Asian Trader has just sat down to talk to Steve Fox, managing director for retail at Booker, after he has given an exhaustive guided tour of Noel Kavanagh Jr’s latest Budgens store located in the historic town of Eton.
With the business seeing year-on-year sales growth of 15% more than a year after opening, it is clear to see the pride Mr Fox has taken in helping the business – as well as all retailers under Booker's care – to prosper.
“Noel’s store is just one example of the how we are helping our retail customers to make more and save more,” he says.
“There is a lot of growth in the convenience sector right now and retailers understand they have to run a great business because consumers have a lot more choice of where they shop. I see more retailers investing in their business now than I have ever seen before.”
Mr Fox’s optimistic outlook on the convenience sector has also been bolstered by the positive performance of Booker’s two latest symbol groups – Londis and Budgens.
This month marks just over a year since Booker acquired the fascias from the struggling Musgrave Retail Partners GB group in a £40m deal. The move led to the creation of Booker Retail Partners, designed to oversee Booker’s entire symbol estate of Premier, Family Shopper, Londis and Budgens stores.
With widespread reports of falling sales and unhappy retailers at Londis and Budgens, many questions were raised at the time about Booker’s purchase of the groups. Would Booker look to consolidate the number of symbol groups it operated? Would it be make sweeping cuts to Londis and Budgens staff and stores?
Mr Fox says he is happy to report that, just over 12 months down the line, the partnership has led to a turnaround in fortunes for the two fascias, with Booker Group sales including Londis and Budgens growing 15.2% year-on-year according to its second quarter financial results.
In addition, Mr Fox says 175 independent retailers have joined Londis in the first six months of Booker's financial year, with a total of 197 joining in 2016 so far. This is in comparison to a total 65 retailers joining Londis in 2015.
He adds Budgens has seen similar growth, with 52 new store opening in the first half of the year compared to just eight for the whole of 2015.
“Budgens and Londis are in growth for the first time in five years,” says Mr Fox. “The existing customers are growing because they have a better proposition and are attracting new consumers, and we are also attracting new retailers from other symbol groups.
“Mike Baker (brand director at Budgens) says he’s recruited more customers in the last six months than he has down in the last five years.
“We always said that Londis and Budgens are two fantastic brands and we were always going to keep both, and they had fantastic retailers and colleagues – there are some great entrepreneurs throughout the estate. What’s great to see is that many of those colleagues and customers are still with us.”
Mr Fox says this performance is being driven by its long-standing strategy to improve “choice, price and service” for its retailers.
“Our mission from day one was to make sure that all our retailers got benefits out of joining forces.
“The first thing we set about doing was working with Budgens and Londis retailers and giving them more freedom to retail. We put them on a simple model.
“Speaking with the Londis and Budgens retailers, we told them we want to make them more cash profit, as that was their biggest complaint and thing they wanted to see improve.
“In terms of price, they (Musgrave GB) were a declining business before, which made it difficult to invest in price. What we’ve been able to do improve the base price of everyday products but also improve the promotional price, so retailers have better margins. In terms of service, logistics, delivering on time and better availability are all areas where we’ve been able to improve for Londis and Budgens retailers.”
Mr Fox adds the addition of Booker’s own label range is also helping Londis and Budgens stores offer competitive everyday pricing on essential while also offering retailers generous margins of up to 30%.
“Euro Shopper has gone down really well, especially in Londis, but you’re also seeing it Budgens stores where it is appropriate,” he says.
Mr Fox also points to the successful introduction of Booker’s Farm Fresh range of fruit, vegetables and fresh meats in Londis and Budgens stores.
He adds the company has further plans to strengthen its fresh proposition, using its Budgens and Londis distribution model to mutually benefit all of its symbol groups.
Mr Fox explains: “One of the things our Premier and Family Shopper retailers have always told us is they want us strengthen the fresh proposition.
“If you look at the SKU count on Premier on fresh, they have access to about 300 lines. On Londis they have 1,100 and on Budgens they have 2,500, so we have plenty of choice there already.”
To this end, Mr Fox says Booker is currently trialling a new fresh and chilled delivery service for 20 Premier and Family Shopper retailers, with deliveries coming directly from the Londis distribution centre in South Elmsall in Yorkshire.
“Some of the retailers involved in the trial have seen their chilled purchases go up by more than 90%, while the average growth for these stores is up 50%,” said Mr Fox.
“It's what we call ‘pick to zero’ – it’s a fresh life product delivered to stores six days a week from the distribution centre.
Mr Fox said Booker will run the trial for 12 weeks before reviewing its successes and then possibility of rolling this out to further stores in 2017.
“I believe we already have the best fresh offering in the market and we can now share this among our four fascia groups.”
This integration will not just stop at fresh, according to Mr Fox, who says Booker is also looking to share more Londis and Budgens products with all of its symbol retailers.
“They have some great products in the Londis and Budgens range,” he says. “For instance, there is a brilliant wine called Secretary Bird that we have now made available for Premier and Family Shopper retailers.”
While Mr Fox says much of Booker’s focus over the past 12 months has been on integrating Londis and Budgens into its network, he adds the group has also grown business for the rest of its retailer estate.
He points to the firm's Premier business, which passed the milestone of 3,300 stores in August, while Booker also reported more than 100 retailers had taken on its new Premier concept focusing on growing sales opportunities such as dedicated ‘kids zones’, slush machines and affordable family ready meals.
In addition, Booker is also supplying Motor Fuel Group which will see it launch over 359 Londis and Budgens stores on forecourt sites, as well as 86 Rontec sites. “We are delighted to have such prestigious national accounts and it’s a privilege to serve them”.
With such rapid growth over the first half of 2016, Asian Trader asks Mr Fox whether this places more pressure on Booker to maintain high retail standards across its estate.
“It puts the responsibility on us to do a great job for our customers, especially with many of our retailers investing thousands of pounds to improve their businesses.” he replies.
“Also, while we have added more than 300 Premier retailers so far this year, we have also taken out around 150 stores at the same time. It’s not about the numbers game, it’s about having quality stores.”
He also admits he would “like to do more work” on the company’s discount Family Shopper format, but adds the symbol group will play a greater role in Booker’s plans next year.
“Family Shopper will benefit a lot from the Booker Retail Partners integration in 2017,” says Mr Fox.
“There is definitely a role for it, especially with IGD claiming discounters are in growth. People like B&M and Home Bargains have great offers but they probably can’t bring their offer into the 2,000sq ft space like we are able to do.”
Mr Fox adds other challenges for Booker will come from upcoming government legislation, particularly around tobacco and soft drinks.
Mr Fox says: “Tobacco legislation remains a challenge for us but our retailers understand that and are starting to work through it.
“With something like the sugar tax, businesses like Booker have a responsibility to look at how they can reduce calories in their products. It’s going to be a challenge going forward, however we are starting to make good progress. For example, we have recently introduced a zero sugar isotonic drink to our Euro Shopper range and Booker’s technical department are constantly looking at more ways for us to help our retailers.”
Mr Fox says this, coupled with the National Living Wage, pension auto-enrolment and other big issues for retailers, means Booker will look to work even harder to support its retail customers over the next 12 months. He says the group will focus on “how we help our customers ‘make more, save more’ through promotions, own label and Booker Energy”.
These plans also include a national roll-out of its ‘Core in Every Store’ scheme starting this month, which aims to remove slower-selling product lines from its stores to increase their profitability.
“We trialled this with a retailer and his sales went up by 15% after we removed 500 lines from his range,” says Mr Fox.
He adds the group is taking a similar approach with its promotional activity, particularly around Londis and Budgens where he says Booker has reduced the number of products on monthly promotions while increasing profit on return for retailers.
Mr Fox adds that Booker is also making some improvements to its Retail Club offer which means it will now be free of charge to retailers and the POS is being refreshed.
“It’s about scale, working with suppliers, and making sure all our customers benefit as well as consumers ,” says Mr Fox. “Retailing to me is all about partnership. I always say to retailers that if you’re doing well, we’re doing well and the suppliers are doing well; we all benefit together.
More importantly for Mr Fox, he says he and Booker will continue its mission to build close working relationships with retailers and listen closely to their needs drive further sales and profits in the future.
“In my opinion, a great independent retailer will always do a better job than a managed business. If you run a great business and know your local community, you really will survive and thrive.”