• What Conviviality’s Bibendum PLB deal means for the trade

    News has broken today that Conviviality PLC has agreed in principle to buy Bibendum PLB for £60m. All of which still has to be agreed by shareholders, but if it goes ahead, as it surely will, the combined business has the power and the influence to transform the face of the UK on-trade, particularly the premium sector. It is very early days, but let’s digest what that means for the industry.  

    News has broken today that Conviviality PLC has agreed in principle to buy Bibendum PLB for £60m. All of which still has to be agreed by shareholders, but if it goes ahead, as it surely will, the combined business has the power and the influence to transform the face of the UK on-trade, particularly the premium sector. It is very early days, but let’s digest what that means for the industry.  

    mm By May 1, 2016

    What now for the premium on-trade after Conviviality’s move for Bibendum PLB?

     

    Conviviality PLC’s shock announcement that it has agreed, in principle, to buy Bibendum PLB to the tune of £60m will shock the wine trade out of its Bank Holiday slumbers. The news had been leaking since Saturday afternoon and was officially confirmed when a press statement was released on Sunday afternoon.

    Whatever the timing this will have long, wide ramifications not only for the UK drinks industry, but for producers right around the globe.

    On the face of it the combined deal will create the biggest combined drinks distribution and retail business the UK has ever seen.

    It at a stroke increases Conviviality’s already sizeable business by some 23% and with with combined annual sales of the two businesses of some £1.4 billion.The deal, however, is not cut and dried. It not only requires Conviviality shareholder approval but will need to go in front of the London Stock Exchange.

    The initial statement makes clear that all businesses and company brand names will be run separately, but there will also be enormous opportunity for synergies and joint buying where possible.

    The deal needs to be approved by shareholders at a general meeting on May 19 with potentially the deal going live as of May 20.

     

    Impact on producers

    Wine is a particular area of interest, concedes Conviviality, and we can expect to see a wine strategy emerge where increased buying power will allow it to drive lower prices for the overall group.

    Drink suppliers and producers of Matthew Clark and Bibendum are going to be in for an uncertain time. Whilst it appears it is business as usual for both sides, there will eventually be producers that will win and lose after the deal goes through.

    The rest of the on-trade will only be able to sit and watch. Particularly the sector’s other major distributors who will have to look on from the sidelines wondering what the fall out is going to be and what impact it is going to have on them.

    As with all such deals there is arguably some competitive advantage for them in that they can promise no disruption and no change to their service to their customers at a time when there is bound to be upheaval and uncertainty amongst all the businesses caught up in the Conviviality and Bibendum PLB merger. And for all the coming months whilst they work out how they are going to make this colossal deal actually work.

    If Conviviality can find a way of bringing Bibendum and Matthew Clark together – but keep them separate at the same time – then this could be a breakthrough day for the on-trade. Particularly if they can do it in a way that enables them to combine the skills, and the knowledge and expertise that exists in all areas of its new business.

     

    Strength in numbers

    Conviviality now has access to Bibendum’s strong London and South East customer base, an area it has openly conceded it has been weak in the past. Matthew Clark and Bibendum’s joint customer base in the south of the country now gives them enormous potential control over this key trading area. But providing they do it in a way that takes their customers on the journey with them. For there will be a lot of competitors looking to pick up anybody who is slightly less keen about this merger than the respective directors and shareholders involved.

     

    Stand out synergies

    Two big areas of synergy stand out: insights and events.

    One of Bibendum’s USPs has been its industry leading consumer insights division. This is now complemented by Conviviality’s strength analysing off-trade trends through Bargain Booze and Wine Rack. Let’s hope this is an area that Conviviality looks to build on and invest in for the sake of the industry as a whole.
    The other is events an event management. Bibendum’s Wandering Wine Company and Conviviality’s Peppermint businesses both operate in a similar space of working with, talking to and serving consumers, particularly younger drinkers at outdoor events. The learnings there are particularly exciting.

    It is clearly very early days and it will take some time to digest the news. How much fall out there will be in terms of key figures in the combined businesses will remain to be seen. But there is enough talent on both sides of the fence to really make a difference.

    The good news for the Bibendum team is that Conviviality have already shown with the integration of Matthew Clark that they are well placed to make this work.

    You only need to look at the great work that head of wine purchasing, Simon Jerrome and his team have done at Matthew Clark, that has transformed the business over the last year. With so many developments and initiatives that have made genuine difference to their customers already in place and more in the pipeline.

    All of which has come about because they have been given the freedom and the motivation from Conviviality to make things happen for the benefit of their customers. Even if it has required a completely different way of working.

    It is going to be fascinating to see if Conviviality can be equally successful in integrating a very different kind of business in Bibendum PLB.

    • What do you think? Please share your views either here on the site below of if you would like to write a comment piece then please email us at editorial@the-buyer.net.
      • A Director
      • May 2, 2016
      Reply

      You have not focussed on where the cost cutting is going to be? They both have huge logistics networks and a lot of people. There’s going to be a lot of redundancies and cost cutting to make this £60m valuation generate the right level of return.

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