Kitwave Group, the delivered wholesale business, has acquired Total Foodservice Solutions, a leading independent food wholesaler in the North of England for £21 million.
Established over 130 years ago, Total Foodservice delivers wholesale catering supplies of around 4,000 product lines including chilled, frozen and ambient food, non-food and cleaning products.
Total Foodservice’s depots are located in Clitheroe, Lancashire and Huddersfield, Yorkshire with customers including licensed trade and restaurants, coffee shops and sandwich bars, schools and universities and the care industry across the North of England.
Ben Maxted, Chief Executive Officer of Kitwave, tells Wholesale Manager, what made Kitwave want to purchase Total Foodservice and what his plans are for the combined business.
Where have you worked before and in what roles have you worked?
I joined Kitwave over 11 years ago as the finance director of their retailing business, went on to run the frozen and chilled division and then latterly stepping up onto the plc board in November 2021 just after the company was floated.
Previous to that, I was a chartered accountant fellow at the Institute of Chartered Accountants in England and Wales and trained at PricewaterhouseCoopers. I spent about five years working in their corporate finance team doing M&A (mergers and acquisitions) and corporate finance working for PricewaterhouseCoopers.
What does your current role involve?
Stepping into CEO I guess it’s a more operationally led role, we are an operational business. It’s still very much operationally focused, but there’s much more focus on the wider strategy of the business and then as a listed business there are the requirements of the listed status: stakeholder management and investor relations.
What are your goals for what you want to achieve in the role?
Clearly, we have, in our view, an opportunity within the marketplace, we have stated a growth strategy of organic growth alongside M&A. We have made 13 acquisitions since 2010 and we will continue to do M&As, that is part of our growth strategy. My stated goal as part of my success will be to ensure that we continue to deliver that strategy as well as we have done.
Secondly to that we have an organic growth strategy and to deliver that organic growth strategy involves growing top line but also growing the operating margins. We see opportunities within the business for efficiencies in terms of cost to serve. There are also the technological advancements of the business – how we look to involve and invest in and deliver technological advancements to help with that growth strategy in terms of routing sustainability, routing efficiencies, taking efficiencies within the warehouse, whether that be voice or robotics. Clearly, there’s an awful lot that can happen in what is a relatively straightforward business being high frequency, deliveries and warehouse work, which is high repeatability and highly predictable so there are opportunities there in terms of RPA, robotics and other advancements in terms of voice technology and delivering that will help with our organic growth strategy.
How is Kitwave performing as a business?
It’s performing well, we have just acquired Total Foodservice Solutions and we are pleased with that. That’s a very good business, it gives us further breadth in terms of geographical spread across the M62 corridor with sites in Huddersfield and Clitheroe. We’re very happy with that business. It’s a Fairway member so it sits alongside Miller’s very well and we will continue to build the foodservice footprint that we have in the North.
From that perspective, we have a great business. We have inherited a team of great people there and we can look to really build that business now as part of our ever-growing food orientated foodservice side of the business whilst we continue to work hard to deliver the budgeted numbers and the plan for the rest of the business.
What made Kitwave want to purchase Total Foodservice and what are your plans for the combined business?
We have known the shareholders there for quite some time, through our links with Fairway, we are both members of the Fairway Foodservice buying group. We have known of the business and it comes with a very high-quality management team. It comes with a very high-quality reputation for service and within the areas that it operates, across that M62 corridor, it’s very well respected for that service. That’s where it was an attraction to us, that it was very much that high quality business that really sits alongside our delivery capabilities and our ability to sell on service and on availability. It has a really good product range, and as a fellow Fairway member, it helps with the continuation of that growth story with Miller’s being in York. We now have similar businesses where we can look to integrate together across that M62 corridor all under the Fairway buying group but also looking to build our own foodservice footprint across that geographical area. With our head office in the northeast, we’ve got a nice footprint now across that part of the country.
How would you describe Kitwave for anyone who hasn’t heard of the business?
We’re a food wholesaler, we focus on a delivered solution. Our USPs are exactly that, first time delivery, breadth of range, a very good service level on a delivered wholesale perspective. From a first-time meeting, we strive to do things the right way, we strive to deliver that customer relationship, customer service and delivery excellence, to ensure that we are the independent’s choice whether that be through retail, we service a lot of temperature specific retail outlets for ice cream, frozen food and chilled. We are quite strong in terms of our capabilities within frozen and chilled and then from an ambient perspective, we have the same, it’s about that delivered wholesale solution, whether that be into vending or retail. That was where we grew our business to start with and I think the knowledge that we’ve taken from that, and where we’ve succeeded, is that a high frequency small drop delivery capability lends itself very nicely towards foodservice. Because what is foodservice? Well, it’s all about exactly what it says in the name, isn’t it? It’s about the service side and I think that fits our USPs: high frequency of drops, small order quantities, 6, 7, or 8 foodservice deliveries a week, sometimes multiple deliveries per day in some parts of the country, or the cut-off can be as late as midnight, because the chef needs that food next day.
They need that availability of product at a moment’s notice. And I think that really suits our service level. Our high depot network frequency of deliveries lends itself to what Kitwave is – we have built our business as a delivered wholesaler into retail.
Which is the bigger side of your business, the retail or the foodservice?
From a turnover perspective currently our retail side is still slightly larger but going forward with Total, from a profit perspective, from a bottom-line operating input, our foodservice business division, which includes on-trade, will now be a larger contributor to bottom line profit than retail.
Do you have a membership scheme?
We don’t. All of our customers are independents. We do some larger multiple site work for the likes of B&M, for Bestway, we do some drop shipment relationships into Premier. But the majority of our 40,000 plus customers are all independents and they’re not contracted, they aren’t part of any buying relationship. It’s more that they utilise us on service and availability. The stickiness of that customer base comes from the ability with which we have served these customers for a long time, whether that be through Kitwave or through the companies that we buy. We only look to buy very well-run customer bases because they come with sticky customer bases who have utilised those companies for a long time and rely on that level of service.
Is Kitwave part of any larger buying group?
Yes, it’s a part of Unitas which we are very proud of, and they are supportive of us being a member. From a foodservice perspective, we are a member of Fairway for some of their own label products and we work with them from a buying perspective.
What benefits does Kitwave get from being part of Unitas and Fairway?
From Unitas we get scale benefits. The whole point of being a part of a buying group is we get some scale benefits, there are certainly benefits from on-trade. We are one of the larger on-trade members of Unitas and it’s all about that brand relationship. Our reason for existence is to connect the brands to the customer base. As a delivered wholesaler that is our stated aim and the best we can do that through delivery excellence, the more that we can look to grow our business with the support of the brands. I think we do that particularly well, we have a high level of engagement with the brands, whether that be the brewers or the larger branded partners. But Unitas enables us to do that with added value, with added engagement and utilising Unitas from that perspective helps.
From a foodservice perspective, there’s a slight nuance there in that a lot of the benefits we get from Fairway is from commodity-based buying, large, contracted commodities, which are a little bit more volatile in price and therefore contracted volumes, so contracted pricing can help. From an own label perspective, Fairway have a high level of SKUs of their own label, which chefs know come with a quality stamp and a level of provenance. That helps us from an own label perspective in foodservice, whereby we can utilise Fairway’s own label, whether that be beans or mayonnaise or other lines that we have that are branded Fairway own label alongside the scale benefits that we get from foodservice.
How far is the geographical reach of your business?
From a retail wholesale perspective, we have a national infrastructure, we have national capability. If you look at our frozen and chilled business, for example, we deliver to every postcode in the UK at least three times a week. From a retail perspective, we very much have national footprint mainly focused on frozen and chilled temperature specific goods.
We have a large, ambient wholesale business that sells into vending, we don’t actually stock the machines, we provide and sell into the vending wholesale channel. They then take those goods and fill their own machines and that is a national footprint.
From a foodservice perspective, we aren’t there yet. We are building that through acquisition. It’s important to say why are we doing that, and it certainly isn’t to be a national player in terms of contracted revenues. We’re not really here to take on large national NHS contracts or large national schools contracts. We do have some independent localised geographic contractor business whether that be care homes or educational settings, but really, our focus is independents. Our focus is small drops, it’s that independent, hard to reach channel, small drops, high frequency, and that market is serviced by literally hundreds of foodservice operators who don’t really operate outside a 50-mile radius from their depot but do it very, very well. They are the businesses that we will look to be our acquisition targets because they’re the businesses operating at a high level of EBITDA margin, a high level of customer retention, high level of service-led deliverability, which really are the businesses that we would look to buy. We will naturally spread geographically, but that is not to knit those together for any other reason than to create more capabilities to service independents. We aren’t here to service a part of the market that maybe a Brakes or a Bidvest look to service because we leave them to their part of the market, which is higher drop values, lower frequency of drop and that contracted business is really for them. Our real reason for existence in foodservice is that £50, £60 or £100 drop seven times a week into that small independent café, shop, restaurant or golf club. That’s the part of the market where we are looking to operate.
Do you have an e-commerce site for your customers?
We do. We have invested about half a million pounds in the last three years on our e-commerce capabilities. We feel it’s a very good, best-in-class ecommerce platform, our partner is Foodservice Online, who have delivered us a very good, polished website. We’ve taken electronic audit capture from about 20% to 47% in the last three years, and we’ve done that through engagement through not only with the best-in-class website but also through brand engagement. The brands have really developed alongside both the e-commerce platform but also their capabilities online on our platform. That all adds together to quite a powerful customer experience, which is also leading to 7-8% increases in average order value, once ordering online.
How many products does Kitwave actually supply and what categories do you cover?
We cover all categories; we have about 40,000 SKUs. Our capabilities are ambient, frozen, chilled, butchery and fresh produce and also on-trade alcohol, so really across all segments of the marketplace.
Do you have any new products in your ranges that you want to talk about at this time?
Not really. There’s no part of the marketplace that we are not covering. Grocery or household is probably the one we are a little bit weak in. We don’t have a huge offering there. We have strong relationships with all the brand supply partners, in terms of products we have relationships from a frozen or chilled perspective, which evolve all the time. But there isn’t any one product that I would call out and say this is the one that we’re really excited about. It’s about keeping those relationships with all those major brands because they’re constantly developing the NPD, they’re constantly trying to invest to grow consumption, to grow the marketplace, and as a branded supply partner, we will get benefits from that.
How has the wholesale industry changed in recent years?
I think a lot of wholesalers and a lot of independently owned wholesalers have come out of Covid in a better form. I think a lot of them, including ourselves, utilised that time within Covid to really look at their businesses, to look at what works, what doesn’t work so well. Although it was a very difficult time for everyone, with the help of our brand supply partners, government support and also with the ability of management teams to look internally within their business, I think they’ve come out of it stronger and better businesses, probably more efficient businesses. We’re seeing businesses that now are back to a run rate, pre-Covid, but actually operating in a much more efficient and better way. I think we’re also seeing a much more conscious decision or ability to engage and harness the use of technology. I don’t think we are at the forefront of technology and industry, but now with e-commerce, with AI, with RPA, with robotics, with voice, I think we are starting to see a lot more engagement in ERP platforms, delivering the capabilities that are driving efficiencies in terms of voice technology, AI routing for you and things like that. So, I think we’re seeing people invest in their business, making the technological advancements, but also looking at the external macro, I think we’re moving through that high inflationary market, that’s starting to settle down now and I guess we’re in a much steadier market. And hopefully now with people having a little bit more disposable income in their pockets, you’ll start to see consumption grow. In foodservice and across on-trade and retail, with interest rates looking to fall, people will be willing to spend a little bit more as we hopefully come through the end of the cost-of-living tightness that we’ve seen in the last couple years.
Tell us about your new distribution centre.
We have invested nearly £3million in a distribution centre, a brand new 80,000 square foot site in the West Country. With MJ Baker in Newton Abbot, there is clearly an opportunity to integrate the two businesses together, take the advantages and really look to grow our foodservice footprint in the southwest off the back of that great new distribution centre, which we’re really proud of.
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