Wholesale change for BWG

Managing director of BWG Foods, Willie O’Byrne, speaks to IF&CR about the year ahead and what’s next after the Londis takeover

In June 2015, the Competition and Consumer Protection Commission cleared BWG’s long sought after deal to acquire ADM Londis for €23 million, some ten years after offering €35 million for the symbol brand.

It was the icing on the cake following a year of achievements for the Irish wholesaler, and its managing director Willie O’Byrne was understandably upbeat when speaking to IF&CR about the purchase.

Alexander the Great wept salt tears when there were no more worlds to conquer, a decade after first pursuing ADM Londis, we asked Willie if BWG had planned beyond their hard-fought acquisition.

“We’re not saying we’re done,” he said resolutely. “There are lots more mountains to climb. Our partnership with SPAR South Africa has given us a strong balance sheet and we are capable of further growth by acquisition. At the time of the deal we announced we had €100m to invest in our business.”

“Our investment plan is not limited to acquisitions. However in the last year we have invested a record amount with our retailers in their stores. Retailers are upbeat about the future and want to renew their infrastructure. Their appetite has been whetted by new store imagery for SPAR, MACE and now Londis. We are delighted to invest shoulder to shoulder with them. I’d expect us to continue with that into the future and our store project pipeline is very full as we enter 2016.”

The other good news for BWG this year was how their powerful symbol, MACE, has grown to become Ireland’s most common forecourt convenience store with 166 locations across the country.

“The realisation that MACE was number one came from research undertaken in preparation for the MACE Convention held in Killarney last November,” Willie said. “We presented this research as part of a comprehensive health check of the MACE brand.”

Willie attributes “a significant part of the success” to the strategic partnership between the convenience brand and Maxol that stretches back to 1997.

“It’s been a very good relationship, transcending that of supplier-customer. We value this strategic partnership highly,” he said.

And MACE is far from finished its progress either, as Willie points out, the brand objective is to be a leading player across forecourt and neighbourhood store formats in Ireland.

“Mace is focussed on these specific sectors and there is scope and opportunity to progress further in both markets.”

While Mace has emerged as the forecourt sector’s biggest hitter, BWG’s line-up has strength in depth, with SPAR, SPAR Express, XL, and Londis occupying some 350 forecourts.

That powerful retail network helped generate sales of €1.2 billion during 2015, up seven per cent on the previous year.

With the Irish economy bouncing back to a year-on-year growth of seven per cent, we asked if BWG’s impressive performance was down to a stronger economy or better performance by the company?

“We’d love to claim all the credit,” Willie laughed. “There is a combination of factors at play. There’s no doubt the Irish economy has rebounded strongly. Macro strategies are paying off. Unemployment is falling and there are more people on the move. The congestion on the M50 [Ireland’s busiest motorway, which orbits Dublin] is now back to pre-recession levels and that is a measure of how strong the economic pulse is beating.”

Willie explained that initially the recovery in consumer spending was being funnelled into big ticket replacements. New car registrations are up 35 per cent this year.

“That’s been a huge ‘hoover’ for the extra spending power, and other big ticket items are featuring very strongly,” he said. “Grocery has been the laggard, and didn’t benefit in the early months of the consumer recovery.”

“Convenience, forecourt and grocery retailers didn’t feel the lift at first but we are now seeing benefits from the overall lift in consumer spending.”

Now retail, food service, cash and carry revenues, and off-licence sales are all up, Willie said. The addition of Londis revenues for 3 months also helped BWG figures, their full year effect will also lift 2016 revenues.

And while they await that stocking filler to arrive next year, Willie said the firm was delighted with underlying like for like growth.

Volumes are even better than turnover growth suggests, revenues have has been impacted by price deflation, a problem not just for BWG but for its retailers too. It is an issue likely to persist throughout 2016. The BWG MD said that there was little chance of a return to price inflation in the short-term.

“The weak Euro should be an inflation risk,” he said. “However commodity prices internationally are weak, and that is a bigger factor.

“A very tangible example is the forecourt experience. Crude oil prices have fallen sharply and the price for fuel at the pumps is well down year on year.

“When it comes to price deflation it is not only driven by international commodity prices. Local competition has been pushing down prices too.”

According to Willie, that increase in competition is being seen across all food and grocery businesses, but particularly in the larger box formats where the impact of hard discounters has been most apparent.

In a classic squeeze, retailers are seeing their own costs rise. Wages in particular are a concern and for the retail sector the rise in the minimum wage set for January will drive costs higher. Also evident though are emerging labour shortages and this could present a bigger challenge in 2016.

“These trends will test us all,” Willie said. “We will need to work smarter to manage this new environment. It’s not that these issues are going to overwhelm us, but we will have to work hard with our retailers to stay ahead of them.”

Having said that, the BWG Foods MD explained that every year there were always parts of the business that “surprise and delight”, and one of the sources of both in 2015 was Ireland’s qualification for the UEFA European Championships in France.

SPAR took the risk of becoming Official Convenience Retail Partner for the Football Association of Ireland when the Republic of Ireland’s qualification hopes looked bleak, but the team’s turnaround buoyed both the retail brand and the nation.

“We decided to enter into the sponsorship this time last year, when not many people gave the Irish team a chance,” Willie said. “We have now caught a wave. That sponsorship has turned out really well for us and our retailers.”

The deal also saw SPAR become title sponsor of the Primary School 5’s Programme, a national five aside competition for boys and girls in 4th, 5th and 6th class.

Over 1,000 schools and 18,000 children took part, and Willie said the SPAR business was delighted with this wonderful community link.

While 2016 holds great promise for BWG, Willie is still mindful of how things can change, with the looming election, and increased regulation becoming the formula to address matters of public health from obesity to alcohol abuse.

BWG Foods’ multi brand strategy has underpinned their recent progress and development, the wholesale company looks set to enjoy another bumper year in 2016, ahead of the economy’s performance and their competitive set.