Chief executive's report


Energetic management teams drive pleasing group performance
Results confirm value of a rebalanced customer mix
Trading profit up to R5,5 billion as trading margin reaches 4,2%
Global rebranding energises and empowers teams
Exciting progress with own-brand development
Spanish acquisition a platform for Iberian growth
Digital differentiator drives sales gains
Planned entry into new territories imminent
Continued organic and acquisitive growth projected
Bernard Berson
Chief executive

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.


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.

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.

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 Gastronomia 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.


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.

The digital template is not imposed on other regions, but without exception our local managers see the benefit of accelerating the pace of business development in their own areas by borrowing from this tried and tested model. Costs are cut and duplication avoided.

Divisional snapshot

All teams can be congratulated on impressive gains in a watershed year.

Australasia put in a strong performance, underlined by a great finish to the year. The "all about the food" focus drove impressive trading profit and margin growth in both Australia and New Zealand. The foodservice space became increasingly competitive, but our team has more than held their own.

United Kingdom performance was impacted by currency effects as the rand strengthened by 20% against sterling. However, trading profit was up strongly and exceeded expectation. Free trade volume growth of 8% was achieved. Logistics again disappointed. Corrective actions in this non-core area are being implemented, and we will be significantly downscaling our exposure in this segment over the next few years, hopefully not at significant costs to the group.

Europe delivered very pleasing results. In constant currency terms, trading profit rose 20,5%. Opportunities flowing from buoyant economic conditions in eastern Europe were maximised. In Spain, exciting growth potential opened up and our Italian business delivered impressive gains across all categories.

Emerging Markets delivered commendable results in sometimes volatile conditions. Bidcorp Food Africa recorded excellent results on strong penetration of the independent channel. Greater China finished the year strongly, underpinned by substantial mainland contributions. Hong Kong revenue was well up. Singapore delivered good growth following its transition to a core foodservice focus. Brazil recorded excellent results despite political uncertainty and economic challenges. Chile made continued gains. Middle East division performed well, significantly improving revenue and trading profit. Turkish losses persisted; however, we are confident of the potential of this business in a large market.


The people of Bidcorp put in a tremendous effort in a challenging year. Their ability to outperform in lacklustre business conditions is a continuing source of competitive advantage and I thank them for it.

I am also grateful for the continued support of our esteemed suppliers and loyal customers. Without them, business growth would be impossible.

In addition, I extend sincere appreciation to my chairman and long-time colleague and mentor, Brian Joffe, for his many years of leadership and wisdom, and Bidcorp's board for its guidance and vision. Setting long-term goals requires insight and knowledge, but it takes fortitude to stick with the task when tough choices have to be made and I thank my directors for their strategic stamina.

The 2017 base

Our first full year was highly satisfying as so many strategic elements were put in place and such pleasing progress was made. However, it was hardly dramatic and was certainly not revolutionary.

At the time of our listing, we set out certain key goals, mainly focused on in-country growth (organic and acquisitive) in existing territories, complemented by additional gains as we explored new national markets. In 2017, we again executed on that strategy.

Keeping your head down and doing what you said you were going to do hardly makes for exciting reading at year-end. However, there is a lot to be said for living up to your promises and we derive a lot of satisfaction from that.

We understand the foodservice sector and have the experience and knowledge to make fair profits while building enduring relationship. That was our 2017 focal point and 2018 will be much the same.

We also understand that business is not a bunch of numbers. The figures that matter are people, not zeros. The ability of our people to achieve incremental gains in niche after niche was the key to our success in the review period.

We also witnessed greater cooperation across international markets as businesses shared best practice and exchanged ideas. This was not driven by head office gurus with spreadsheets, but by working managers with common issues and opportunities.

The people on the ground drove the business and did an amazing job of it. We expect more of the same in the coming year.

The future

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.

There are always challenges to confront, but, in our view, there is more good news out there than bad.

Worldwide, the foodservice industry is characterised by growth and new opportunities, even in markets with ageing populations and modest economic prospects. Out-of-home eating continues to grow; so does the appetite for new taste experiences and cuisine with an international flavour.

Within Bidcorp, portfolio rebalancing will continue at a pace that suits our local teams.This includes dealing with the Logistics UK business which will be exited in the medium term.

In Australia, 87% of volumes are already accounted for by foodservice sales, with strong foodservice focus. Other regions are making the same journey and achieving similar gains. Benefits will become increasingly apparent as the new year progresses.

Businesses in existing markets continue to build momentum, via organic growth and, where appropriate, via bolt-on acquisitions. This is evident in markets in which we have long-established positions such as Australia, New Zealand, the UK and South Africa.

In more recent Bidcorp markets, we see tremendous future upside. For example, exciting potential exists in Spain – where we now have critical mass – and Italy. European economies look stronger, suggesting new growth possibilities in both western and eastern Europe.

Entry into new national markets is already under way. We obtained a foothold in the German, Austrian and Portuguese markets in the first quarter of the new period. Other territories are being investigated.

South America offers enticing opportunities and attractive valuations. In this region, further acquisitive growth in existing Bidcorp markets may well be considered in tandem with entry into new countries.

Exciting possibilities are also evident in other emerging markets.

We will always see international stresses and strains. We are not about to change that. Bidcorp is all about the food and for our part we see a world of opportunity.

Bernard Berson
Chief executive