P&H in administration

The British delivered wholesaler Palmer and Harvey, better known to the UK grocery industry as P&H, has gone into administration on Tuesday November 29th. The sad news follows months of reported ongoing difficulties, which ended in defeat after rescue talks with private equity firm Carlyle failed to produce the hoped for positive outcome.

A BBC report quoted administrators at accountants PwC as saying 2,500 jobs would be lost with immediate effect.

P&H, which among other things is the UK’s largest tobacco supplier, had been struggling for some time with debts and was known to owe large sums to key suppliers, including Japan International Tobacco (JTI.)

P&H is the UK’s fifth biggest privately-owned firm, and delivers over 12,000 products, including food and alcohol. It supplies some 90,000 outlets around the UK including major multiple retailers, convenience stores, corner shops and petrol station forecourts.

Administrators PwC told the BBC the group had been “hit by challenging trading conditions in recent months and efforts to restructure the business have been unsuccessful. This has resulted in cash flow pressures and it has not been possible to secure additional funding to support the business.”

P&H Group employs about 3,400 employees. PwC said it had “unfortunately been necessary to make about 2,500 immediate redundancies at head office and the branch network.”

The remaining employees would “assist the joint administrators in managing the activities of the business to an orderly closure.”

Costcutter Supermarkets, a major P&H customer, told the BBC it was searching for other suppliers to fill the gap: “We have activated our contingency plans to provide alternative sources of supply through appropriate regional and national options.”

Japan Tobacco International (JTI), a long term supplier to P&H, extended a loan to the company while it was in talks with Carlyle in the autumn. JTI said it had been informed on Tuesday 29th November that the company had “unfortunately entered administration.” The company spokesman said: “Throughout the whole process JTI has worked continuously to facilitate a constructive solution to the P&H Group’s challenges, including extending significant financial and operational support to allow P&H to continue its operations.

“Regrettably our considerable efforts were not successful. We have a contingency plan in place and do not expect any significant interruption in the supply of our products.”

Sky News reported tobacco firm Imperial Brands, which had also lent financial support to P&H, as saying that while it had contingency plans in place to ease supply problems it figured on a £160m hit to its own operating profits, mostly from unrecoverable excise duty.

It said: “P&H has been a long-standing trading partner in the UK and for several months Imperial has been working to find a solution that provides the business, and its employees, with a sustainable long-term future.

“Imperial was prepared to explore further alternatives but other parties have been unwilling to pursue these to a successful conclusion.”

Joint administrator Matthew Callaghan said the PwC administration team will focus on working with employees, clients and suppliers to facilitate a smooth and effective wind-down or transfer of operations over the next few weeks.

“The P&H Group has faced a challenging trading environment, and the need for significant restructuring has been recognised for some while. The company has insufficient cash resources to continue to trade beyond the short term and the directors have concluded that there is no longer any reasonable prospect of a sale. Therefore, the directors have had no choice but appoint administrators.”

It is not known what the next move will be for P&H directors Tony Reed, Chief Executive, Martyn Ward, Managing Director of Palmer and Harvey McLane, Paul Hagon, Group Strategy and Development Director, Steven Watson, Commercial Financial Director and Noel Robinson, Managing Director of Direct Van Sales.

In the spring Martyn Ward presented a brave face at Palmer & Harvey’s Pro Retail show at Telford, which had long been a fixture in the grocery calendar and this year had the theme “Your business, your future.” The company remained committed to educating retailers to buy the right products and introduced a number of initiatives including category education brochures and a charity partnership with Missing People

P&H’s failure comes on the heels of a string of mergers in the grocery industry, which have seen a blurring of the traditional lines between retail and wholesale. This follows a shift in shopping habits from retail to online, supermarkets coming into convenience retailing, aggressive marketing from the discount retailers and Amazon’s ongoing march into grocery. All this has pushed retailers to shore up their businesses by snapping up grocery wholesalers. The most notable such deal was Tesco’s £3.7bn takeover of Booker, which the CMA approved in early November.