Unpacking the Bidcorp business model

Responsible procurement  
Responsible product sourcing   Product cost volatility

We purchase from thousands of domestic and international suppliers. These suppliers include large corporates selling branded products, to the own brand manufacturers which produce and supply Bidfood’s own brand range. In order to meet growing demand for locally sourced products, we increasingly source specialty, fresh and seasonal products from small to mid-sized producers. As a wholesaler of food and non-food items we may be exposed to liability claims.

What it may mean to us

  • Consumer illness
  • Product recall
  • Reputational brand damage

How we manage this

We take our responsibility for transparency and efficiency in our supply chain very seriously. We ensure that our practices reflect the highest standards of integrity, respect and safety for supplier and other partners.

We only engage with suppliers who meet our standards, respect our values and would provide the transparency required should an evaluation of their environment be required. No single source of supply individually accounts for a significant source of purchases made by a particular Bidfood operation.

Most of our suppliers are globally recognised and reputable manufacturers, certified to best food and safety standards. Bidcorp conducts rigorous ad hoc supplier assessments to ensure compliance with food quality standards and importantly with ethical work place practices. We have global group liability insurance policies in place.

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Foodservice distribution is characterised by high inventory turnover at relatively low Profit margins. Product availability at the right quality, right quantity and right price is never guaranteed. Profit may be negatively affected by product cost volatility.

What it may mean to us

  • Margin erosion
  • Lack of product availability
  • Loss of customer confidence as prices are adjusted to align with volatility

How we manage this

We typically do not enter into long-term customer agreements, therefore our businesses are able to react quickly to changes in product pricing.

We adopt a decentralised model where local purchasing decisions are based on the quality and price of the local product, and according to customers’ ever-changing needs.

We are agile enough to respond to our customers quickly and easily.

Product cost volatility

Value-add processing  
Own brand product range   Food safety

Products packaged under our Bidfood own brands have either been contract manufactured and packaged according to our specifications, or processed in-house and packed in line with customers’ needs.

What it may mean to us

  • Lack of in-house manufacturing expertise
  • Risk of food contamination
  • Reputational damage due to sub-quality products
  • Legal action including management time and legal costs

How we respond

For in-house manufacturing, we engage experienced production teams, who have the knowledge and expertise to implement best practice food processing standards.

For contract manufacturing quality assurance teams certify the manufacturing and processing plants where these products are packaged, enforcing global quality control standards and assuring the quality of all supply sources to meet our rigorous requirements.

Product recall processes have been revised to include stricter protocols around customer contact and control of affected stock, using internal IT systems to facilitate tracking and impact of product reach. Specialty product recall insurance policies are being implemented in countries where in-house processing is prevalent.

 

Inherent to the industry, outbreaks and contaminations are experienced from time-to-time. Industry-wide awareness relating to food safety management has been heightened. Bidfood has always held food safety as a top priority but has used this opportunity to engage with our suppliers, customers and end consumers throughout the group to ensure the food safety best practices are adopted.

What it may mean to us

  • Consumer illness
  • Product recall
  • Reputational brand damage
  • Heightened regulatory scrutiny

How we respond

Strengthening positive and constructive relationships with governments and other industry players in order for us to anticipate and respond to regulatory and policy developments.

There is a strong drive to deliver on transparent and prompt communication with stakeholders along the full supply chain, as well as proactive customer engagements and engaging food safety specialists throughout the group, to ensure the highest standards are implemented.

Climate change   Cost of compliance

Extreme weather patterns and environmental degradation have the potential to significantly impact the entire value chain, from production through to distribution and sales.

What it may mean to us

  • Lack of product availability
  • Product pricing increases
  • Constraints in energy and water supply
  • Regulatory risks associated with environmental legislation eg carbon taxes

How we respond

We are serious about the impact and role we have to play in reducing our impact on climate change. Each of our businesses have engaged with local stakeholders and have set targets and goals to minimise emissions and impact on their environment.

At a group level, quarterly monitoring of the operational ESG reports is reviewed and improvements monitored. Best practice is rolled out among our businesses as quick wins for each to minimise their impact.

Inclusion of sustainability targets in each operation’s annual strategy is in place. We engage supportively with our businesses sharing best practice to ensure we are continually improving our emissions efficiencies thereby diminishing our impact on the environment.

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Compliance is non-negotiable. We face a broad range of ever-changing legislative and regulatory requirements that are managed by each local teams, being positioned close to the specific and relevant authorities. However, the cost of compliance remains significant, and increasing.

What it may mean to us

  • Personal injury to stakeholders if non-compliant
  • Fines and penalties for non-compliance
  • Reputational brand damage

How we respond

We invest in assurance teams, compliance tools and engage outsourced professionals to guide and direct us in our efforts to promote the highest levels of compliance to food quality and health and safety standards in the market. Quarterly reporting of material non-compliances against the group standards is monitored by the divisional audit and risk committees, in line with the Bidcorp code of ethics and as a quarterly management representation.

Entity level targeted training is rolled out, appropriate policies, systems, procedures and reporting is in place. Appointment of skilled technical resources and consultation with subject matter experts where required ensures that Bidcorp is operating within the legal and regulatory boundaries in each geography globally.

    http://www.bidcorpgroup.com/code-of-ethics.php
Warehousing and distribution efficiencies  
Timely infrastructure investment   Fuel and energy costs

The development of robust infrastructure is key to creating the capacity demanded by growth ahead of the demand curve.

What it may mean to us

  • Strategic proactive capex into the right business and market
  • Loss of opportunity or customers due to capacity constraints

How we respond

Growth requires that depots be large enough to be economically viable, yet small enough to ensure we remain agile and customer focused. Through timely investment we are equipped and able to facilitate growth and capitalise on market opportunities as they arise.

To remain ahead of the demand curve, we invest in assets with state-of-the-art sustainable capabilities, all designed to lessen our environmental impact and improve our operating efficiencies.

 

Increasing fuel and energy costs drive up the cost of servicing the customer, increasing product prices and distribution costs. In addition, higher fuel costs often negatively affect consumer confidence and discretionary spending, dampening demand for food consumed out-of-the-home.

What it may mean to us

  • Reduces operating efficiencies
  • Margin erosion
  • Product availability

How we respond

Continued investment into the latest technology, energy and transportation equipment to improve operating efficiencies. We have a successful track record of proactive engagement and problem-solving with our customers to identify mutually beneficial solutions. This stands us in good stead with customers, strengthens relationships and builds trust.

Labour recruitment and wage pressures   Natural disasters

Labour retention, recruitment of the right skillsets and wage pressures are key drivers in higher operating costs over the past year. Most significantly the impact was felt with the scarcity of drivers across Europe, the UK and Australasia.

What it may mean to us

  • Shortage of qualified labour
  • Interruptions, planned and unplanned, impacting production and service delivery
  • Product costing volatility
  • Customer pricing increases
  • Product supply scarcity

How we respond

The changing dynamics of labour in many jurisdictions around the world is clearly evident, and therefore it is key for the group to ensure continued attraction, retention and motivation of the existing entrepreneurial workforce. With escalating employee costs a higher level of management focus is required to ensure that we continue to achieve our operational and strategic objectives. While cost management and efficiencies play a critical role, suitable and relevant incentivisation remains an important motivator.

Warehouse and driver, recruitment and retention are global issues but local challenges. It is vital to recognise the importance of these roles and support them with tools to enable the best possible job. We invest in driver training programmes while providing incentives and better work environments. With onboard tracking and monitoring systems we improve driver safety.

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Our facilities and our customers’ businesses may be subject to extreme, and occasionally prolonged, adverse weather conditions resulting in disruption to normal operations.

What it may mean to us

  • Business interruptions
  • Restrict customers’ access to us
  • Disrupt product availability
  • Delays in sales and deliveries
  • Losses incurred due to disaster

How we respond

Robust disaster recovery plans are established in all businesses. In the event of business interruption, our decentralised network of smaller depots allows us to support any business impacted by adverse weather conditions until they are able to resume normal operations.

We have the appropriate global insurance policies in place to protect our assets and address business interruption risk.

Market-leading innovation solutions  
High reliance on technology   Cybersecurity

We are highly reliant on technology, embracing the efficiencies, insights and improved service levels it provides to effectively respond to our customers’ needs. We use software and other technology systems to generate orders, systems to create efficiencies in depots, to load and route trucks, to procure, to monitor and to manage our business on a day-to-day basis. We use our ecommerce platform, CRM tools, social networking and other online platforms to connect with our employees, business partners, suppliers and customers.

What it may mean to us

  • IT disruptions inhibiting customer service
  • IT implementation delays could reduce service delivery

How we respond

Bidfood innovates, develops and uses market differentiating tools and systems to ensure we remain at the forefront of purchasing, order placement, warehouse management, efficiencies in loading trucks, storage space optimisation and optimal ecommerce sales and customer service engagement. Our decentralised model ensures that we do not have global dependency on a single IT system but are locally independent.

We have invested in and continue to develop our ecommerce technology, CRM functionality and Supplier Turn-in-Order App all the while ensuring the implementation of best of breed cybersecurity, business continuity and disaster recovery planning.

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Reliance on our IT networks and systems to process, transmit and store electronic transactions is pervasive across all operations. Our operations gather, store and transmit a wide variety of information, including customers’ and suppliers’ information, employee private information and financial and strategic information about Bidfood globally.

What it may mean to us

  • Cybersecurity breaches, espionage, system disruption, online platform hijacking
  • Critical system downtime
  • Unauthorised access and misuse of personal information

How we respond

We have rolled out a group-wide rapid response plan and implemented measures to protect our data and to prevent cybersecurity breaches and incidents. Continuous vigilance in the face of potential attack is at the heart of our cyber risk management programme. Ongoing training and awareness campaigns are implemented across the group to equip our teams with the information and tools to recognise and respond to a potential attack. Insurance cover is in place to offset potential losses from some cyber risks.

Business information security controls implemented include, but are not limited to: malware protection, network security, incident management, disaster recovery planning and back-up strategies, IT general control audits, and periodic information security reviews.

Customer service excellence  
Market disruptors   Last-mile differentiator

Increasingly tech focused delivery companies are focusing on the foodservice market, initially in the consumer delivery space but with an eye on the foodservice wholesale model, threatening disruption. Competition from these disruptive market entrants have threatened to take market share.

What it may mean to us

  • Margin erosion from competition
  • Loss of market share
  • Loss of supply chain buying power

How we respond

Bidcorp remains committed to our core foodservice business, to maintaining the world-class service and efficiencies ethic, which our customers have come to expect. We have seen significant success in the adoption of our value-over-volume strategy, focusing on the high margin, high service customer.

We remain vigilant watching market trends and are agile enough to implement timely interventions, to respond to our customers changing expectations and needs.

We are focused on what we are good at: namely, ensuring a shared passion among our stakeholders about food, service and easy to use, intuitive technological solutions to develop a mutually beneficial customer relationship.

 

Differentiation in the foodservice industry is achieved through ongoing close contact with customers, positioning competitive pricing, with the ability to provide a full basket of products and consistently delivering promptly and accurately.

What it may mean to us

  • Competitive advantage in the market
  • Fit-for-purpose warehouses
  • Responsive, agile and flexible delivery cycles

How we respond

Our success in the roll out of our metro strategy is as a result of the establishment of conveniently located warehousing solutions, specifically enabling a faster, better last-mile quick turnaround response to customer orders.

Through the implementation and effective use of our ecommerce solutions to take and anticipate customer orders; the offer of regular and quick turnaround deliveries, and a broad range of high-quality competitively priced products, Bidfood aims to differentiate themselves on the last-mile service excellence.

Consumers’ changing eating habits

Changes in consumer eating habits such as a decline in consuming food in restaurants, strong preferences for organic and vegan product offerings, or shifts in non-customer restaurant preferences could reduce demand for the current product range and impose significant changes on the supply chain.

What it may mean to us

  • Loss of market share
  • Obsolete stock and significant write offs
  • Product range procurement adjustments
 

How we respond

We remain close to our customers’ requirements arising from changes in consumer eating habits. Our market-leading ecommerce platform provides a comprehensive database, tracking trends in the overall foodservice environment and in particular changes in consumer preferences. These insights allow us to proactively adjust and realign our go-to-market strategy and product focus.

This bespoke data insight has enabled Bidfood to provide customers with substitute product suggestions, product usage reports, menu-planning advice and food safety training, to proactively deal with the changing consumer preference landscape.

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Own brand Chef’s Classique, Bidfood South Africa.

Growth    
Succession planning   Third party “group purchasing organisations” (GPO)

Bidcorp’s ability to operate sustainably depends largely on the experience and skills of its management team and their succession plans. Any senior management departures or unavailability (due to death, injury, illness or other reasons) or technically skilled worker shortages could adversely affect Bidcorp’s operational performance.

What it may mean to us

  • Loss of key members of management
  • Loss of customer and supplier relationships due to loss of a team member
  • Group sustainability

How we respond

With a robust and significant global footprint, international opportunities are provided to those eager for career progression. Skillsets existing across the group could be used in other group businesses should the requirement arise. Experienced management skills within the group are demonstrated through continued annual growth. Each management team is encouraged to grow and mentor high-potentials within their team to ensure a strong succession plan exists.

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Some customers purchase via third party GPOs in order to reduce prices paid on foodservice orders, which then in turn results in the GPOs placing pricing pressure on us. Some GPO memberships have recently included smaller, independent restaurants.

What it may mean to us

  • Dampened customer orders
  • Margin erosion
  • Increased competition reducing pricing

How we respond

We offer innovative, real-time engagement with our customers through our bespoke industry leading ecommerce solutions. We are small enough to be agile and meet the most demanding requirements; but global enough to source even the most hard to and products. Fundamental to our success is the strength of the real personal human connection we strive to develop with our customers which generates loyalty and appreciation for the personalised service excellence which sets us apart.

Intense competition

Foodservice distribution is highly competitive, with low barriers to entry. Pressure on key customers is increasing due to challenges in the macro-economic environment. Changing consumer tastes, preferences and loyalties have heightened the risk of consumers shifting their preferences to competitor products. Customers switch suppliers easily for lower priced, differentiated products or perceived better customer service.

What it may mean to us

  • Loss of customers due to competitive pressures
  • Increased competition reducing market share
  • Margin erosion
 

How we respond

The cost of switching for local customers is very low as are the barriers to entry in this industry, therefore customer relationships and engagement is key to differentiate. However the benefits of scale in a national business do create barriers to entry. The group structure being decentralised, provides the ability to compete at a local level with the benefits of procurement scale, enhancing our competitiveness. Each local Bidfood operation also has access to a global platform, enabling teams to present new culinary trends, unique product ranges and introduce a variety of cuisines. We continuously monitor external market trends and collate consumer and customer insights to assist in the development of category and brand strategies.

Own brand “Cooking with…”, Bidfood South Africa.

Organic expansion and acquisitive growth   Economic instability

Bidcorp will selectively pursue opportunities to supplement organic growth with strategic acquisitions, both bolt-on and new country investments. These acquisitions present opportunities for growth and increases the scale of Bidcorp’s operations.

What it may mean to us

  • Exposure to political, economic and social conditions beyond our control
  • Impact of familiarisation of new local laws and regulatory constraints

How we respond

A global executive management team provides oversight of all transactions. We ensure full and proper due diligence and sovereign risk assessment is completed before any acquisition is nalised. New country acquisitions are conducted under the oversight of the group executive drawing on the expertise of all the group management where required.

In line with the decentralised Bidcorp governance framework bolt-on acquisitions are conducted by local management who are close to, and understand their local markets.

Political upheaval

Political instability is unpredictable and can present suddenly, with significant impact. These unforeseeable upheavals can potentially disrupt normal business operations materially.

Business sentiment to political upheavals such as Brexit or the Hong Kong protests generally appears to be more cautious than the average consumer sentiment.

What it may mean to us

  • Adverse impact on financial performance
  • Inability to pass on cost impacts to our customer, impacting margins
  • Higher borrowing costs
 

How we respond

The impact of Brexit to date on our UK foodservice market has been limited, with consumers continuing to seek out-of-home meal options. Consumer confidence may, however, wane through fatigue and uncertainty. Our core philosophy of naturally hedging assets and liabilities remains and is an important group fundamental.

Political strife in Hong Kong is having a material impact on that business with hotel occupancy down 85%. Management has enabled flexible working hours for staff and are negotiating with suppliers and landlords to minimise operating costs. Safety measures to protect staff and assets have been implemented.

We continue to keep a close watch on political developments, within the ambit of what we can control, we remain agile in our response.

 

 

Bidcorp is a geographically diverse business exposed to changes and instability affecting the global economic environment.

What it may mean to us

  • Business slowdown due to financial instability, trade restrictions, imposition of tariffs and volatility in exchange rates.

How we respond

We are committed to the jurisdictions in which we operate. Our local teams are best placed to focus on what we can control, delivering the right food, at the right price, at the right time, to the right customers.

Through our globally diverse decentralised footprint, although exposed to high-risk macro environments, local teams continue to manage their local environments and grow in each of our markets.

BPC provides a solid backup plan should disaster strike and support is required to find alternate product supply. This is the advantage of being a part of the global team.

Own brand EasiYo, Bidfood New Zealand.

Own brand EasiYo, Bidfood New Zealand.

Our material risks:

  • Food and product safety
  • Product scarcity
  • Cyber breaches
  • Competitor activity threatening margin and market share
  • Lack of access to our consumers
  • Labour and skills scarcity
  • Reputational damage
  • Economic and political unrest
  • Climate change impacting product availability and our ability to operate