Eoin McGettigan says it is high time that regulators act to ensure a better deal for independents. Elaine Watson reports
Given that few people this side of the Irish Sea had even heard of Eoin McGettigan when he took the reins at Budgens two years ago, the applause he received when his name was called at last month’s IGD Food Industry Awards is a measure of how his profile has changed.
While this reception was, in part, for pulling off a £60m deal to acquire Londis this year, most of it was probably for his unofficial role as champion of the independent retail sector. Musgrave’s UK executive chairman is by no means a lone voice fighting this sector’s corner, but he has proved one of its most eloquent advocates at a time many feel could prove a turning point for the industry if regulators fail to intervene.
And he is on fighting form in his first major interview since the acquisition of Londis in July. The way the market operates now, says McGettigan, speaking from Londis’ Hampton Hill HQ, “there is no chance in hell that a smaller player could come in and grow in this market the same way that Wal-Mart did in the US.
“Don’t get me wrong,” he adds. “We’re just asking for a level playing field, some transparency instead of the cloak and dagger deals that we have now, whereby no one can explain or justify why highly professional and efficient but smaller operators are getting terms more than 11% worse than the multiples.
“Look at Jacksons,” he continues, warming to his theme. “They were one of the slickest operators around.
They won this year’s The Grocer Gold Award for best independent retail chain, for goodness’ sake. Yet they too have been swallowed up by one of the multiples. What added value can Sainsbury possibly offer them?”
As Jacksons’ suppliers, who received letters from Sainsbury immediately after the takeover demanding better terms, will testify, “the only thing Sainsbury can bring to Jacksons is disproportionate buying terms through its superior scale”, he says.
All that smaller retailers want are the same terms as Tesco for the same efficiencies, the same discounts for ordering in full truckloads, and the reassurance that if their sales go up by a certain increment, their terms will improve accordingly, he insists.
As to whether there is any appetite within government for change, he is sanguine. As long as Gordon Brown sits down to his monthly dinners with Tony DeNunzio and Sir Terry Leahy and consumer organisations continue to believe that having a Tesco on every street corner is the best way to serve the public, it’s hard to see how things might change, he argues, adding: “It is also hard as a representative of a sector with 8% of the market and a commercial interest in it, to engender credibility.”
However, most of his time lately has been spent working on a plan to integrate Londis with Budgens.While working out how the combined group will integrate its supply chain will take several months, there will be some quick wins, he says.
First, costs will be cut though the centralisation of head office functions at Musgrave UK’s new HQ at Harefield at the end of the month. There will also be range rationalisation and the introduction of cluster meetings for Londis retailers enabling them to share best practice and have a say in how the business is run.
A trial to deliver chilled ranges to Londis retailers from Budgens’ Wellingborough depot starts this month to assess demand and the price files of Budgens and Londis are already being consolidated, which along with other measures should result in improved terms for retailers in the new year, he says.
Incentivising Londis retailers to buy all their stock centrally from Musgrave will take more time, however. “Understanding their businesses better will be a key, and for that we need greater penetration of EPoS systems, so we can get more information back to the centre.”
As for the £20m remuneration package that Londis bosses originally negotiated for themselves in the event of a takeover, which outraged Londis retailers and scuppered Musgrave’s original deal last year, McGettigan is blunt. “I don’t think people realised what was going on.” Once it was in the public domain, he says, he was always confident that Musgrave would emerge the eventual winner in any bidding war because it had the better proposition for retailers.
Morever, he says, “there were people in the process who weren’t serious about acquiring the business and had never expressed any interest in it before. Their sole purpose was to make the thing fall through.”
At Budgens, the move to sell off company-owned stores to independents and run the business as a franchise operation is progressing well, with more than 1,000 applicants to buy the stores, he says.
While store numbers have not gone up dramatically since Musgrave acquired the business two years ago, there has been a lot of re-engineering within the portfolio, with the sale of larger or underperforming stores, and overall, Budgens has exceeded internal expectations. Sales at Budgens topped 3% last year - a credible performance in a fiercely competitive market, he adds.
Looking ahead, independents cannot afford to sit around hoping the Competition Commission will get its act together, he warns. “There are 50,000 independents with 8% of the market. Look at the capex that has been spent in those stores in the last three years and compare it to what’s been spent on stores representing 8% of the market owned by the multiples. There is no comparison. Our sector has to professionalise.”
Given that few people this side of the Irish Sea had even heard of Eoin McGettigan when he took the reins at Budgens two years ago, the applause he received when his name was called at last month’s IGD Food Industry Awards is a measure of how his profile has changed.
While this reception was, in part, for pulling off a £60m deal to acquire Londis this year, most of it was probably for his unofficial role as champion of the independent retail sector. Musgrave’s UK executive chairman is by no means a lone voice fighting this sector’s corner, but he has proved one of its most eloquent advocates at a time many feel could prove a turning point for the industry if regulators fail to intervene.
And he is on fighting form in his first major interview since the acquisition of Londis in July. The way the market operates now, says McGettigan, speaking from Londis’ Hampton Hill HQ, “there is no chance in hell that a smaller player could come in and grow in this market the same way that Wal-Mart did in the US.
“Don’t get me wrong,” he adds. “We’re just asking for a level playing field, some transparency instead of the cloak and dagger deals that we have now, whereby no one can explain or justify why highly professional and efficient but smaller operators are getting terms more than 11% worse than the multiples.
“Look at Jacksons,” he continues, warming to his theme. “They were one of the slickest operators around.
They won this year’s The Grocer Gold Award for best independent retail chain, for goodness’ sake. Yet they too have been swallowed up by one of the multiples. What added value can Sainsbury possibly offer them?”
As Jacksons’ suppliers, who received letters from Sainsbury immediately after the takeover demanding better terms, will testify, “the only thing Sainsbury can bring to Jacksons is disproportionate buying terms through its superior scale”, he says.
All that smaller retailers want are the same terms as Tesco for the same efficiencies, the same discounts for ordering in full truckloads, and the reassurance that if their sales go up by a certain increment, their terms will improve accordingly, he insists.
As to whether there is any appetite within government for change, he is sanguine. As long as Gordon Brown sits down to his monthly dinners with Tony DeNunzio and Sir Terry Leahy and consumer organisations continue to believe that having a Tesco on every street corner is the best way to serve the public, it’s hard to see how things might change, he argues, adding: “It is also hard as a representative of a sector with 8% of the market and a commercial interest in it, to engender credibility.”
However, most of his time lately has been spent working on a plan to integrate Londis with Budgens.While working out how the combined group will integrate its supply chain will take several months, there will be some quick wins, he says.
First, costs will be cut though the centralisation of head office functions at Musgrave UK’s new HQ at Harefield at the end of the month. There will also be range rationalisation and the introduction of cluster meetings for Londis retailers enabling them to share best practice and have a say in how the business is run.
A trial to deliver chilled ranges to Londis retailers from Budgens’ Wellingborough depot starts this month to assess demand and the price files of Budgens and Londis are already being consolidated, which along with other measures should result in improved terms for retailers in the new year, he says.
Incentivising Londis retailers to buy all their stock centrally from Musgrave will take more time, however. “Understanding their businesses better will be a key, and for that we need greater penetration of EPoS systems, so we can get more information back to the centre.”
As for the £20m remuneration package that Londis bosses originally negotiated for themselves in the event of a takeover, which outraged Londis retailers and scuppered Musgrave’s original deal last year, McGettigan is blunt. “I don’t think people realised what was going on.” Once it was in the public domain, he says, he was always confident that Musgrave would emerge the eventual winner in any bidding war because it had the better proposition for retailers.
Morever, he says, “there were people in the process who weren’t serious about acquiring the business and had never expressed any interest in it before. Their sole purpose was to make the thing fall through.”
At Budgens, the move to sell off company-owned stores to independents and run the business as a franchise operation is progressing well, with more than 1,000 applicants to buy the stores, he says.
While store numbers have not gone up dramatically since Musgrave acquired the business two years ago, there has been a lot of re-engineering within the portfolio, with the sale of larger or underperforming stores, and overall, Budgens has exceeded internal expectations. Sales at Budgens topped 3% last year - a credible performance in a fiercely competitive market, he adds.
Looking ahead, independents cannot afford to sit around hoping the Competition Commission will get its act together, he warns. “There are 50,000 independents with 8% of the market. Look at the capex that has been spent in those stores in the last three years and compare it to what’s been spent on stores representing 8% of the market owned by the multiples. There is no comparison. Our sector has to professionalise.”
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