Businesses need to prepare for tough times ahead as retail competition intensifies, warned Charles Wilson, chief executive of food and drink wholesaler Booker at the Sentry Conference.
“There is going to be a punch up – people can already feel it in the supply chain,” he told delegates at the land management company’s conference held at Linton, Cambridgeshire.
“I haven’t seen the environment look more ripe than now for a crisis in the supply chain – 50% of products are on promotion, we’ve never seen it as high as this.”
The combination of cheap money, demanding consumers, oversupply and high financial gearing was a recipe for problems.
Well-known for turning around struggling businesses, Mr Wilson rejoined Booker in 2005 when sales – at £3bn – were down 5.9%, it had debts of £361m and earnings before interest and tax of £10m.
Now debt is down to £10m, there is cash in the bank and turnover has grown by £500m in the past four years, with earnings before interest and tax of £39m in the six months to September 2010. Central costs have been cut by 40% in the same timescale and supply chain costs by 20%.
Troubled businesses were vulnerable to a vicious spiral of distress, which started with staff morale falling once they knew or suspected there were problems, he said. After this, suppliers, then customers, backers and the media would find out.
“It used to take years [for this to happen], but now it’s months or weeks. The speed with which you can get caught by the spiral is frightening,” he said. Computers, communications, leverage and liquidity all contributed and sorting out a mess was also a lot more difficult now.
The importance of crisis management should not be underestimated, warned Mr Wilson. The key was to have a good team in place, have a simple recovery plan, tell all stakeholders the same story and deliver quickly over and above what was expected.
Despite being a huge business, Booker spent little on public relations and marketing, he said. “Our biggest ambassador is our customer.” In this regard, the firm’s customer count was up by 24,000 in the past 18 months, most of this achieved by word of mouth, he said.
Among customers are 900 farm shops which are increasingly using new media to communicate with customers, often through Facebook groups being set up by customers.