The food and drink manufacturing industry is the single largest manufacturing sector in the UK, with a turnover of £66bn, accounting for 14.8% of the total manufacturing sector. This huge volume of produce is distributed to the consumer via a major service industry with many distribution channels and routes to market.

In today’s foodservice supply chain, delivered wholesalers hold the lions' share of the market but contract distribution is a significant, and arguably the largest, route for large chain operators. At the other end of the size spectrum, the cash and carry performs a vital role mainly for independent operators.

The outlook for food wholesale and distribution is promising as long as consumers continue to purchase processed, frozen and packaged foods, or eat out, as opposed to producing these products themselves. Indeed, according to recent figures from Mintel, despite some increased demand for locally grown produce, convenience foods are still enjoying by far the strongest growth. This ongoing trend ensures the need for an industry to finance, warehouse and transport to the market billions of pounds worth of goods.

Currently, the distribution market is fragmented, consisting of around 500 independent and group distributors of which a large number are small players - often with a turnover of less that £5 million. To give a sense of scale, in the ‘out of home’ market, (non grocery), this group accounts for over half of all food by value, whilst a couple of major distributors - Brake Brothers and 3663 - have a turnover in excess of £1 billion and account for just under a quarter of the market.

According to the Food and Drink Federation (FDF), however, increased consolidation and a greater concentration in the supply chain are just around the corner, with the larger players expanding more quickly than their smaller competitors – both by organic growth and through acquisition. This pressure coupled with increasingly stringent EU regulations on, for example, traceability of goods, will require many smaller and independent operators to rethink their business processes to improve supply chain efficiency and ensure customer satisfaction.

For many of these businesses, the latter is the most pressing concern in a consolidating market, as customers can easily be enticed away by larger competitors with deep pockets. In this market it is vital to anticipate sales and maximise cross and up-sell opportunities, but this can be a daunting task without the necessary customer data at your fingertips.

Tazaki Foods, Europe’s largest Japanese food distributor is one such company. Established in the UK since 1979, the company cornered a lucrative niche in the market but has since seen many changes in the distribution business and increased competition from other players. In order to secure a competitive advantage, Tazaki Foods invested in new technology, designed to enhance sales effectiveness.

“This is a fast moving business and even though we are a specialist company we compete like everyone else,” explains David Binns, head of sale s and marketing at Tazaki Foods. “We chose VECTA Sales Intelligence technology as it allows us to immediately see when our customers have stopped buying certain lines. We have over 2000 product lines and our old back office system simply couldn’t provide the relevant, timely information needed to support the sales operation.”

VECTA Sales Intelligence technology is specifically designed for sales professionals working in wholesale and distribution. It takes information from existing back office and accounting systems and delivers insight into customer buying patterns, proactively keeping the sales team informed of cross or up sell opportunities or potential problems with drifting sales.

In practice, this may simply mean identifying the products which have highest margins and ensuring that these products are sold alongside basic, low margin stock wherever possible. Or it may be used, as was the case at Tazaki Foods, to identify why a certain product is slow moving and address the problem. In this instance, the product line wasn’t selling quickly because only one customer was still buying it and, armed with this information, Tazaki was able to offer that customer a special deal to shift the stock.

VECTA also incorporates those elements of CRM that are relevant to distributors and resellers such as contact, diary and activity management. The key difference in the Vecta approach, however, is that it does not require the level of investment, both in terms of time and money, as that of traditional CRM or BI solutions. There is no need to build data warehouses and dashboards using toolkits like many BI solutions, and unlike CRM, salespeople don’t have to enter data before they get useful information back, so end user adoption is almost guaranteed.

“This is a customer led market and we need to stay one step ahead of our customers at all times,” says David Binns. “Sales intelligence allows us to do the necessary gap analysis to spot opportunities and threats within our customer base before the competition does.”

The market may be tough but it is also experiencing growth, and it is clear that there are profits to be made by those who understand it. Last year, the amount spent on food and drink out of home grew by 2.6%, and for retail the figure was 4.1%. According to the latest forecasts from Horizons, distributors will be selling an extra £480 million of food a year, to the out of home market alone, by 2007. Success will depend on knowing where this additional spend will come from, and those who understand their customers, what they are buying and why, hold the key to that knowledge.

DATA SOURCES & Statistics from:
Food and Drink Federation/Food From Britain / National Statistics
Optimum Food Service Supply Chain Initiative (OFSCI)
Food and Drink Federation/out of home
TNS Market information.

Key Pressures:

Improving supply chain efficiency.

Overcoming increasingly stringent EU regulations.

Ability to grow sales in a consolidating market.