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Overall appraisal
Local businesses in 30 countries and five
continents were the driving forces as Bidcorp
delivered pleasing results in its first full year
as a distinct listed group. Economic growth in
most Bidcorp markets was moderate at best.
The real excitement was generated by local
teams as they differentiated Bidcorp in market
after market as foodservice specialists who
add value through insight and innovation.
We are all about the food. In the process,
we are all about helping customers address
the challenges of an increasingly tough
food industry. This positioning came over as
never before.
As is often the case, the figures do not
begin to tell the full story; especially as rand
strength tempered financial gains made in
euro, sterling, Australian dollar and other
currencies. Even so, group trading profit
rose 6,9% to R5,5 billion and trading margin
improved to 4,2%. Net revenue growth of
4,6% was delivered in constant currency
terms, though on rand translation, net
revenue, at R131 billion, fell 6,8%.
In human terms, our 2017 story was
dominated by the hard work of highly
motivated Bidcorp people who increased
market share, explored new categories and
introduced new product lines.
We have a decentralised business model,
but our operations share some important
characteristics. One is the ability of local
managers to generate above-average
returns in home markets no matter what the
business climate. This was a key factor as
teams group-wide delivered substantial levels
of organic growth.
Global rebranding
In 2017, businesses in all geographies
embarked on our rebranding as Bidfood.
The process was not imposed from head
office, or even orchestrated from the centre.
Each business rolled out the new identity in
its own way.
Interestingly, local managers at locations half
a world apart adopted a similar approach.
For them, this was not an opportunity to call
in a sign-writer to fix the truck livery, but a
chance to reintroduce Bidcorp and explain
just how we add value.
From a customer perspective, rebranding
fostered even stronger relationships.
Internally, it empowered staff, channelled
their enthusiasm and built pride.
Rebranding was not a distraction from our
day job of building sales. It created added
momentum as we built profit in markets
that often exhibited mediocre growth and
low inflation.
Strategic rebalancing
The numbers were not only affected by
currency movements. Sales volumes also
reflected the deliberate, strategic exit of
contracts that offered low margins and
distracted us from our focus on foodservice
and food innovation.
On occasion, revenue streams suffered as
national teams balanced their exposure
between contract, national and independent
customers. The net effect is to prioritise our
commitment to the free trade or independent
channel focused on smaller and mid-size
foodservice providers.
Lost volumes chiefly relate to curtailed
distribution contracts and involve work for
large corporates looking for the maximum
delivery capacity at the lowest price. In
these circumstances, there is limited scope
for a food specialist to add value and little
opportunity to generate returns.
Chief executive’s report
This gives rise to a situation whereby the
more revenue you bring in the less money
you appear to make. You either live with
these frustrations or you move on. We have
decided to make the move and reposition
our offering.
We acknowledge greater free trade focus
creates different challenges. There is a
relatively high cost of service per customer
when you meet the needs of multiple smaller
players, rather than fill delivery orders for
a few major groups. Credit risk may also
rise. However, our track record shows we
are good risk managers and build mutually
beneficial customer relationships that often
last for many years.
What’s more, the focus on smaller
foodservice providers offers better margins
and enables us to build repeat business
through added value products and services.
In the review period, significant growth
was achieved in this area. By year-end, we
estimated that 56% of our volumes were
generated by independents, up from 51%.
Volume growth was accompanied by margin
improvement – a solid indicator we are
playing in the right space.
The balancing act will continue as each
business works on the ideal mix in its own
market.
Though we have a firm view on our long-term
positioning, we remain pragmatic traders.
Local managers take local responsibility.
Sometimes they may decide to sacrifice
margin to maintain volumes. This is up to
them. Local flexibility is built into our business
model and will not change.
Own brands
Another area of opportunity – in which
exciting progress was made – is the
creation of our own brands. The product
development space gives us the freedom to
innovate and demonstrate our closeness to
consumer trends and customer needs.
We take western gourmet foods to Asia,
Japanese dishes to China and Italian
specialities to a growing number of markets
while simultaneously developing new lines for
domestic markets that demand healthy eating
and new options across all price ranges.
Food is local. Food is also global.
We take pride in local sourcing and support
produce growers from surrounding areas.
We also buy food products from a growing
international network of outside suppliers
while tapping intra-group resources as our
operations become increasingly adept at
creating brands with broad appeal.
In 2018, we project continued growth in all
regions. Our stable management teams are
close to their markets. We therefore expect
another year in which they deliver above-
average returns no matter what the business
conditions.
15
Annual integrated report 2017
Bid Corporation Limited