Dawood Pervez: determining the Bestway forward
Bestway’s managing director Dawood Pervez (pictured) explains how he is shaking up the UK’s largest independent wholesaler – from streamlining its fascia portfolio to operating C&Cs as dark hubs for delivery.
Bestway’s financial results were described as ‘mixed’ in the year ended 30 June 2020: the wholesale division recorded an increase in turnover and operating profit but the retail division suffered a loss in profit, a drop in gross profit margin and a decline in store numbers.
Since then, a lot has happened, not least the full force of Covid affecting trade and Bestway’s acquisition of Costcutter. Managing director Dawood Pervez has taken several steps to stabilise the business, and he spoke to Cash & Carry Management’s managing editor Kirsti Sharratt about the progress made and his plans for the coming year.
How did Bestway Wholesale and Bestway Retail perform in your financial year ending 30 June 2021?
Until we submit our accounts to Companies House, all I can tell you is that we achieved double-digit growth across the business.
We were still in turnaround mode going into that financial year. We did a lot of different things in our business: we changed our structures – our pricing, the conditions for delivery – and that was accepted by the market.
During Covid, like for every other retail-focused wholesaler, our sales were incredibly strong. On-trade consumption went into the off-trade, so we saw huge increases in beers, wines and spirits. Obviously, sales of impulse soft drinks, confectionery and crisps were suppressed because people weren’t out and about as much as normal, but what we did see was an increase in take-home packs of those products.
Although we are overwhelmingly ‘sales to retail’, we do have a catering business; pre-Covid it was worth £150 million, but it halved during Covid. It is springing back again now.
‘When we finally landed Costcutter, we got true convenience expertise’ – Dawood Pervez.
February 2021 was when we bought Costcutter. We have a turnover figure for Costcutter in our accounts but, at that point, it was still coming from Nisa – for example, we didn’t have the buying synergies. The things that we’ve done in the Costcutter business since acquisition have improved its profitability and prospects significantly.
How are turnover and profits tracking in this current financial year (ending 30 June 2022) and what are your targets in terms of growth?
Turnover to 30 June 2022 is forecast at £3,001 million against a target of £2,928 million. Profit is tracking ahead of expectations.
What has been your strategy for turning around your retail business (now under the umbrella of Bestway Retail)?
Firstly, not only have our sales turned around during the course of the last financial year (2020-21) but our profits have turned around too.
Bestway Retail covers all our fascia businesses [best-one, Costcutter, Bargain Booze, Mace, Supershop, Wine Rack, Tippl, Central Convenience, and Select Convenience].
Fascia retailing is a continuum. At one end, you might have a loosely put-together offer, which is not carefully thought through – no real store planograms, no real intelligence about what’s going on in the locality – and fundamentally the retailers involved have slightly less purchase loyalty. That’s where we were to some extent. There were members in best-one that weren’t necessarily typical symbol-group material, and in some respects they were better off moving to our club (Xtra Local).
When we bought Conviviality Retail [in 2018], we had to restructure and then drive the efficiency of the business.
When we finally landed Costcutter, we got true convenience expertise. What we’ve been doing for the last year is effectively merging the Crewe and York head offices [Conviviality and Costcutter respectively] into one function.
We also merged our best-one and Costcutter symbol teams and they are trained to talk about both fascias and both the Bestway and Nisa supply chains. Our central function pulls that all together. We also have a new business team, which is out recruiting as well.
About three weeks ago, we did our first proper recruitment drive – a week on the road – and we’re working our way through all the leads. Anand Cheema has joined us from SPAR, and we’ve got a string of other retailers about to sign.
With the restructure of the retail division, what are your plans for your other offices in Crewe, Huddersfield, Edinburgh and Park Royal?
With the [Costcutter] acquisition, we have the opportunity to create centres of excellence across the country. In Crewe, a core function is looking after our off-licence estate, whilst Huddersfield looks after our IT framework and credit control requirements. Edinburgh predominantly looks after on-trade requirements, while York becomes a centre of excellence for convenience.
How many new retailers are you looking to recruit and which fascias will they be joining?
Along with Costcutter, Bestway will focus on best-one and Bargain Booze as its main fascias.
We want to recruit over 300 retailers this year. We have a budget against each fascia: Costcutter and best-one will get the lion’s share, and we will also be adding to Bargain Booze.
We are focusing on these three fascias because they have grand resonance and cut-through. Best-one is ideal for stores that are impulse-led and probably about 1,500 sq ft; Costcutter is class-leading when it comes to neighbourhood convenience – take-home with a higher chilled-led offer; and Bargain Booze is the largest off-licence chain in the UK, with some real regional pockets of loyalty and brand recognition.
Bargain Booze is now in 80 Iceland stores and will be in 120 by the end of next month.
This year, we’ve driven forward the whole Bargain Booze offer because of the deal we did with Iceland. We’re now in 80 big food warehouses, and we will be in 120 by the end of next month.
We’re also in conversations with other people about providing them with a specialist alcohol offer. We’ve got a trial right now of a Costcutter store with a Bargain Booze inside. It’s in London and is going rather well.
With your focus on those three fascias, are you planning to change the other fascias that you offer?
Tippl was a solitary store trial, and we are utilising the learnings from that for Wine Rack. There are only 20 or so Wine Racks but their performance during Covid was off the charts. It is highly likely that when we find the right stores we will do a Wine Rack within a store. When you just sell alcohol, margins for retail are very tight. You have to broaden the range to other products.
Select Convenience is the booze franchise that came with Conviviality. There’s a whole bunch that are operated by us as corporate stores, there’s also a whole bunch operated by Jonathan James, and there are a few more operated by others.
I would suggest that if the Costcutter Bargain Booze trial or Costcutter Wine Rack trial – which then lead into best-one Bargain Booze and best-one Wine Rack – works, that would be the future for our booze fascias.
We have to continue producing the Supershop offer for our retailers in Northern Ireland, but Supershop is basically a big Costcutter. Point is, it’s going to be a offshoot of what we do in Costcutter, rather than completely separate.
We own 110 Central Convenience stores and I would go as far as to say that Central Convenience isn’t a brand that has any real recognition on a national basis. Over time, when it makes sense, they will most likely become best-ones or Costcutters.
Mace is also less important going forward because it overlaps with best-one.
So will you be trying to migrate Mace retailers to best-one?
Bang on. Even if they retain their Mace fascia, if we can get enough of them to agree to move across, then we’ll give them the best-one offer. Mace retailers are generally smaller stores, and they’re struggling with the Nisa minimum order requirements. We have an offer that’s more suitable for them.
Do you have any plans to increase your company-owned retail estate?
We currently have 180 corporate stores: 110 Central Convenience, 16 Costcutter, 4 Co-op, 40 Bargain Booze, and 10 Select Convenience. We’re in the mode to do a better job with what we have – and that means potentially removing stores we don’t need – before we say whether we want more or not.
Is it your intention to keep using the Co-op to carry out deliveries to Costcutter retailers, and would you extend this to other parts of your business like best-one?
Since acquisition, we’ve been in a five-year contract with Nisa for the supply to Costcutter. We have an opportunity to continue in that deal or perhaps come out of it at certain points, but we are acutely aware of the importance of the Co-op own-label to those retailers. We will continue to work with our partners at the Co-op to come up with the best way forward to deliver those products to our customers.
What has been your strategy for enhancing your wholesale business?
There’s misinformation being spread that we put up all our prices by 3%. We have not. We put up our non-promotional/non-tobacco prices for delivery. Only 25% of the basket is non-promotional/non-tobacco, and a big chunk of that is beers, wines and spirits, which we put up by a lot less than 3%!
In our depots, we do one-day deals and seven-day deals where we drive down the prices as hard as we can. One-day deals are not available for delivered customers; seven-day deals are, but we uplift the prices. There’s always been a small uplift on tobacco, but it’s very minor.
What are your plans and priorities for increasing Bestway Wholesale’s sales and profits in the coming year?
Bestway will be expanding its BB Foodservice offering to more general catering needs.
This year presents significant opportunity for our catering division, BB Foodservice. While our competitors in this space tend to operate from a single hub, we have access to a UK-wide network and market-leading range of over 5,000 SKUs, so expanding our offering to more general catering needs such as pubs with food, hotels, sports clubs and even wedding venues could facilitate a strong rebound.
Our contracts value though BB Foodservice has remained consistent and the division is well positioned to win further business in the cost sector arena.
More recently, our on-trade division, Drinks Express, has seen a high level of growth as the on-trade reopens and dedicated distributors are finding it difficult to stand back up again. We will be looking at replicating that success in the South.
2021 was the biggest ever sales year for our pets division, BestPets, so we will look at building on this and increasing our market share. We will be attending a few core trade events, such as PATS in Sandown and Telford, this year to highlight our proposition to new retailers and suppliers.
Our Bestway Vans Direct division [comprising Bestway Snacks and Bestway Sweets] also saw outstanding results during the pandemic as it was able to supply much-needed top-ups of key categories in between larger delivery shipments.
Now used by over 20,000 independent retailers, Bestway Vans Direct has a commitment to be a company that is easy to do business with and this is demonstrated by no delivery fees or minimum order requirements.
Our team of skilled professional customer sales representatives have built up outstanding personal relationships with both suppliers and retailers. We are looking to support even more independent retail customers and investigating opportunities to add to the categories already offered.
What plans do you have for your cash & carry business specifically?
Bestway will continue to push down its ’collect’ prices for its cash & carry customers.
We will continue to push down our ‘collect’ prices and offer the best package in the market to help our retailers cope with the external pressures they face.
We continue to drive improved service and efficiencies through our delivered network and we’re trialling a few changes to the network in preparation for the future.
For example, our dark hub trial in Exeter [during the pandemic, Bestway altered the cash & carry operation to focus on delivery] has proven to be highly instructive and we are looking to expand the trial shortly. As the name implies, dark hubs are generally not open to the public and have a different layout that is based on sales, not category. While we do have a very small weekly window for ‘collect’ customers, the focus is to support delivery customers by ensuring stock availability.
Booker is about to introduce delivery surcharges for its customers. You currently put a £25 surcharge on deliveries with an order value of between £500 and £1,000. Are you planning to increase this charge or apply charges to different order values?
We have no plans to do that currently. Never say never – you never know what will happen with inflation. Instead of a delivery charge, we prefer to offer a good delivered price with everything included. Incidentally, no one places an order worth less than £1,000.
What are your plans for Xtra Local?
Xtra Local is an important part of our offering as these deals have great value and drive sales in our ‘collect’ business. Some retailers prefer their independence and want to remain entrepreneurial, but rather than penalise them we encourage it by not instilling high levels of compliance. Our four-weekly promotions are particularly well suited for those customers who choose not to be part of a disciplined symbol group.
How are you using technology to enhance your service to customers?
We have tailored our solutions to match changes in consumer behaviour. For example, we have partnered with a range of ‘hyper-delivery’ apps, such as Weezy/Getir, and have latched onto the importance of product personalisation by partnering with the shopping and payment app Jisp.
We are proud of the digital support we offer to our retailers, such as social media advice and management, industry-leading ordering platforms, self-service checkout capabilities, and dedicated hubs for our retailers that offer all the necessary tools, such as planograms, to run a successful store.
There have been a lot of senior management changes in recent years. For example, the ‘Power Exec’ – as the business called them – which included Paul Rowland, Lee Morris, Tony Holmes and Carolyn McMenemie, left around the time the last MD Martin Race retired (2018). Can you explain the more recent high-level departures such as Tim Fairs, Noel Robinson and Andy Cresswell?
Like with all businesses, there are periods of change, but I am excited about the senior management team that’s in place today. It’s important that I have a team that is aligned to my vision for the business.
Staff morale is really strong at present. There were some difficult times during the pandemic when our colleagues had to go above and beyond for our customers. The commitment and collective effort from all staff has resulted in the business being in the best health it has been in for a very long time.
Bestway in numbers:
£3,001 million turnover (forecast for year to 30 June 2022 for Bestway Wholesale and Retail combined) 3,839 Bestway Wholesale employees
2,000 Bestway Retail employees
60 cash & carry depots
30,000 active C&C customers
20,000 Bestway Vans customers
10,000 BB Foodservice/Drinks Express customers
4,700 members of Xtra Local
2,000 best-one stores
1,500 Costcutter stores
480 Bargain Booze stores
32,000 users of Wholesale app
3,000 users of BB Foodservice app
