10 January 2008
"A challenging 2008 for the industry" says Younus Sheikh, MD Bestway Cash & Carry
In a recent article published in The Grocer (5th January 2008) Younus Sheikh, Managing Director of Bestway Cash & Carry sets out the challenges and some opportunities for the industry in the year ahead. This is the full text of his article.
“I believe that the coming year promises to be one of the most challenging our industry has faced in recent history. There has been a significant shift in geo-economics at a global level, which is already feeding through to UK consumers. The combination of the “credit crunch” and rising food inflation, now both established in the economic cycle will be far more influential in 2008.
The “credit crunch” is high profile with the Northern Rock situation. The banks are responding by becoming more selective about lending money. Despite the recent cut in interest rates, many households will have less disposable income and I expect consumers to be more careful about spending and certainly more value conscious in 2008.
Food prices have been exceptionally stable over the last ten years and we have a generation of consumers that will not remember the inflation we experienced in the 70s and 80s. Consumers have come to expect good reliable supplies of low cost food. It’s vital that we continue to offer our customers great value in this challenging environment. We are also experiencing new pressures on supply lines as availability tightens in certain areas – notably wheat and grain based products. Our younger colleagues in the industry will have to develop new skills and learn quickly to operate effectively in an inflationary climate. In this changing economic landscape we will need to work harder than ever on the basics: good availability, value pricing and excellent service.
There are a number of other shifts in the UK consumer market offering great opportunities for the industry. The increasing awareness of healthy eating will require product innovation and an adjustment to range assortments. We’ve already seen many suppliers responding positively to this challenge. The smoking ban effective in July 2007 precipitated a change of approach by many pubs and restaurants moving to an increased and more diverse food offering. These changes are already feeding through to purchases from our warehouses. Packaging is becoming a big issue and consumers will expect to see a reduction in overall packaging and an increase in recyclable material. Our industry will need to quickly become proactive in this area.
A word on the Competition Commission. Through the good offices of the FWD, the industry has lobbied hard on the competitive issues involved. We will not be sitting back and waiting for a result in our favour. We will be working very closely with our suppliers to secure the best possible terms for our customers to enable them to compete and thrive in this testing market. However, it is well documented that our industry is disadvantaged in the area of supplier trading terms when compared to the multiples. This in turn is putting small independent retailers under pressure. We will be expecting the Competition Commission to take positive steps to redress the balance”.