Bestway on manoeuvres as lockdown lifts

Bestway recently completed its integration of Costcutter Supermarkets (CSG), bought from Bibby Line Group last December – a purchase that has placed Bestway at the forefront of independent UK retail as well as wholesale, adding to its own shops, including the best-one fascia, to create a symbol, franchise, and company store retail estate incorporating more than 3,795 stores (including 2,682 fascia and 195 company owned).

A flurry of activity has just seen the appointment of former Customer Director with the McColl’s Retail Group, Tim Fairs, as Bestway’s new Director of Marketing. He has been given responsibility to support planned strategic growth and innovation across the retail arm of Bestway’s business, which is advancing at pace after the CSG acquisition and, before that, the Bargain Booze and Wine Rack additions following the demise of drinks group Conviviality.

“Further to our recent acquisition of CSG, the integration of our Retail operations is successfully continuing whilst we refine our service and support packages to retailers in order to give them competitive edge and deliver the best offer in the business” said Kenton Burchell, Bestway Group Trading Director.

Rebates R Us

In addition to the Fairs hire, Bestway has also decided that to encourage and support independent retailers at a time of supply shortages and delivery driver drought, it will throw open the doors of its depots to indies so they can go and pick up stock for themselves.

Bestway Retail Director Mike Hollis said the move is vitally important in ensuring retailers can top up and ensure consistency of service as well as keeping their shelves fully stocked during the current market conditions.

“We have just announced that CSG retailers and best-one retailers will all have the added benefit of access to our Bestway [and Batleys] Cash & Carry depot network with rebate rewards on qualifying additional purchases – making rebate rewards available across the widest possible range of products – with immediate effect,” Hollis said last month.

“Retailers that join our Bestway family now have a compelling choice as to the symbol or retail proposition that best meets their needs, skills, and aspirations,” he added. “We know that ‘one size does not fit all’ and that’s why each of our symbols offer something different within our estate portfolio.”

It is clearly the start of a recruitment drive (“We would invite all retailers to come and talk to us when they are considering their future and let’s discuss how we can make a real difference to their businesses,” says Hollis), and Bestway is taking advantage of its nimble and independent position to advance during this “pingy” post-pandemic period.

“It’s a fact of life within our industry that independent retailers need to top up their delivered services to ensure continuity of products and supplies at times of pressure to meet their individual needs and increased consumer demand,” Hollis said.

Following these announcements, Asian Trader sat down with Bestway CEO Dawood Pervez to talk about the current conditions in the sector and how Bestway is working within it to improve conditions for its existing – and potential – retailers, and about the differences between symbol and franchise set-ups.

But first of all, how had the Costcutter integration been working out, especially with the Co-op supply deal still existent?

“As you know we’ve been working hard to join the teams up as much as possible,” says Dawood. “We’ve now got the customer-facing side of the business all set up how we wanted it to be set up, and we’ve started moving forward on the combined opportunity.”

He makes the point that symbol group retailers are not exclusively tied to their parent organisation: “Even if you look at Nisa retailers, I think they only buy 55-60 per cent of their requirements through Nisa, and funnily enough, Costcutter retailers are more loyal to Nisa than Nisa fascias are – over 60 percent. Then there’s a whole bunch of stuff they buy direct to store.”

And then, he adds, there’s another chunk of business, “20 per cent or so which is, let’s say, floating out there, where they go and top up at, possibly, their local cash and carry.”

This lies behind the rebate guarantee that Mike Hollis was outlining, and about which Dawood elaborates:

“What we wanted to do – what we are doing – is to say to all the Costcutter retailers, Hey, if you shop at Bestway for your distress top-up, we will honour the rebate you earned as a result of your purchases through the Costcutter platform via Nisa.”

He says it is not about trying to take sales away from that platform (“That’s a very valuable platform, and we want them to do their big weekly shop as they normally do it”). Bestway wants the retailers to continue having access to Co-op, and is not encouraging them to stop.

“But what we are saying,” Dawood continues, “is that because deliveries and availability is challenged, there’s probably a lot more top-up shopping going on. And if they’re going to do that top-up shopping, they can do it at Bestway and we’ll honour their rebates.”

That is something Bestway already offers to its best-one retailers, although it’s not something they are planning to introduce to the Bargain Booze operation. “It’s a franchise offer with a far higher level of compliance, and the offer is far more carefully manicured. And therefore, you know, having top-up shopping is not ideal in that market. And also, Bargain Booze’s availability and service levels have not fallen below 95 per cent at any point.”

We home-in on the compliance and service levels that differentiate the range of offers and contracts in the symbol and fascia world, which are often complex and contain varying tiers of service and compliance for retailers under a single fascia board.

“The opportunity is obviously to combine what we call our facia businesses,” says Dawood. “That’s the franchise side, which is Bargain Booze, Wine Rack and Select Convenience, our symbol group side –which is best-one and now Costcutter – and then our corporate-operated stores which are spread across Bargain Booze, Central Convenience, Select Convenience, Wine Rack, and also Costcutter.”

On the spectrum

Together, Bestway can now boast a business which has in excess of £1.2 billion in wholesale revenue in facia retail –“Which we would say is an absolute powerhouse.” And Dawood is adamant that the nature of Bestway’s retail is far closer than any other to the spirit of true “independents”.

“The point is that Musgrave, Budgens, Booker Retail Partners – they are very big symbol group complexes, right?” he asks rhetorically. “But the overwhelming majority of their turnover sits in multiple accounts, like MFG, or Shell, or companies like that. So they’re not really what I would call true independent retail. And Nisa’s turnover is what, £1.56 billion? Costcutter is a third of it. So if you really think about fascia retail, independent retail, I would say we are the biggest.”

Conceptualising the symbol and fascia options for independents is timely and extremely helpful coming from Pervez, who topped off his success as a barrister specializing in mergers and acquisitions with helping to build Bestway into a leading UK business worth many £billions.

“The way we look at it is that you’ve got a spectrum,” he says of the independent retail sector: “And the way Bestway thinks about this spectrum of independent retailers, is totally non-judgmentally. We appreciate all of them for their own business roles.”

At one end, he says, are what he calls unaffiliated retailers (UAR).

“That’s your traditional cash-and-carry customer that has his own fascia above the store, and they are in some respect very entrepreneurial, focussing more on how they buy over anything else. And that’s where Bestway’s original core business is grounded, and always will continue to be because there are 40,000 independent retailers in that market – the biggest bucket, by far, of convenience.”

This is where Bestway itself started – not as wholesalers to begin with, but as retailers back in the late 1960s, with Dawood toddling around the store as his father, now Sir Anwar, unloaded the van on his return from the cash and carry.

“We obviously try and get them [UAR] to spend more money with us, and we have what we call a retail Club, Xtra Local, where they get better deals and better offers, if they can spend more with us and show us a bit of loyalty.”

It is the decision to sign up for the “full package” (although there are many gradations within that), which defines the storeowner who is ready to commit to a more exclusive contract, which will typically come with wider benefits and a closer relationship with the mother-ship.

“What we find is, some retailers choose to have a better get-up-and-feel customer experience,” says Dawood. “That’s where the symbol group comes in. And within symbol groups, there’s a spectrum as well, from those that want the most basic elements of get-up-and-feel – some posters, some PoS, maybe a uniform, you know, maybe some format – all the way through to the planogram by category for the bays and ‘here is what you put at the end of your fixtures; here is your pricing that we would recommend and actually expect you to follow,’ to a larger or greater extent.”

At the furthest end of this spectrum lies the franchise model, where the pricing is basically dictated and programmed into an ePoS system, and where a high degree of loyalty to the fascia is standard.

Franchise is probably the least common indie “costume” at the moment. Bestway has its Bargain Booze, there is the Co-op model, and One Stop has made franchise the speciality addition to its own retail estate. All said, it is not a widespread model for the sector.

“The interesting thing is that if you look at that ‘pond’, there was a Co-op franchise, there were about seven or eight Simply Fresh franchises, effectively, which were a push model by Sainsbury’s. And then there’s One Stop. That’s what One Stop is, and it’s been like that for getting on 15 years, and they have around 200 independent retailers on franchise,” [quoted as 222 by One Stop head of franchise John Miller, with plans for 100 more to open this fiscal year].

Dawood believes there is a good reason for the relative scarcity of franchise up to now. “That’s fundamentally because the clue is in the name: ‘independent retailer’. Generally speaking, most of them actually want to run their own business, and they want to put their own knowledge and know-how an understanding of their local community that they serve, into their store.”

He says that although many storeowners don’t want to necessarily run a franchise or hard franchise “it looks like it might be increasing now”.

The reason for that is partly demographics within the sector, and partly the changing nature of the industry, especially with a new generation of storeowners who want uniformity and order to clone and expand their operation, Macdonalds-style.

“Maybe,” says Dawood, “franchise is for younger retailers who want a solution that’s basically done for them, so that they can implement it, get the return and roll it out. It’s like the mentality of someone that wants to own a bunch of Costa Coffee franchises or Subway, or chicken shops or whatever else. It’s a different mentality to someone that wants to run a shop themselves.”

With the fashion among indies for dessert bars and coffee stops, concessions and food-to-go units, all of which can be made cost-efficient by being more modular, perhaps franchise, “catering” to these services for a new style of convenience store, will be a bigger element of the sector? It certainly has an effect on the relationship between retailer and fascia-provider.

“The reality is, as customers move into a higher level of compliance, if you can call it that (they hate that word), they also expect you [to do more] in return,” Dawood agrees. “So not only do they expect better service, they also expect you to look after them in many different ways: how you pay their rebates, how you answer their queries, if you’ve got any information that they want to understand and how you deal with that, and with the advice you give them it becomes far more of a closer partnership.”

There’s clearly more desire around, he continues, “as you saw from Simply Fresh’s traction in the market where they reckoned they’d got up to about 30 retailers interested in that model. And clearly there is some traction at the moment in One Stop. Apparently. So they say. So there are probably an increasing number of people willing to do franchise.”

Knock-on effect

It is not simply a case of choosing between alternatives – at least from the wholesaler’s point of view. As Dawood defines it, the ends of the spectrum, independent to franchise, passing through fascia, retail club and symbol group, really represent two different models with different business characteristics: a true independent, generally speaking, will still primarily collect and a symbol group is primarily delivered, says Dawood, and that has big cost implications for the wholesaler. In short, true indies are much cheaper to service, and prices for them reflect that.

“So therefore, we are able offer a great collect price to those retailers,” he explains. “For a symbol group or a franchise clearly not only do we have to have all the stock and the warehousing, but on top of it when putting the stock into the shelves, we’re picking it back out again; we’re packing it, we’re putting it on lorries, we’re dynamically reaching those lorries; lorry drivers are delivering those products, usually then dropping as well. We have a credit team dealing with their credit, a rebate team giving them their rebates. We have a planogram for them, we have a business development team going out, helping them develop their business and drive sales … So there’s a lot more associated costs on top of the traditional cash and carry offer, which of course usually gets returned as you get a bigger basket from them and they’ll give you more spend.”

One hates to say, “swings and roundabouts”, but the calculation is a complex about what not only suits different retailers depending on a whole list of circumstances, including location and even temperament, but which also changes over time and according to economic weather.

For a wholesaler and retail enabler such as Bestway, the challenge is to be all things to all retailers, setting prices accordingly.

“Hopefully what you give them in return is a totally different level of service,” says Dawood. What’s interesting is [that] there is a relationship with a symbol group’s retailers, where we can say, ‘Look, here are the key promotions of the month, or period, and we would like you to, please implement these promotions. ’What happens then is that suppliers see the benefit being passed onto the consumer. And they feel more emboldened to invest in certain promotions, or in those symbol groups. Those promotions for those symbol groups is more about retail execution and how the supplier has seen it happening and how they [then] want to leverage that. Whereas when we give you a great price in cash and carry that’s because we’ve got the product in there for the right price  and as efficiently as possible.”

Life under pingdemic

We are seeing light at the end of the Covid tunnel – hopefully not the light of an oncoming train – and I ask Dawood how he has found the surreal experience of the last eighteen months – especially looking back at the terrible shortages facing convenience after the early panic-buying.

“I’ll tell you what,” he says,“that was really bad. Independent retail was seeing the greatest uplift but was getting zero coverage, zero stock, zero respect and zero credit. It was really extreme. More was being said about the multiple retailers, about food drop schemes, but nothing said about the 50,000 independent retailers. It sounds really overdramatic, but they put their health at risk serving their local communities. And it was as if they didn’t exist.

“That’s why I ended up making quite a lot of noise about it, getting into Defra and all that stuff, and we got some recognition.”

He says that – driver shortages apart – supply lines have recovered and that consumers are now less afraid to venture out to the big stores. “So what you’ve seen since Christmas is the multiple retailers have had really strong sales and continue to do so. So it means retail is also doing very well versus 2019 – double digit growth, and convenience retail has clearly got some wind in its sails. I think lots of communities have reconnected with that local store, seen the value of a local store. I think there’s an opportunity for independent retail to keep growing at a good rate or a rate better than the rate that was anticipated pre-Covid.

Dawood says that he is doubtful that foodservice and the on-trade will recover their previous levels either this year or next, and that some venues will reopen only to close again – perhaps as the debt burden begins to really bite.

But it’s also changed habits. “There is a definitely move from consumption of calories or drink on premise to off premise,” he says, and although the mults are back running full bore, a rising tide floats all boats and convenience will do well also.

“The division between multiple retail and convenience retail [depends] on just how much people want home delivery and how much people are back on the streets–so as offices reopen and life does return to some extent to normal, we’ll see the convenience retail impulse market pick up further, especially in the city centre.”

Dawood sees one big trend as the continued increase in delivery – although that is not all good news for the mults, as they “will obviously have the challenge of dealing with the increased cost.”

The other “is probably a continuing trend for a weekly online shop supplemented by local shopping, which is also good for convenience retail. There’s two avenues, there’s two broad buckets: high urban density stores and local community stores [have benefitted from] restarted impulse and obviously the opportunity to continue to serve as the major top-up.

Dawood believes that it is time to drop our old assumptions about consumer habits and preferences: the pandemic has rendered them, along with much else, outdated.

“I think that whole that whole debate of ‘mission of convenience is all about distressed, top-up, and multiple retail is all about planned purchase’, is falling apart. I think consumers expect the same value wherever they go,” he says.“People often will do their weekly shop locally. They might expect a small, premium for convenience, but not a massive one.”

Three years ago cash and carry was yesterday’s model and delivery was the new grail; but Covid has blunted that spear a bit. “What I would say, with the turbulence in everyone’s supply chain, there’s been a lot more top-up shopping in cash and carry by retailers,” says Dawood. “Collect has definitely seen a big resurgence.”

He believes it will swing back, to an extent, because the cost to retailers in cash and time of running back and forth in a van is high relative to the ease and efficiency of delivered.

“Delivered retail generally in the last 20 years has generally outgrown collect. That doesn’t mean were backing one over the other,” he says.

“We do both.”