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Chief executive’s report
Steady expansion of our globally active,
but Asia-based procurement business was
another 2017 success story.
Organic growth
Local growth was frequently driven by the
pursuit of new opportunities in a wide range
of specialist areas. These include food
categories such as fresh produce, meat
products of various kinds, seafood and
speciality offerings.
Local managements in several regions
are also exploring value-add processing
and imports. This is not an attempt to
compete with major international brands,
but experience shows we can add value by
doing the simple things well while responding
to customer needs, eg slicing and dicing,
adding breadcrumb coatings, repackaging
and portion control.
In some Bidcorp markets, we have only
recently begun to pursue these growth
opportunities. It should also be remembered
that we operate in a fragmented industry and
serve smaller and mid-size players who are
just as eager to grow as we are.
In addition, our market share is relatively low in
many jurisdictions. This is even true of markets
in which we have a significant presence. For
example, it is estimated that we have less than
15% of the UK free trade market.
In other geographies, our penetration of
the market is fairly recent and nowhere
near saturation point. The Chinese market,
for instance, offers access to 1,43 billion
consumers. We currently serve only a small
fraction of them.
The above factors indicate considerable
room for organic growth as our teams invest
in wider footprints, bigger product ranges
and additional product categories as well as
new facilities.
Acquisitive growth
It is also possible to grow our national
footprint by acquiring businesses that widen
our reach or accelerate our entry into various
niche categories. This process of bolt-on
acquisitions and consolidation has gone on
for many years and will continue.
In many respects, local teams are their own
M&A managers. They have a clear idea of
what acquisition targets to pursue in which
geographic areas or product categories.
Down the years, our managers have
demonstrated that closeness to markets is a
good basis for successful deal-making.
In 2017, we concluded several transactions
of this type, notably in Australia,
New Zealand, Brazil, Belgium, Italy and the
UK, spending more than R590 million.
Acquisition also creates an opportunity to
significantly upscale a national presence or
gives us a chance to explore an entirely new
national market.
Iberian expansion
The traditional Bidcorp progression – entry,
exploration and upscaling – was highlighted
by recent developments in Spain. We
secured a Spanish foothold some years ago
and became increasingly excited by a market
with a domestic population of 50 million,
augmented by an annual influx of up to
70 million tourists.
To create scale for meaningful growth, we
have bought 90% of Guzmán Gastronomía
and Cuttings (Guzmán), a leading national
Spanish multi-temperature foodservice
company that supplies hotels, restaurants,
industrial caterers and other institutions.
This creates readymade exposure to all the
elements of the customer mix that we regard
as strategically important. The deal, at an
enterprise value of €75 million (R1,1 billion),
was concluded in April 2017.
Furthermore, we entered totally new markets
early in the new period when we expanded
into neighbouring Portugal via the purchase
of a niche horeca business and moved into
Germany and Austria after acquiring 70% of
Pier 7 Foods, a niche foodservice business.
The Portuguese acquisition is modest
in financial terms, but may be significant
long term as we regard the entire Iberian
Peninsula as an area of strategic opportunity.
The German business is based in Munich and
covers five locations in southern Germany
and one in Austria, giving us a vehicle from
which to explore an exciting market.
Disposals
We remain largely happy with our portfolio
and did not dispose of any significant
business during 2017, but we did sell 50% of
our South African bakery supplies business
to Puratos NV. Our new joint venture partner,
with head office in Belgium, is a major
industry player and supplies the bakery,
patisserie and chocolate sectors in more
than 100 countries.
In no way can this be viewed as a bid to
reduce South African exposure.
The new jointly controlled company is a
platform for exciting growth as it enjoys
instant access to the latest technology
and will benefit from a strong new product
pipeline. Puratos is known for creating
competitive advantage through constant
innovation and we look forward to a
dynamic, growth-focused partnership.
Forever young
In 2017, many of our businesses achieved
double-digit profit growth while investing
in modern infrastructure, harnessing new
technology and buying complementary
operations as a springboard to further growth.
Our businesses are dynamic and energetic.
When we consolidate, it is preparation for a
new growth spurt; not a signal that we are
tired and ready to slow down.
Yet in some quarters, Bidcorp is seen as a
mature company and by implication is regarded
as a defensive business. This is at odds with
operational reality and our track record.
We may have been around for three
decades – on our own or as part of Bidvest –
but we have never been a boring, stodgy
company. We are acquisitive, innovative and
ready for new challenges.
Foodservice may be a well-established
sector in developed geographies and
Bidcorp may be viewed as mature by some
yardsticks, but we still have a lot of growing
to do.
Digital differentiation
We are not a technology company, but we
are enthusiastic adopters of new technology
solutions and increasingly use technology
as a key differentiator.
Bidfood Australasia has shown how digital
convenience can be used to deepen
customer relationships and achieve
competitive advantage. For several years,
the business has employed its own
dedicated software development team. As a
result of single-minded focus on foodservice,
they have created the industry’s most
advanced online ordering system.
The online site offers customers free access
to planning and costing tools, further
entrenching customer relationships while
growing repeat business.
The emphasis falls on win-win scenarios.
We use software to benefit our own business
and enhance operational efficiency, but we
simultaneously create customer-pleasing
features that encourage customers to stick
with us.
From a group perspective, this digital proving
ground creates opportunities for sharing
best practice and ever closer inter-divisional
cooperation was a feature of the year.
Annual integrated report 2017
Bid Corporation Limited
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LEADERSHIP REVIEW