A valuable network
With a new Castlebar Value Centre about to come on stream, BWG Wholesale's John Moane talks to Gillian Hamill about how the brand is managing to capitalise on a potent combination of national status and strong regionalised geographical locations
Print16 May 2013
"A bolt out of the blue," is how John Moane, managing director of BWG Foods Wholesale Division, describes the fire which gutted Value Centre Castlebar on 23 July last year.
Fortunately after an investment of over €2 million, Value Centre is now gearing up to open a brand new state-of-the-art 30,000 sq ft outlet in Castlebar at the end of June. In doing so, the group has been able to turn a disaster into a huge positive.
Naturally, there were many challenges en route that required a quick, clear-headed response. Moane recalls how for him, the journey started with an anxious drive down to Castlebar on the evening the news broke.
Major news story
"I got a phone call at home at around 6.30pm to say there’s a serious fire at Castlebar, so I drove down that evening. I remember listening to the news on the way down and it was on all the bulletins. Effectively the building and all the business was destroyed."
John Moane, managing director, BWG Foods Wholesale Division
It is still not known how the fire started but fortunately it began after the premises was locked-up and no-one was hurt. "There was a full investigation carried out, both forensically and from an insurance point of view," says Moane. Foul play was quickly ruled out and the most likely explanation is that an electrical fault was responsible; that is "the general kind of consensus."
A contingency plan sprang into action that night to minimise any inconvenience for the centre’s 400-strong customer base.
Advantages of belonging to larger group
Fortunately BWG was able to utilise the Value Centre’s network of 22 sites across the country and by the next day, the company’s Sligo and Galway centres were able to provide a delivery service to its Mayo customers.
Being part of a larger organisation also paid dividends for the group when it came to ensuring that vital data wasn’t lost. The group could quickly recover customer details and orders and Mayo customers could still place orders the next morning with the group’s centralised order-taking and telesales function in Cork.
Pulling off the feat of delivering to customers the very next day was an impressive logistical coup; one which involved working right through the night with the group’s transport company to ensure all routes and deliveries could be replicated for the coming weekend.
The team decided to open a scaled-down 10,000 sq ft Value Centre in the well-known area of Spencer Park to service Castlebar’s walk-in customers. This carries significantly less lines of stock than the original 30,000 sq ft premises; approximately 2,000 lines compared to the 8,000 stocked previously. In another impressive move, this walk-in centre was open within a week of the fire occurring.
No job losses incurred
While the team banded together to provide such efficient results, unsurprisingly the first reaction of staff, many of whom like Castlebar manager Frank Duffy, had been based there for many years, was one of disbelief. The Value Centre management subsequently sat down and clearly laid out their plans; assuring staff that there would be no job losses.
With a reduced service in place in the town, all other employees were transferred to Galway. BWG provided transport for their journey and staff were paid for their time spent travelling.
Moane believes a mood of optimism currently prevails. "Now that they can see the new building, beginning to take shape and come to life, they’re hugely enthusiastic about getting back into it again," he says.
New improved offering
The former premises was a "fine building", yet given that it was built in the 1970s and would have experienced natural wear and tear over time, the Wholesale Division MD believes the new building will be a significant improvement, with more natural lighting and modern building techniques.
The layout will also be changed to better match customer trends, and will use scientific data to maximise category management. However the cash and carry will still be divided into three channels; retail, licence trade and catering/hospitality. Moane adds that although the Value Centre outlets are still called cash and carries, around 60 – 70% of transactions are actually deliveries to customers’ businesses. The new building in Castlebar will therefore also provide an opportunity to lay the building out more efficiently from an operations perspective.
Strong geographical network
When the new, improved Castlebar Value Centre is up and running, Moane believes its strong regional location will fit in well with the group’s overall network. "Our strategy for Value Centre is very much to keep it as a local business with 22 branches in good locations," he explains. "If you look at the map, we have good locations; we have good provincial towns everywhere.
"It’s a really critical strategy of ours to retain that presence and I suppose when the fire happened, maybe in some people’s minds, even for a short period of time, there might have been a question, will BWG go back into Castlebar? Will the strategy make sense? But it is absolutely core to us that we retain a strong network."
While Value Centre is able to benefit from the economies of scale and buying power that come with the territory of a national brand, Moane thinks it also benefits from having a highly local presence across the country. "People say to me, is Value Centre different to some of our competitors? I would say we have the best of both worlds. We have a very strong local brand which people will relate to. Yet we’re also part of BWG so we’ve got a very strong national message."
Leveraging buying power
One of these advantages is the fact that BWG has a national distribution centre in Kilcarbery in Clondalkin, Dublin. Moane says this is "primarily the alcohol and ambient distribution centre for our retail Spar and Mace estate, so it’s a separate supply chain effectively." However the bonded warehouse operation in Kilcarbery also supplies the alcohol needs for Value Centre. Moane therefore views it as a valuable resource because, "it gives us as a company opportunities to leverage our buying power…If you look at the competitive landscape, we would certainly see ourselves as having a scale advantage against say Stonehouse. And we would see ourselves as having a local advantage over say Musgrave, which only has seven [ROI cash and carries], whereas we have 22."
"If you look at our Value Centre business, we strongly believe that we are gaining market share in the wholesale cash and carry sector and we are doing it at the expense of our competitors," says Moane. "The market isn’t growing. It is therefore incumbent on us to stay focused on our own business and our own strategy and for that to provide the momentum for us to grow our business and leverage our position."
Hospitality the strongest channel
Despite the challenging economic climate, he notes that the best performing channel presently for the group is the foodservice and hospitality channel. "I think the licence trade has huge challenges in it as we all know. There’s been a fundamental change in consumer behaviour and that’s not going to go back."
"There’s been a huge shift to the off-trade as we know. The off-trade is very much dominated by the big multiples and effectively that’s a very competitive market. So whilst we do well in that channel it’s not a growing channel, whereas our hospitality and catering and foodservice channel is actually growing for us."
This is partly due to the fact that he believes the hotel sector is less stressed than it was 24 months ago, helped by marketing initiatives such as The Gathering. He adds that Value Centre has invested in its foodservice offering and this has paid off as it has three multi-temperature sites, in North Road, Dublin, Galway and Cork. These supply a full ambient, chilled and frozen offering on a delivery only basis so "from a foodservice and hospitality point of view, we can supply all their needs". Value Centre is also planning to "introduce a web-based ordering platform for our customers from hopefully from June or July of this year", whereby all customers will be able to order online.
Continued consolidation within industry
Moane believes the wholesale sector is evolving and there will be further consolidation within the industry. "We do believe that there will continue to be some consolidation in this sector; that’s inevitable. If you look back over the past two or three years, we have made some acquisitions. If you go back to 2008, we acquired Mangans, we acquired Wicklow Cash and Carry, we acquired Connolly Food Service, and we acquired Morris Brothers last year; so we’ve been able to make acquisitions that have fitted in well to our business.
"Unfortunately there have been some closures in the [wholesale] business; Kilmartins closed last year, that’s very unfortunate but the reality is that there’s a lot of stress and I would still be of the view that there are too many wholesalers in the marketplace. That’s my belief; the market is over-serviced." Moane doesn’t view consolidation as a "negative from a consumer perspective" because he believes "there’s still going to be two or three strong wholesalers in a market of this size". However he views greater consolidation within the overall sector as an opportunity to provide "a better supply chain from a customer point of view."
Continued investment is a central part of the overall Value Centre strategy moreover, with the Castlebar Value Centre reopening and expansion programme in Letterkenny happening this year, further potential investments in Sligo and Dundalk and a significant refurbishment in Limerick last year; all of which add up to "an established track record of investing in the business".
XL is excelling
Another challenge for the business is that the number of independent retailers is shrinking yet this has been off-set by the success of Value Centre’s retail brand; XL. "We took a decision three years ago to dramatically overhaul it in terms of the brand appearance and the look and feel of the type of store it created," says Moane, explaining its transformation from the XL Stop and Shop banner. Since 2010, XL has recruited over 90 stores, and is on target this year to add another 30 stores.
"We’re not putting ourselves out there as being an alternative to the big brands," says Moane, "but we certainly do believe that it is a brand that has resonated with a lot of retailers who are proactive, who do want to survive and more than survive, to improve their standards and improve their offering and align themselves to a good group." It’s not surprising that the XL symbol group brand has proved a popular option for retailers, considering that establishment costs "could be less than half" the price of other groups and the ongoing costs are also lower.
Another plus for the Value Centre group, is that it has seen an increase in its walk-in trade. That is "interesting and when we analysed it, I think what is clear is that for some customers who maybe are under some financial stress, shopping in a local wholesaler where they can manage their credit is helpful for them," says Moane.
"We also have a scenario where retailers, regardless of what group they’re aligned to, are tending to shop around more for value. That has given us a broader base of customers, shopping with us over the past three or four years than might have traditionally shopped with us." The Value Centre network certainly seems to be doing its utmost to cater for the demands of this expanding clientele.
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