Operational factors

Persistent food inflation created one-off opportunities to buy in ahead of significant price increases, thereby protecting margins. Our hospitality supplies division is still in the early stages of its strategy to develop a truly national offering and failed to meet admittedly ambitious sales and profit targets. In contrast, foodservice operations with their much stronger national offering had an exceptional year. QSR also grew market share and achieved its targets as the business continues to benefit from the deployment of dedicated support teams that understand this sector’s special needs.

Growth across all divisions was achieved by continued focus on the previously announced strategy of range extension, development of the customer-base and geographic expansion.

Innovations/investments

The foodservice division further strengthened its national footprint through the acquisition in July 2007 of a small business in regional New South Wales with branches in Armidale and Tamworth. In January, a foodservice business was bought in Hobart, Tasmania – giving the division a physical presence in every state and territory.

The foodservice business also invested in new warehouses in Wollongong, New South Wales and Sunshine Coast, Queensland and doubled its warehousing capacity in Mackay, another Queensland growth point. The dry goods capability in Perth, Western Australia, was extended and work has begun on expanded facilities in Cairns, Queensland, and Darwin, Northern Territories.

Sydney warehousing that was previously outsourced has been bought outright. It houses our Stephensons foodservice operation and associated importing and logistics functions.

Total investment in new or expanded facilities amounted to approximately A$20 million.

A small Sydney-based hospitality supplies business was acquired in July 2007.

Risks

Credit risk is the principal concern as interest rates rise and business confidence falters in non-commodity sectors. Food inflation affects consumer choice. As a broadline supplier, this is an opportunity rather than a risk as it provides a chance to grow market share in affordable product lines. Skills can be a risk factor in a full employment economy, but this is not a strategic growth constraint. It tends to be a cost driver as higher pay invariably secures access to higher skills and better industry experience.

Sustainability factors

Jobs growth of about 10% was achieved and the total staff complement now stands at approximately 2 100. Training investments continue to grow and we continue to invest substantially in the development of our people.

The business has developed a comprehensive environment policy that promotes energy efficiency and environmental sensitivity. The policy finds practical expression in many ways; for instance, replacement refrigeration units on QSR delivery vehicles are about 60% more efficient, computerised routing fosters efficient distribution and new technology enables electricity load to be spread into off-peak periods, saving costs and cutting carbon emissions.

Whenever possible, we support suppliers of quality local produce to assist communities and reduce transport costs.

All operations are housed in energy-efficient premises and take pride in providing a safe and hygienic working environment.

The Bidvest Australia team has developed a paperless warehouse management system which is being rolled out progressively through the business. Distribution centres have developed recycling programmes covering cardboard, paper, plastic, wood and metal.

We took rapid advantage of new federal legislation permitting the sale of biofuel.

Cultural factors

Pride in Bidvest Australia is increasingly evident. Teams across the business share a sense of mission as they are pioneering the first truly national foodservice model in Australia. This puts them at the leading edge of the trend towards solution-based products and services and gives them a strong edge in fragmented markets that traditionally failed to unlock economies of scale and other customer benefits.

The future

The pattern of buoyant growth and sales significantly higher than the industry norm came to an abrupt end in the last two months of the year. It is impossible to say if this is a natural correction after two exceptional years or whether a more fundamental shift is at work. Food inflation appears to be moderating, suggesting that large trading gains ahead of big price increases will not be repeated to the previous extent.

The hospitality supplies division increasingly benefits from national reach and uniform systems. Closer integration is becoming evident across the division’s previously disparate teams (brought together by several years of acquisitive growth). An improved performance is expected.

The overall business has the stature and expertise to secure competitive advantage in a more challenging environment and further growth in sales and profit will be sought.