Bestway must work hard to win over Bargain Booze franchisees
Bestway has an enormous job on its hands to win over embattled Bargain Booze franchisees and restore order to the estate following its takeover of Conviviality’s retail division.
Britain’s largest independent wholesaler safeguarded more than 2,000 jobs when it rescued Bargain Booze, Wine Rack and Central Convenience from the ashes of the failed Conviviality empire.
At £7.5 million the deal looks like a bargain indeed, as it comes with 769 stores and a property value alone worth more than £7.5 million.
But many franchisees are in trouble after the spectacular collapse of Conviviality left them with bare shelves, forced them to close over Easter and sparked reputational damage among local shoppers.
Rival wholesalers have been out canvassing them to switch fascias, so the estate Bestway has purchased on the surface may not be the estate it is left with when all the dust has settled.
A source close to Bargain Booze told DRN: “With Tesco and Booker merging, Bestway needs to keep gaining scale to compete, and £7.5 million looks like a good deal, so from a brutally commercial basis it makes sense. There is little or no risk in terms of finances, and it gets it a potential chunk of volume.
“I say potential, because the Bargain Booze franchisee estate is not in a very good place right now. They have had three to four weeks of very poor availability and service levels, and they have been diving into whatever cash reserves they have to stock up at cash and carries, including Bestway.
“The retail estate is in a pretty powerless position right now. Bestway has to get the supply chain switched back on again and it has a challenge on timing.”
A string of staggering financial mishaps brought about one of the quickest corporate collapses in British history as Conviviality – recently valued at £750 million – was plunged into administration.
Magners owner C&C, backed by AB-Inbev, bought distributors Matthew Clark and Bibendum PLB from the wreckage, and Bestway stepped in to pick up the retail division.
Under Diana Hunter’s leadership, Bargain Booze turned into Conviviality and swallowed up a range of business en route to becoming a colossal group with many tentacles. During that time, the once strong relationship between franchisees and head office in Crewe was shattered, replaced by a corporate affiliation.
“When I started in 1999 it was great,” said Doug McQueen, who sold his 20 Bargain Booze stores at the end of 2017. “We would work as a team and the franchisees and head office would look out for each other. That all changed. You got the sense that nobody was joining up the figures in head office.”
Franchisees told DRN that Bestway has a lot of work to do to engage with them. A source said: “The Bargain Booze management now has no credibility. Whoever they put in from Bestway needs to reengage with the franchisee base in the way the Bargain Booze management used to. That will be absolutely crucial. They used to present to us every six months and the senior management would never leave the meetings until the last franchisee had gone.
“Head office runs the tills so there is no wiggle room, it’s not like a symbol group where you can cherry pick the drinks and promotions you want, so franchisees have a right to challenge management as they are controlling their livelihoods.
“That strong relationship has been chipped away at. Bestway will hopefully bring back that strong relationship with franchisees.”
DRN caught up with Martin Race, managing director at Bestway Wholesale, to ask him what messages Bestway is relaying to franchisees in order to persuade them to stick with the group rather than switch fascias.
“In the short term, the main aims are to reassure the retailers that we are the best fit for their businesses, we are here to grow their businesses and to get warehouses stocked to capacity, so they can get a full range of products back on shelf,” he told DRN. “The past couple of weeks have been turbulent and stressful, so it’s all about giving the retailers the security they deserve and instilling confidence that Bestway is a safe pair of hands. We will be able to bring stability to retailers and also the scale to make them greater profit.
“One of the first things we did was to draft comms to retailers and staff, which have been issued. We are also in the process of setting up all customers with Batleys and Bestway accounts at their local depots, with their usual credit facilities, as an interim measure so that they can trade straight away and get product on shelf while we get deliveries back on track which will happen next week.
“We will be looking at all terms and trying to improve, where possible, the retailers’ earnings. We have already communicated with franchisees to welcome them to the family and are reviewing the franchisee package and will work out a way to ensure retailers are better off.”
The Conviviality saga evoked painful memories of the collapse of Thresher and previous woes suffered by national off-licence chains like Oddbins.
Former franchisee Doug McQueen said: “I never had great faith when somebody wanted to turn 700 specialist off-licences into convenience stores. It had been tried so often, in several formats, Thresher had tried it, and it had always failed. What gave people the arrogance to make people think they could do it now? Goodness only knows.”
We polled 200 retailers to gauge confidence levels, and just 32% said they felt it is possible for a big national chain like Bargain Booze or Thresher to thrive in the years ahead, while 68% said no.
We asked Race what he thinks, and he said: “There will always be a market for specialists. Shoppers know that these stores offer a wide range of products that are not necessarily widely available on the high street.
“Bargain Booze and Wine Rack play distinct roles in the off-trade. Bargain Booze is predominately a discounter while Wine Rack is a specialist offering a more premium and advisory role to consumers. The fact that both are profitable businesses demonstrates that there is a market for both. Our aim is to build on their heritage and resonance with shoppers and to grow their business.
“Both operate within the convenience sector, which is the place to be at the moment, given the growth in the sector. Local, little and often has replaced the big shop.
“However, with this trend, there is the opportunity to expand the offer into different categories that deliver higher margin for retailers. The average size of a Bargain Booze and Wine Rack is under 800 sq ft, so the options are limited to an extent, but the opportunity still exists. We will be working with franchisees to extend the range where appropriate.”
When asked which categories might provide these retailers with opportunities to boost sales, he said: “To grow sales, retailers need to look at category adjacencies rather than just categories. Food to go, coffee and fresh and chilled are the obvious categories shoppers are seeking which will help retailers get consistent sales throughout the day.”
He said that deliveries to Bargain Booze and Wine Rack stores will be reactivated “as early as next week”.
A source at Bargain Booze head office told DRN: “Everyone is glad that it hasn’t gone bust and that they haven’t lost their jobs. But there is still a huge amount of uncertainty as to what it means for everyone. A lot of jobs are replicated in Bestway and Bargain Booze.
“There are now two finance teams, two marketing teams, two logistics teams, all these depots over the north of England, and they may not need it all.
“We hope nothing will happen in the short term. They haven’t paid too much, so they can take a step back and take time to iron everything out.”
We asked Race if the plan is to move group alcohol buying to the Bargain Booze head office in Crewe, close Crewe and run all buying through Bestway or keep both separate.
He said: “The four brands will continue to be run from the Crewe office as it has the knowledge and experience of the business. We will look to attain synergies in buying but the main priority is to make sure that all stores have continuity and that means getting product on shelf and ensuring great availability.”