Positioning and reputation

Each business is shaped by the unique needs of its market. Each is expected to identify and maximise the opportunities in each geography. Unifying factors are unswerving commitment to quality and customer service. Our businesses are leaders in their sectors.

Macro- and trading environment

The foodservice industry faced a challenging environment worldwide. Trading conditions varied enormously across geographies as national markets are at different stages of economic recovery. The road to recovery appears to be the slowest in the UK and western Europe as national governments impose strict fiscal discipline.

Performance

The business put in a satisfactory overall performance as a refocused division. Trading profit, including the Nowaco and Farutex acquisition, rose 16,3% to R2,0 billion (2009: R1,8 billion). At R58,4 billion, revenue was 1,0% lower (2009: R59,0 billion). Excluding this acquisition, on a like-for-like basis, revenue fell 7,8%, primarily a result of adverse exchange rate translation.

Strategic and industry dynamics

Innovation in the face of changing markets was necessary in all operations. Management was confronted by volume pressures and downtrading. Inflation is lower across all geographies. In some cases, food deflation complicated inventory and margin management. Consumer focus on value and price was especially evident in the UK and Europe.

Pressure was felt in both the consumer and institutional markets. Major customers and government departments were aggressive in pursuit of cost savings. This trend is expected to continue and even accelerate.

Skills shortages still apply across most markets. It is a strategic priority to retain good people. Our business is primarily built on solid relationships. Pressure on the wage bill continues even in markets where unemployment may have moved higher.

Consumer activism for the environment and awareness of responsibility in the foodservice supply chain is on the increase, supported by tightening legislation. Bidvest Foodservice regards this trend as an opportunity to position its brands ahead of less well-resourced competitors. By applying strict standards throughout the foodservice chain, coupled with smart monitoring technology, we are able to offer our customers safe, quality products, sourced from responsibly managed resources.

Efficiencies

In the face of an industry downturn and downtrading, all businesses sought efficiency gains.

Structures were reviewed and further rationalisation achieved as local teams rightsized businesses for a much-changed trading environment. Expense management and working capital efficiency remained a focus area.

Technology is increasingly deployed to achieve efficiency improvements. There is no common platform and no plan to enforce a uniform approach. However, learnings from various technology sets are being shared. Initiatives include internet based selling solutions, paperless warehouse systems, dynamic routing and mobile devices for field sales members.

UK retrenchment costs and further costs relating to depot closures were fully expensed.

Benchmarks

Across all geographies we benchmark versus each other and against our international peers, when this information is available. Targets are set individually inside all operations.

Brand and operational dynamics

Value brands were a focus area. Teams looked to expand the range of products per drop to achieve distribution efficiencies.

Development of a house brand strategy across geographies receives increasing attention. We are exploring efficiencies across commodities, products and brands. We will investigate all sourcing and procurement solutions with the potential to deliver a supplier or customer benefit.

New initiatives

Nowaco (in Czech Republic and Slovakia) and Farutex (Poland) were acquired early in the period and bedded in well.

The other major new initiative was the introduction of a new structure, creating a single Bidvest Foodservice business across all geographies while reinforcing the decentralised model that ensures individual accountability within each business unit. The new structure was introduced in the second half. There was little disruption as the only material change affects reporting lines to the Bidvest Foodservice chief executive. Teams were always and will continue to remain responsible for local performance.

Business risks

Though markets are diverse, we face challenges common to all distribution businesses. The long-term prognosis on fuel and energy is the same worldwide – prices will rise, government oversight of carbon footprint issues will increase and we will be under pressure to maximise cost and energy efficiencies. All businesses are alive to the challenge.

Food price inflation is a politically sensitive issue in all geographies, increasing the need for smart solutions on our part. We also face the challenge of anticipating changes in taste (food is today part of the fashion industry) while responding quickly to economic impacts that trigger downtrading by consumers, cutbacks by corporates and belt-tightening by governments.

Global commodity risk increasingly affects food. The burgeoning appetite for certain foodstuffs in rapidly growing emerging markets can drive prices to unprecedented levels. The effect is compounded when a worldwide shortage of that commodity occurs at much the same time.

Culture

The Bidvest brand identity is increasingly deployed across operations. The unifying factors in the culture are pride in leadership performance and self-reliance. The change in structure has led to greater cohesion and a new sense that we are all on the same team with lots to learn from one another. Motivation levels are high.

Future

Double-dip recession fears have intensified in Europe and the UK. Asia Pacific has recovered relatively well from the financial crisis. South Africa was deeply affected by recession, but some improvement is expected.

Opportunities are being sought in Europe to expand Bidvest’s presence in the hospitality and fresh sectors. Growth opportunities in eastern Europe will be explored, as will those in other markets that we don’t presently operate in.

Overall, we will target a revenue increase above the GDP growth rates of our regions, adjusted for relevant food price inflation or deflation and a resultant trading profit growth. Synergies and efficiencies across geographies will be explored although no substantial benefit is anticipated in the short term.