Restructuring at board level, the threat of a rival buying group moving in on its turf and members facing unpredictable market conditions. It is fair to say that Cedabond has had it all to contend with in the first half of this year. But the foodservice equipment buying group insists it is still delivering profits for its distributors and suppliers. Catering Insight met Cedabond’s financial director Barry Hallam (who also runs JBH Supplies) and secretary Pat Newman to find out more.
For those that aren’t overly familiar with Cedabond, where did it all begin?
PN: Cedabond was founded in 1977 by a number of catering equipment distributors that agreed to come together with the aim of negotiating additional benefits from manufacturers and suppliers, based on their joint purchasing strength. At that time there was a small amount of members. We now have 64 members and they deal with 46 leading suppliers from the industry, with products spanning both heavy and light equipment.
Has the number of suppliers and dealers fluctuated much?
BH: I would say that in the last 10 years we have had a big increase in membership and we are actively seeking new members on a monthly basis. We have taken on seven new members in the last two years, which is the largest amount of new members in that space of time in the history of Cedabond.
If that’s the case, what do you put that down to?
BH: It is down to the face of Cedabond in the market, going out and actively seeking and searching for new members — both members and suppliers — and explaining the benefits that any potential members would incur by becoming a member of Cedabond. Like any business, we rely on growth and obviously the natural way to the market for growth is having both new members and suppliers join the portfolio. We are actively looking to increase that with both parties.
What other highlights have there been over the past year?
BH: Cedabond had a record breaking year in 2011, where we had the largest single monthly remittance by any member, the largest annual remittance by a member and, more importantly, the largest ever monthly payment to our suppliers, which was over 12% higher than the previous record. With all the doom and gloom in the industry I think it was a great achievement to hit so many new records in 2011. In all, it was a very profitable year for both Cedabond and its members. As an annual dividend, Cedabond distributed around £900,000 to its members in May 2012, which is an impressive average of £16,000 to each member. The individual figure obviously depends on what they put in.
Most people see the role of a buying group as being all about securing lower prices through joint purchasing power. Is it any more sophisticated than that?
BH: It’s the special buying prices, the special deals, promotion material — there is an overall package of benefits that you get from being a member of Cedabond. Obviously the financial benefit is probably most people’s incentive to become a member. When I joined Cedabond my profit margin increased considerably by the extra discounts that I was attaining, but even more so because of the rebates that I was getting yearly. Becoming a member increased our discounts beyond our normal discount structure from the suppliers and, at the same time, gave us a handsome yearly retro rebate. Through the 15 years or so that we have been members of Cedabond our rebate has increased considerably from when we joined. Cedabond has always marketed itself as a business- growing consortium.
So what would you cite as the main benefits of becoming a Cedabond member?
PN: Monthly and annual rebates; preferential trading agreements with suppliers — which are negotiated on behalf of all the members — one easy payment that covers all the suppliers; access to exclusive discounts; and offers from suppliers that are only available to Cedabond members. Members also have access to a bespoke online marketing system, while networking events and yearly regional business meetings are held which provide an opportunity to discuss new initiatives and ensure that members’ voices are heard. On top of that they also obviously have the support of Cedabond as and when required.
There have been some high-profile personnel changes at Cedabond this year, including the departure of chairman Garry Smart. How much turbulence has the organisation faced?
BH: Garry Smart had to leave the position as our chairman due to work commitments within [his company] Cater Wight. We have taken one step backwards but we have already come forward since his departure quite substantially, which leads onto the new [executive director] position that is currently available.
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So what is the current structure of the board at this point in time?
BH: Currently we have Clive Groom [CNG Foodservice Equipment] as the acting CEO and then there is myself and Mike Nunn [Dentons Catering Equipment]. There is obviously also Pat as secretary and Gordon Murphy, our executive officer. We meet once a month, every month, throughout the year, so there is ongoing dialogue. Myself, Pat and Gordon talk every day. Because it is such a large organisation it is necessary that we communicate regularly.
Given the changes that have occurred at Cedabond, how much attention do you pay to the way in which the group is perceived in the market?
BH: Well, it is like anything, Cedabond is a business and if we don’t adapt to the market changes then we might get left behind. We need to develop and evolve like any business, and maximise our retro rebates to deliver higher profits for members at the end of the year.
There is the prospect of a new buying group called ENSE entering the UK catering equipment market this year. What is your reaction to that?
BH: Cedabond is, as far as we are concerned at the moment, the UK market leader as a buying consortium within the catering industry. There is the potential of ENSE coming into the country but it has different views, different ideas and a different business model to Cedabond in that it would not actually be giving a dividend to its members, whereas throughout the last 30 to 35 years Cedabond has divided a substantial financial reward between each member. At the same time, we have always given our members the best buying price that is available on the market from certain suppliers.
Are you concerned that some of your dealer members might leave Cedabond to join ENSE?
BH: It is like anywhere given the financial climate, if we were to lose members or lose suppliers then, yes, we obviously would be concerned. But, at the same time, if we lose members we are actively going to be seeking new members too.
What are you doing to develop additional value for members?
BH: Obviously with the changes that have happened on the board recently, we are now actively seeking an executive director [at the time of speaking]. The role of the executive director will be to promote Cedabond to both distributors, new and old, and suppliers, new and old. We also obviously want to achieve natural growth with the existing database of membership that we have by promoting the suppliers and their products through e-shots, special discounts and monthly promotions.
How do you deliver value to your supplier members?
BH: The value to the suppliers is one regular, monthly payment from 64 members and increased sales through the membership, which increases their exposure to the end-user. We have 64 members which may each have the potential for up to 1,000 customers, so the potential for every supplier is endless.
What criteria does Cedabond use to measure its success?
PN: We measure our success on growth, which includes natural growth through our membership and growth through potential new members and suppliers. More importantly, we measure it on the percentage of profit that we are able to redistribute to our members.
Do you see the demands of your members changing, particularly in light of the competitive market conditions they face these days?
PN: It is very difficult to say because we are dealing with a cross-section of companies. We are dealing with very small companies and very large companies, and everyone has their own needs, which we try to accommodate. We have smaller members within Cedabond that offer the one-stop-shop, we have larger members that do contracts only, and we have a large core of members in the midrange that can offer anything from crockery, cookware and utensils to kitchen equipment and fully fledged kitchen schemes.
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How does Cedabond work?
Cedabond is a buying and marketing consortium that utilises the collective bargaining power of its distributor members to secure favourable annual trading agreements with suppliers. Dealers only have to make one monthly payment through Cedabond’s central payments system for the products they have purchased through those agreements, preventing any extra burden on the accounts departments of members.
Suppliers, meanwhile, receive one monthly payment on behalf of all members on the seventh day of each month, which is designed to make invoice processing and collection simple.
While payments are processed centrally through Cedabond, the daily responsibility for ordering and supplying of product remains between the supplier and each member, which is a key component of the system.
“This means that members are doing what they normally do, but they pay through us on a predetermined date, once a month,” says Barry Hallam, financial director of Cedabond. “The Cedabond slogan is ‘Partnership for Profit’ and that applies to both distributors and suppliers. As the members increase their profit, the suppliers will increase their profit because the natural growth of equipment would give the suppliers more profit.”
Every year, Cedabond returns a dividend to distributors based on the profits that have been generated throughout the previous 12 months. This year it delivered an average rebate for the 2011 period of £16,000 to each member, with some earning more than £50,000.
Membership costs and criteria
Membership to Cedabond entails an up-front payment of £100, which represents the ‘shareholding’ in the group and is repayable in the future should a member leave. Cedabond also charges a one-off joining fee of £1,500, although there is a reduction on this figure for companies that are members of CEDA. The fee is not required in advance, however, but deducted from dividends achieved by the member in the first two years of membership.
Barry Hallam, financial director of Cedabond, says dealers are carefully vetted prior to joining the group and must adhere to its Charter of Standards and Service. “First and foremost is the financial stability of the company,” he says. “Secondly, we look at things like the availability of sales people on the road and the number of technical people. The company needs to be a recommended or recognised catering equipment distributor.”
Hallam insists that despite the difficult economic climate of the last few years, Cedabond has “consistently” performed ahead of the industry trend. “Cedabond has been the leading industry buying consortium for over 30 years and remains so. It has every intention of not only maintaining that but strengthening that in the months and years ahead.”
For more details on Cedabond membership, dealers and suppliers can visit: www.cedabond.co.uk
A-Z of Cedabond suppliers
Advanced Hygienic Contracting
Amerex Fire International
ARC International Tableware
Boss Contract Furniture
Carrick Leathergoods Co.
Craven & Company
Distributor Supplies (UK)
East Anglian Installation Systems (EAIS)
First Choice Catering Spares
Gilberts Food Equipment
Linda Lewis Kitchens
MCS Technical Products
Martin Luck Group
Metcalfe Catering Equipment
Mitchell & Cooper
P & L Systems
Parry Catering Equipment
Paul Swolf Sales Co.
RB Distributors/Uropa Distribution
Robert Scott & Sons
SJH Row & Sons
Standex Food Service Equipment
Zodiac Stainless Products Co.