No-one knows better than Chris Etherington how tough life is at the top. Palmer & Harvey McLane may once again have topped off The Grocer's Big 30 annual league table, but its position has looked far from comfortable with a resurgent Booker snapping at its heels and margins remaining thin. Over the past year, though turnover has leapt from £3.53bn to £3.98bn but margin has only grown from 0.6% to 0.7% - still less than half the industry average of 1.9%.

The wholesaler hasn't helped its cause by being a bit of a "sleeping giant", admits its CEO in an exclusive interview. But that's about to change, he insists. Since joining the company 18 months ago, Etherington has been secretly working on a strategic review of the business in a bid to drive margin growth. His remit? To scrap P&H's one-size- fits-all approach to wholesaling and tailor its offer to retailers' formats. Last week saw the launch of Partnership Plus, the first initiative to come out of the review.

Over the next few months, there will be further changes as P&H overhauls its offering to create a greater emphasis on higher-margin chilled foods. With its over-reliance on tobacco, crisps, snacks and drinks, P&H was in real danger of being left behind by the changing face of convenience, he admits.

"When I joined P&H, the company was at a crossroads," he says. "P&H was a strong wholesaler, good at what it did, but it was obvious that developments in the market were taking business away from our core areas."

In-house research showed that the real growth areas were fresh and chilled foods. Shoppers were increasingly using their local stores to shop for food for their evening meals - items such as ready meals, pizzas, pasta, sauces and ethnic products. They were also looking for fresh fruit and vegetables.

As well as overhauling ranges to reflect this, P&H realised it had to develop a more tailored offer. "P&H had traditionally offered the same thing to all independents regardless of the type or size of store," admits Etherington. "But the traditional offer of a CTN store is very different to a 2,500 sq ft c-store."

As part of the review, P&H's 60,000 customers were divided into three categories - convenience stores, CTNs and forecourts. Account executives with retail experience were then recruited to specifically drive sales in those areas. On the back of the restructured customer base, P&H launched its Partnership Plus loyalty scheme, under which customers agree to spend a minimum amount in return for 2.5% cashback on non-tobacco sales.

Initial feedback has been good, says Etherington. "When we announced Partnership Plus, the response from our suppliers was 'this is what we have been waiting for'," he says.

That's not the only new initiative P&H has introduced. To accommodate a bigger chilled offer, it has also conducted a full review of its delivery infrastructure. In the past, P&H has only offered a small number of chilled lines, which have been delivered alongside frozen. From now on, it plans to deliver chilled with ambient to allow more frequent deliveries and is therefore replacing its delivery fleet with multi-temperature vehicles.

So far only a third of the fleet has switched but Etherington says more will be converted throughout the year. The strategy is already paying off. P&H can now deliver a complete range of chilled foods six days a week, allowing retailers to order little and often. With a new focus on chilled, P&H had to be nearer its customers and last August it snapped up wholesaler T&A Symonds, bolstering its existing network of 14 depots.

"T&A knew it wasn't going to have the capacity to go into chilled on its own - it had to team up with a larger wholesaler," says Etherington. "Acquiring T&A gave us the opportunity to shift our delivery boundaries slightly - from our Medway depot to our Fareham depot, Fareham to Yeovil and Yeovil to Bristol."

T&A remains one of four members of delivered wholesale group Key Lekkerland, though critics had predicted the alliance would be dissolved because P&H's symbol group fascia Mace was a direct competitor to Key Lekkerland's KeyStore fascia and Booker had snapped up fellow Key Lekkerland member Blueheath earlier in the year - with Blueheath remaining a member of Key Lekkerland. For now, P&H and Key Lekkerland will continue to work together, says Etherington.

P&H's focus on the independents does not mean it's taken its eye off the multiples, he insists. "We're definitely not giving up on the multiples. We have a good trading relationship with them and our accounts with them complement what we do. Booker's strategy is fine for Booker, but not for us."

Meanwhile, the T&A deal has given P&H an appetite for further acquisitions. "We are continually reviewing our network and we will work to expand our locations," says Etherington. "We're going to step up a gear or two to exploit our infrastructure and strengthen our position. P&H has been a bit of a sleeping giant in the past, so expect to see a bit more of us going forward. "nA year of wholesale change

February 2007



?Booker launches a new customer website to help it double net sales and kicks off its 50th anniversary with a month of deep promotions. Bestway rolls out its range of £-line products after a successful pre-Christmas trial. JW Filshill is crowned Scottish Wholesale Association Champion of Champions after winning three top awards. Nisa-Today's revamps its chilled range with a focus on better-for-you and organic. North London's J&J Wines becomes Landmark Wholesale's 30th member.

March



?Nisa-Today's outlines plans to combine the buying power of its wholesale and retail arms in a bid to generate better terms from suppliers. The FWD convinces the government to tighten the duty drawback laws, a major contributing factor to the supply of illicit alcohol. Northern Ireland's wholesaler J&J Haslett receives offers from two companies hoping to buy the business. Spar UK launches Golden Deals, its biggest-ever promotional campaign, to celebrate 50 years in the UK.

April



?The IGD predicts delivered wholesaling will take over C&C sales in three years in its UK Grocery & Foodservice Wholesaling 2007 report. Landmark joins the ACS . Business review at P&H comes to light as company aims to boost profitability. Parfetts MD Steve Parfett threatens to delist products with trans fats including Maltesers. Irish convenience giant Musgrave is the favourite to land J&J Haslett in a bid to rival Spar wholesaler Henderson Group in the province.

May



?Booker takes over Blueheath via a reverse takeover and boss Charles Wilson promises to make Booker the biggest and best wholesaler in the UK. Woodward Foodservice MD Ed Hyslop (above) and trading director Dave Howarth are sacked amid rumours of cashflow problems. Wick wholesaler Sutherland Bros adds a wind turbine and solar roof in response to Tesco opening an eco-store in the town. CJ Lang & Son cuts food miles by supplying fruit and veg direct to store.

June



?48,000 independent retailers take part in the inaugural National Independents' Week. Foodservice giant Brakes wins The Grocer Gold award for for its green initiatives. Wholesalers claim duty fraudsters are moving from beer to wine after a crackdown by HMRC. United Wholesale Scotland MD Athif Sarwar is found guilty of an £850,000 money-laundering scheme at Glasgow High Court. He is later sentenced to three years in jail but was then released pending an appeal.

July



?Irish convenience giant Musgrave Group snaps up Northern Irish wholesaler J&J Haslett, doubling the number of stores it supplies in the province. Hothi C& Carry changes name to HT & Co (Drinks) and announces it is considering opening a second depot. Capper & Co adopts contingency plans as flooding brings parts of southern and central England to a standstill. Makro suspends sales of controversial delicacy foie gras following pressure from animal rights campaign group Viva!

August



?P&H buys fellow Big 30 wholesaler T&A Symonds and reveals it is looking for further acquisitions. 3663 First for Foodservice launches its First For Sustainability initiative that puts environmental concerns at the heart of all business decisions. Supply problems at Heinz give wholesalers headache over availability of HP Sauce. Parfetts unveils its long-awaited convenience retail format Local 4U at a site in New Mills with the intention to add a further eight sites in the next 12 months.

September



?AF Blakemore chief Peter Blakemore (left) agrees a partnership with Heart of England Fine Foods to help retailers source locally. Booker's Euro Shopper economy range tops £2m two months after launch. Landmark persuades Müller, Vimto, E&J Gallo and Kraft to support its Hot House scheme bringing supplier numbers to 46. Forward Foods buys fellow East Anglian wholesaler Charlie's Larder; Budgens doubles the number of lines in its premium Our Kitchen range to 93.

October



?The Competition Commission claims there is no evidence to suggest wholesaling's financial viability is under threat. DCS Europe sets up its own manufacturing arm for its Enliven health and beauty range. Spar wholesaler Appleby Westward becomes a wholesale member of food marketing group Taste of the West. Landmark appoints Ian Davidson as marketing director, replacing Chris Rose who is retiring. Booker promises longer and opening hours for its customers.

November



?Bestway chairman Sir Anwar Pervez (left) is angered by comments made by Competition Commission chairman Peter Freeman that his wealth reflects the health of UK wholesale. Northern Irish wholesaler Henderson Group opens the first of Spar UK's Stores of the Future in Lurgan. Booker unveils its first-ever pre-packed meat range and new fruit and veg range and wins a major contract to supply CTN chain Rippleglen. Batleys reveals it is looking for a site for new depots in Brighton and Scotland.

December



?The founder and chairman of Cobra beer, Lord Bilimoria joins Booker as a non-executive director. Oriental wholesaler Wing Yip relaunches its online service, offering more than 1,000 products. FWD pledges to fight plans to place a ban on displaying tobacco outlined as part of the Department of Health's Cancer Reform Strategy. 3663 wins a contract to supply 209 restaurants owned by the Gondola Group under the Ask and Zizzi brands.

January 2008



?P&H launches Partnership Plus, a new loyalty scheme aimed at encouraging greater discipline among retail customers. Iain Hill (left) is elected vice-president of the Scottish Wholesale Association and takes over as president in June. CJ Lang introduces a Challenge 25 policy for selling alcohol. Makro and Nisa-Today's agree to end their joint buying relationship - Makro will remain a member of Nisa-Today's but will only work with the buying group with regards to shared promotions.will online work?

The potential for getting their supplies online sales remains largely untapped by independent retailers nervous about the reliability or complexity of the technology. The failure of online wholesaler Blueheath, before its takeover by Booker, to make money also provides little inspiration.

"It is really difficult for the true independent," says Parfetts Cash & Carry MD Steve Parfett. "Many retailers aren't ready for technology, they are not that familiar with email marketing and doing business online."

Parfett admits he is talking to technology suppliers to see what IT can do for his business but as yet is unsure about the potential.

Booker chief executive Charles Wilson is happy with what the Blueheath systems can deliver and argues that independents are ready to embrace technology. "I think technology will completely transform independents' trade over the next few years," says Wilson, who claims sales through Booker's internet site have risen 100% in the last year. "We think it can bring more and more benefits to our customers."

Online still makes up a relatively small percentage of group sales. In the first half last year Booker channelled £34m sales through its website. Wilson admits it won't transform his business overnight but also doesn't see it as a prohibitive tool in terms of costs.the 3 big buyouts of 2007

Booker - Blueheath



In what was probably the deal of the year Booker landed online specialist Blueheath via a reverse takeover in May, not only giving it a much-needed delivered offer but returning the company to the public market. Booker boss Charles Wilson says the integration of Blueheath is ahead of schedule. He hadn't expected to win any new contracts until this spring, but Blueheath has already helped it win important delivered supply contracts with retailers such as Rippleglen. Although Blueheath had yet to make a profit when Booker stepped in, Wilson believes the addition of Blueheath's technology to Booker's size will deliver the returns that Blueheath couldn't achieve on its own.

What next? This deal was a bolt from the blue for both City and wholesale experts, so anything is possible from Booker. Following the deal, rumours circulated that Booker was eyeing Blueheath's Key Lekkerland stablemates to provide instant national delivery . These rumours faded when P&H bought T&A Symonds in August, but there are two others out there: JW Filshill and WH & HM Young.



P&H - T&A Symonds



The purchase of south west-based delivered wholesaler T&A Symonds by Palmer & Harvey McLane in August gave P&H, the country's largest wholesaler, coverage in regions it was previously lacking, according to CEO Chris Etherington. More cynical industry watchers saw it as a clever move that would throw a spanner in the works for rival Booker should it look to continue beefing up its delivered business after taking over Blueheath in May.

What next? Etherington says that the company is now looking to identify other areas where its coverage is not what it could be and that the T&A deal could prompt further acquisitions. So any delivered wholesalers looking for a nice retirement plan should probably drop him a line.

Musgrave Group - J&J Haslett



Not content with owning the third-largest wholesaler in the UK, Irish convenience giant Musgrave Group also has a significant presence in Northern Ireland but until this year it was unable to claim any sort of parity with Henderson Group, the biggest symbol operator and delivered wholesaler in the province. The deal adds J&J Haslett, operator of the Mace symbol in Northern Ireland, to its own SuperValu and Centra fascias and is likely to inject real competition in the local c-store sector.

What next? Henderson will feel the heat. Under Haslett, the Mace symbol was building a new fresh image with a strong focus on healthy eating and community involvement. This combined with the buying power of Musgrave could be a formidable combination.

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