Ed’s view: Tip of the iceberg?

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Last month’s news that the Ali Group has decided to close the Dawson business in the UK and re-distribute its brands through other supply channels was simultaneously a shock but yet not surprising.

With several reorganisations at the supplier over the last few years, and many Ali Group companies in the UK competing for a similar slice of the pie, the writing was on the wall and Dawson fell victim to the crowded marketplace.

But is this just the tip of the iceberg? With Brexit on the horizon it is eminently possible that other European manufacturers will decide that it’s just too much trouble to keep a local UK presence running.

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When the UK can access products from around the globe, it may not make business sense for manufacturers to incur local overheads, providing they can provide effective support from afar. We may even see centralised offices organised by continent rather than country if this factory-only model gains traction.

Furthermore, our departure from the single market could diminish UK plc’s importance in the global standings, while any additional trade tariffs could make products less competitive. Already we are seeing price rises or surcharges from some US foodservice equipment manufacturers and it would not be outside the realms of possibility for European manufacturers to follow suit – and they vastly outnumber their cousins across the pond.

This then begs the question as to how many other manufacturers, suppliers or distributors are at risk? With margins so squeezed throughout much of the catering equipment supply chain, any extra tariffs could push more from the brink to over the edge.

Just last month another web-based dealer, Thames Valley Catering Equipment, succumbed to liquidation – and margin erosion was one of the main reasons cited. Squeezing margins to the bone in order to win projects has been a steadily rising trend over the years and there are bound to be victims to this approach along the way.

Traditionally discounts were seen as an incentive to end users to pay promptly, but when they are increasingly seen as a given, will operators refuse to pay a higher sum if they are taken away? There will surely always be someone there offering lower prices to win the work, and unless anyone wants to incur the wrath of the CMA by artificially inflating prices, this issue is not going to go away.

Gazing into my crystal ball, if the industry continues down this path, I predict that on both the distributor and manufacturer sides of the equation, we could see significant consolidation, resulting in a landscape where only the big boys survive thanks to economies of scale.

But of course I could be way off the mark. Please go and prove me wrong!

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One Comment;

  1. The Oracle said:

    I have been saying this for several years, there are far too many Distributors, wholesalers, importers and manufacturers. It is also abundantly clear that all these cannot survive on the current margins (which are not likely to improve considering the global world being so small nowadays)

    will the big boys win through? YES undoubtedly for lots of reasons including economies of scale and buying power and the ability to own brand.

    Its a matter of time before manufacturers openly break rank and sell directly via their own websites (to protect ehri sales), leaving super dealers, project houses and little else. All of which is not helped by all politicians attitude to small to medium businesses nowadays.

    Profit is seems is a dirty word in more ways than one.

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