For all those who have been either directly, or indirectly, involved in how the C&C Group has helped transform the fortunes of Bibendum and Matthew Clark over the last year would not be surprised to hear chief executive, Stephen Glancey, describe the last 12 months as “being very intense for all involved”. But he would also be quick to point to the work done by the respective teams and, in particular, the role of the senior executives who returned to the two companies to help spearhead the turnaround. Michael Saunders at Bibendum and Steve Thompson at Matthew Clark. Here in the first of a two part analysis, Richard Siddle looks at what steps were taken to get Bibendum back on track, much to the relief of their suppliers and customers.
The C&C Group has proved over the last year that in business actions speak far more than words in how it has given the stability, security and support for Michael Saunders and the Bibendum management team to restore its reputation and re-invent itself as one of the country’s most important national drinks distributors.
It’s just over a year ago since the C&C Group stepped in like the PLC equivalent of a knight on a shiny white horse to save what remained of two of the UK’s most important national drinks distributors, Matthew Clark and Bibendum PLB, from the corpse of what had been Conviviality PLC.
The fall from grace of Conviviality was as spectacular as it was unexpected. One minute the darling of the UK drinks industry, winning plaudits from producers, suppliers, operators and City analysts alike.
The next it was having its insides ripped apart and dissected all over the financial press as investors ran for the hills, its suppliers risked losing thousands of pounds in unpaid bills and customers were left high and dry with no orders, deliveries or drinks to sell.
Quite what went wrong at Conviviality has been largely brushed under the carpet, but wrong it did. But what made its collapse such big news not just in the UK, but all around the world, was how far its influence went.
Producers, wineries and drinks brand owners the world over faced major losses as wine was stuck lost in the Conviviality supply chain.
That is until C&C, the Irish-based global drinks distributor and producer, responsible for big name brands such as Magners, Bulmers, Tennents, came in and not only rescued Matthew Clark and Bibendum, but also set about making sure everyone caught up in the Conviviality collapse had their debts and bills paid.
It’s certainly not been easy. In C&C’s lastest annual report, chief executive, Stephen Glancey admits “the last 12 months has been very intense for all involved”.
It also shows that whilst it bought Bibendum and Matthew Clark for the nominal sum of £1, it has spent £76m, to date, in turning them around.
Its annual report goes into more detail and says the company “assumed a portion of outstanding bank debt (€116.5m)” a “collection risk on €196.2m of customer and other debts and €274.3m of supplier and other liability, including an outstanding tax liability of €35m to the UK Exchequer”. It also “took ownership of €61.2m of stock and €4.3m of other associated tangible assets.” So, in reality, a bit more than £1.
The immediate challenges were clear. The basics of drinks distribution and getting the right products to the right customers at the right time had fallen off the cliff in the last months at Conviviality.
As Glancey explains in C&C’s annual report: “There had been a complete breakdown in financial control triggered by a flawed IT integration project. The most basic accounting reconciliations had not been performed for some time. We also had to agree repayment plans with thousands of suppliers and ensure that cash flow controls were restored.”
It’s particularly interesting to see how C&C regarded Bibendum and Matthew Clark when it took them over: “They had been operating under severe financial and operational stress for an extended period and stock availability, customer service levels, supplier relations and financial controls were in our view significantly below the appropriate level.”
The good news now for the respective management teams at Bibendum and Matthew Clark is that C&C now regards them as having “made excellent progress in stabilising these businesses, with operational performance and customer service now fully restored”.
Noticeably C&C did not look to bring in outsiders to put the businesses back on track. Instead it went back to the individuals that had made Bibendum and Matthew Clark attractive enough companies for Conviviality PLC to want to buy in the first place.
Which meant inviting and bringing back Michael Saunders and Steve Thomson as the respective chief executive and executive chairman at Bibendum PLB and Matthew Clark.
Right time, right place
It was very much the right opportunity at the right time for both parties. For C&C, Saunders was seen as the perfect management solution with the right “industry experience” and “knowledge” to “restore confidence with employees, customers and our partner suppliers,” according to chief executive, Stephen Glancey.
For Saunders the call to return could not have better timed. Even in the short months he was out of work he realised how much he missed the day-to-day of management and leading a team. It’s certainly uplifting to hear him describe his time back at Bibendum as “being the most rewarding 12 months of his career”.
But crucially for an overall UK drinks distribution sector that notoriously operates on threadbare profitability, C&C has put all the emphasis on the Bibendum and Matthew Clark turnaround strategy on driving “margin expansion”. Delivered, it states in its annual report, through “simplification and optimisation programmes” that “deliver unrivalled portfolio strength, value and service”.
As Glancey explains: “A cross business project team was established and activity was divided into three quite distinct phases. The first through to Christmas was stabilisation of service control and supply. The second, which we entered this calendar year, is seeking to simplify the organisations to somewhere near where they used to be. The final phase is themed around optimisation which will seek to secure synergies both in revenue and cost.”
Which shifting through the management speak essentially means getting back to the basics of drinks distribution. Giving your customers the right products at the right time at a price that drives margin and profitability for both.
The C&C factor
Behind all this is the C&C factor. Yes, it is another PLC, but it is a very different beast to Conviviality. This is a PLC that brings strength, security and profitability to the table. And then some.
Having the power and solidity of C&C behind it, which also just happens to be the UK and Ireland distribution arm of AB Inbev, the world’s biggest brewer, has also put Bibendum in a completely different place to where it was before.
It has also benefited C&C. For its purchase of both Bibendum PLB and Matthew Clark has, in the words of its chairman, Stuart Gilliland, “transformed C&C into the largest last mile drinks distribution business across the UK and Ireland”. “The drinks distribution platform we have now created across the UK and Ireland gives us unrivalled access into the on-trade drinks channel,” he adds.
For all the suppliers and customers who had been more than just a little shaken and stirred by the fallout from Conviviality, they now had a PLC business to work with that was not only willing, but also capable of paying back all outstanding debt and taxes within nine months of taking over.
With Bibendum and Matthew Clark they now had businesses they could not only work professionally with, but make some money with too. Rather than worry about not being paid or whether their next delivery was going to turn up or not.
Bigger picture and smaller detail
What makes C&C such a potentially good partner for Bibendum and Matthew Clark is that it’s a PLC business that works just as well on the bigger, global picture, but has the ability to drill down and focus on what needs to be done locally as well. Which is what any good drinks distribution business should be all about.
Or as Gilliland explains: “We are a local business at heart, imbedded in the local communities we serve. Our size and proximity to customers and markets allows us to spot opportunities (commercial and strategic) and move quickly and professionally to secure them.”
But still giving Bibendum and Matthew Clark the autonomy and independence to make the majority of their business decisions for themselves.
Saunders says C&C look at him and Steve Thomson as “entrepreneurs” willing and able to control their own respective businesses.
“They clearly see us as their premium distribution arm. A business that can create them value by re-establishing its deep roots within the industry. Which we have done pretty much. The opportunity is now there to open up new routes to distribution for them.”
Part of the turnaround strategy has also been disentangling itself from Matthew Clark so they can be run as two separate business units. Saunders admits it has been “quite hard work”, but “is about 95% done now”.
“A lot of what was called integration was not done terribly well. So we have had a lot to sort out. But we’ve broken the back of that.
“We have not gone back to how it was all done before, but rather how do we want to do things now. But yes, essentially, we have unwound so we are our own unit under the umbrella of C&C. Which has been challenging.”
But its been vital in giving Bibendum staff better access to the systems and processes that can help them do their jobs more effectively, and offer the right service levels to their customers.
A Bibendum group that itself will continue to be split into its different business units: off-trade, run by its PLB division; independent merchants and Walker & Wodehouse; and on-trade through Bibendum. With buying across all three headed up by Andrew Shaw.
C&C’s ownership also opens up new routes to market for Bibendum. One of which is in Ireland itself and through C&C’s Irish wine distributor, Gilbey’s. Bibendum will now be working with the Gilbeys team to introduce suitable wines and spirits from right across its range for the Irish market. It will trade as ‘Gilbeys with Bibendum PLB Group’ in Ireland and Bibendum in Northern Ireland. “The welcome we have had from the trade at our recent tastings across Ireland has been very exciting. It’s so refreshing to see,” says Saunders. “We are trying to leverage the Bibendum brand within C&C.”
It’s that multi-distribution opportunity, including working with Tennents in Scotland, that Saunders sees as offering more of a “compelling story” for premium brands, particularly spirits and Champagne houses to work with Bibendum.
The premium spirits side of the business, says Saunders, continues to “go like the clappers” such is the demand for new products and innovation. “We’ve found selling spirits not too dissimilar to selling premium wine,” he says. “We now have our separate spirits and wine experts working together on a group basis.”
Going forward the C&C board see the PLC’s overall financial strength giving both Bibendum and Matthew Clark a key competitive edge, particularly in terms of how it can re-assure supplier and customers alike.
As Glancey explains, again in its annual report: “A real issue for many market participants is the availability and cost of credit insurance for product sold to UK retail. A number of high profile business failures has somewhat restricted credit availability particularly for those with high leverage. The strength of the C&C group balance sheet and our cash generative capability we believe will give real longer term competitive advantage.”
Saunders likens customers wanting to work with Bibendum as “a flight to safety” thanks to the security of C&C. “We’re not going to go away. Brexit or no Brexit.”
“We also now have a fantastic route to market that no-one else has in the UK because we can cover England, Scotland, Wales, Northern Ireland and Ireland to the extent we can. We are now a very compelling company to do business with, secured by having C&C behind us, which I can’t stress enough.
“Very few businesses in this country are making any money, and they are independent businesses. Bibendum is not making a fortune either, but we have the parentage of a company that is very secure.”
It’s a drum he admits he is quite happy to beat on a regular basis.
- In part two of our Bibendum analysis we take a closer look at the steps Michael Saunders has taken to get the company back on track and to restore confidence with its suppliers and customers.