50 notes. Wholesale companies have not traditionally been good at seeing the long-term benefits of spending money. But as a market, we work well together in Leeds.”
In Leeds, the number of tenants has reduced to three, which Thompson admits is “the bare minimum”. But it works, he adds. “Possibly we would have liked more companies to be here and possibly with 5-6 companies trading, customers would have expected to be a little happier, but this is how it’s happened,” he says. “It does work, but having a smaller number of traders doesn’t necessarily make it easier - if one of three doesn’t want to co-operate, it’s not difficult to put a spanner in the works.”
Back in Bristol, Matthews agrees with Thompson’s take on investment: “As has been true over the last decade, the successful companies in the wholesale sector will be those who continue to invest money back into their facilities, their technology and their people,” he says.
“The wholesale business is still down to personal relationships and service, however big the company,” says Capespan’s Lennon.
Under its H2H banner, JR Holland also operates from Leeds and Holland says the three-company scenario works well for him. “We get on well and at least we never have the awful scenario you see in other markets where every company is poaching staff from their competition to try and buy business. They see it like buying a star centre forward to score them lots of goals, but the days of that working are gone - it is no longer the salesmen that give the overall strength to a business, but the robustness of the finances behind the business.
“That is not to say salesmen are not important. What no-one should forget is that however big you are, this business always comes back to the quality of its people.”
Punter adds: “Wholesale markets, perhaps more than anywhere, are all about their people. You need to be really remarkable to get out of bed at 2am every day, six days a week. I really can’t thank my staff enough for that, but they also do it because they love it. One of these days we’ll stop opening at 2am and start at 2pm, but this has become a 24-hour business. The supermarkets are open seven days and virtually 24 hours, so we really have to be prepared to do the same.”
It is often said, in wholesale circles at least, that the supermarkets have saturated their opportunities with fresh produce. But is there share to claw back, or do the wholesale markets have a finite bunch of retail customers to work with? “In terms of grabbing market share back from the supermarkets there are very limited opportunities, for instance supplying into farm shops and farmers markets. But shopping in places like these are more lifestyle choices,” says Matthews.
“I don’t think we are ever going to see consumers turning their backs on the multiples in droves. The more important thing for wholesale markets is to concentrate primarily on looking after the business they already have and then to look outside their traditional marketplace for other opportunities for which the multiples do not or cannot compete,” he says.
On the other hand, he says, suppliers might make some decisions for the consumer.“We have seen the first signs of suppliers turning their back on the multiples and realising that wholesale markets offer a healthy alternative for the marketing of their produce and that their perception of the markets was perhaps a little outdated. We only require best quality produce and we are prepared to pay them a fair price for it.”
Jim Heppel, tenants’ association secretary at New Spitalfields, says: “I think growers, in particular, are recognising the need to nurture alternative markets, but if you talk to traders, the one thing they tell you is they are not short of suppliers, it is customers they are always on the lookout for. We are full here and it’s not been a case of keeping the customers here, but of those customers keeping going themselves. It is not just the wholesale markets that struggle to attract new blood.
“But people have learnt the lessons of previous mistakes and have closer links now with both suppliers and retailers. There is much better supply-chain communication and that is enabling wholesalers to be better informed and more customer-oriented.”
Matthews says: “Being customer driven, our focus has to be on quality. Whether it’s people, premises or vehicles our customers have raised the bar and we’ve had to react. In the markets themselves the time buyers have to walk the market has certainly been squeezed over the last few years. For them it’s important that when they place their order they can be confident they will receive the quality they require day in day out. It is part of the reason why commitment to brands has become such an integral part of our business.”
The quality and demands have changed dramatically, says Caddy at Agrexco. “Product that some firms would have had a go at a few years ago, they are far less inclined to take a risk on now,” he says. “The margins in general are tighter and traders have recognised the need for greater efficiency. They are not holding as much stock and not prepared to take product that will end up in the bin as waste they have to pay for. Their customers are no longer taking a chance on substandard product, many of them in the catering trade have food technologists and demand full traceability.”
Matthews agrees: “When your product arrives at your customer 150 miles away it has to be in the right condition because they simply have nowhere else to go. In terms of maintaining your business you’re only as good as your last order so you’d better get it right,” he says.
“Some wholesalers are almost at the point now of having their own specification, says Caddy. “That’s where a company like Agrexco and a brand like Carmel have a big advantage. We can offer that guaranteed service to all of our customers, supermarket or wholesaler.”
Capespan’s Lennon adds: “[The markets] may not yet be at supermarket specifications, but it is not possible to just sell poor quality or rejected supermarket product into the markets and expect to make money any more. It has changed quickly, only three to four years ago, that was still a part of the business.
“The lack of an outlet for rejected product makes the multiple accounts more of a risk, but it also makes it harder to source product for the wholesale customer,” says Lennon. “Some of our customers do make very specific quality demands - they have to as they are competing against a lot of big catering companies as well as the large retail chains. They demand better service, better quality, exclusivity in some cases and that’s where brands are very important, they give companies more guarantees.”
Operating in the world of demand and supply, it is harder for the wholesale trader to give those same guarantees. “Growers want stability on price, which tends to mean they prefer fixed programmes. The wholesale markets offer fantastic value when product is short, but suffer dramatically when there is an oversupply. Deals are often made on a week-by-week basis and this can make growers around the world very wary,” Lennon says.
Denis Punter was singled out by one wholesaler as one of the sector’s true innovators. He in turn picks out another man, Nick Matthews’ father, as “one of the greatest wholesalers of the last 50 years”, adding: “David Matthews was saying as long ago as 1994, when the Strathclyde Report came out, ‘guys, you just cannot continue as you are and survive’. He saw the vision and pursued it with vigour within his own company. Despite his success, you don’t see too many others around who have followed his lead. There is still a degree of the head-in-the-sand mentality,” says Punter.
SPITS LINK TO OLYMPIC LEGACY
As soon as London was awarded the 2012 Olympic Games and the east London sites were announced, New Spitalfields dubbed itself The Olympic Market. So what will the biggest sports show on earth mean for trade? “We are more interested in what happens after the Olympics - its legacy,” says tenants’ association secretary Jim Heppel, “what is left after we’ve had our few minutes of fame.”
The market is lobbying for the opportunity to supplement the fruit and veg market at Temple Mills with a new site, either adjacent on the section of Hackney Marshes to be concreted over for car parking for the Olympics, or opposite, either of which could house a composite market housing the traders from Smithfield meat market and Billingsgate fish market. “Three markets on one flexible 150 acre site with all the benefits of the excellent road access here at Spitalfields would make perfect sense,” says Heppel. “We are talking with the organisers, but things will only move forward in stages. There doesn’t seem to be much overall co-ordination politically at the moment, but that will come later on and we have to keep our hats in the ring.”
Tenants association chairman Chris Hutchinson, pictured, agrees: “It will have a huge effect on our futures and Hackney Marshes will be concreted over, even if it is just for four weeks. At the moment, it is meant to be going back to being football pitches afterwards, but the Corporation of London has a lot of land. Perhaps there could be a swap.”
With green issues to the forefront, he adds, the opportunity to base three markets on a composite site, with the option of making multiple deliveries as well as all the other energy saving synergies, “would make a great deal of sense, a fabulous one-stop-shop and be a good story. We can’t do a lot about our carbon footprint now, but maybe these plans will strike the right chord.”
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