4 March 2010 | Interview
The rapid expansion of one of the UK’s best known pub chains has presented opportunities and challenges for the firm’s procurement professionals
In 1979 JD Wetherspoon had one pub. It now has 750, with 250 more on the way. Head of purchasing Paul Brimmer explains supply chain’s role in this development.
SM: What’s the size and scale of your purchasing operation?
Paul Brimmer: The annual purchasing requirement is
£600 million and growing – that’s no small beer. The purchasing team is seven-strong, plus we’re recruiting a further two positions. The chain is opening 50 pubs a year for the next five years, creating 10,000 jobs across the business.
SM: The chain often draws criticism – how do you reply to it?
Detractors would argue it’s a case of pile it high, sell it cheap, but not only is that observation without foundation it ignores a key element of the Wetherspoon business model.
Yes, the company drives down the price to the consumer – it has to, it is a competitive market with challenges from other pub groups and supermarkets. But it delivers its value in pubs lavished with £1 million-plus conversion costs, equipped and maintained accordingly. It sells premium and leading brands alongside quality specialist products. And it does more than doff its cap to ethical sourcing. We buy more than 14 million free-range British eggs each year, our cod and salmon are from sustainable resources, and we deal with the country’s smallest brewers as well as the world’s largest.
How about claims beer is sourced just before it goes out of date?
Procurement’s job is to allow the business to continually offer great value. Myths have evolved about selling late date drinks but it is just that, an urban myth. We are able to offer top and emerging brands an exciting and high volume shop window. Our role is to communicate to suppliers the value and impact Wetherspoon can offer – ‘building success together’ was the theme of our recent supplier conference.
In many drinks categories the success and marketing of Wetherspoon means it significantly outperforms the sector. Although we have less than 10 per cent of the total volume of pubs in the UK, we sell significantly more than 10 per cent of all the real ale in the trade. Yes, because of value, but also quality – 97 per cent of our pubs are Cask Marque guaranteed.
What was the role of procurement in the purchase of zebu meat, and the consequent change in menu labelling?
The procurement of foodstuffs is one where buying and catering departments have to work closely together. With many of the products we have to balance high quality, animal welfare and year-round availability with price. Only if all of these areas can be satisfied will we enter into long-term relationships. Should, as was the case a few years ago, people question our selection of overseas steaks for example, we are able, thanks to the strict procurement policy to confidently detail our position.
How about successes? What sort of achievements have you had?
The company has always challenged convention. Over the past 30 years, it has repeatedly led on initiatives that benefit customers and, in many cases, have led to transformations across the wider pub world. It has never worried about what its competitors or peers think: if it is keen to progress an idea, it does. For instance, we were the first pub chain to offer all-day menus and open at 9am for breakfast, others followed. And we were also the first to say that 25 per cent of all of our pubs had to be non-smoking, well before the ban. It has always invested heavily to ensure its pubs are ahead of competitors. It spent £15 million to ensure drinks are served at the perfect temperature and built a national distribution centre.
This centre is a key part of supply chain management. Greater purchasing control was required around the availability of products and brands, while we also needed to minimise the number of deliveries to our pubs and control the frequency and timings of deliveries in and outbound. The centre was set up in 2006 and handles 300,000 items each week. It won a Green Apple award (a national prize for environmental best practice) because delivery lorries return loaded with recycling.
The distribution centre was a cultural change, not just for Wetherspoon but the whole industry. No other pub company consolidated all its deliveries and suppliers into one hub. Historically each of the supply sectors had their own supply chains and they were very protective of them. Our own depot and network not only allows us to strip out cost but gives us greater control.
Even when bad decisions are made, and there have been a few, they are changed quickly enough to avoid damage. Oversized lined glasses – where the pint is poured to the line and the rest is head – are an example. It was backed by massive investment but the public hated them so they were quickly withdrawn.
Pubs are about people and their choices. Providing that choice means our purchasing team has to build relationships with 1,300 suppliers and encourage all of them to fully understand us as a business, and what the customer means to us. Providing drinks choice, innovation and value may mean you are agreeing long-term deals with lager suppliers for millions of pints a year one moment and chatting to a local microbrewer for a one-off barrel of beer the next. Both deals, both relationships are equally as important. Supplier relationships are key.
Can you give particular examples of SRM?
East West Ales is a good one. They advised us on real ales for our first beer festival in 1990 and continue to compile our quarterly ale list. The firm that provided furniture for our first pub still supply us, and the success of our Curry Club has been enjoyed by the same company and development chefs for more than
15 years.
Longevity brings benefits to both parties: volume increases provide opportunities to lower costs but can increase profitability for both. And together with some of our food suppliers we have introduced innovations, from ingredient and pack size changes, different cooking methods and equipment alterations that would not have been possible if we just had a buy/sell relationship.
What are the other challenges buyers are facing?
Sometimes there are obstacles in managing brand perceptions with our business needs.
A few years back we didn’t understand why the burgeoning coffee shop market was charging silly prices for a cup of coffee. Wetherspoon decided to offer a leading brand at a realistic price point. The challenges then to the purchasing team were many. First, the brand owner believes their brand will be devalued if it is sold at less than half the price of its competitors. So, while convention may say “buy cheap to sell cheap” we embarked on a massive capital investment programme for equipment and training to show both the brand and consumer we were serious about coffee. We also had to develop a maintenance network that would support our service. The task was to set up 750 new coffee operations within weeks, not years. Today we sell more than 500,000 coffees a week and Lavazza is one of the UK’s most recognised quality brands.
And we now sell more Swedish Kopparberg cider than the brewer does in the whole of Scandinavia. That stemmed from a suggestion from one of our pub managers, who happened to be Swedish.
These are not isolated cases. They highlight how the purchasing strategy of providing service efficiency, revenue growth and keeping cost down can be achieved to the support and benefit of the supplier. Food and drink suppliers are high profile because they’re in the public view but they probably only make up a third of our supplier base. The challenge the team faces is to achieve the mutual win situation with all suppliers.
We can’t cut our £30 million-a-year energy bill by saying we will use more but we’re still faced with trying to cut that cost without reducing the service, so we get involved in reviewing habit or equipment changes, anything that can help us to deliver the saving.
We have also had to cope with legislation, tax and policy changes such as beer duty increases, minimum wage and working practices and the smoking ban, which affect pre-determined action plans and budgets.
The business ethos is one of thinking and acting fast but without compromise – that’s what we have to respond to. Key for us are ongoing innovation, supplier development and supplier collaboration – if we can manage that then we can deal with most things.
