Blackpool-based distributor Caterware has an unashamedly ‘old-fashioned’ business philosophy, according to MD, Mark Drazen. “Businesses aren’t just making money, they are about creating an asset,” he said.
And with the firm entering its fourth decade last year, he believes: “One of the reasons we have been around for 40 years is we have put profits back into the business. We bought our own building, we don’t have any long term borrowings and we hardly have any short term borrowings.
“We work within our own capital and as a result, that is why when there is a bad period, we can get through it. Our ability to adapt and learn from our mistakes has ensured we have lasted for 40 years.”
The dealer has been hovering at around £6m-£6.5m turnover for some years and it is exactly this financial stability that Drazen believes makes it so attractive to the industry. “We have noted that in periods of recession, when there were a few of us distributors going after projects, certain manufacturers came to us with extra discounts to try and land those projects, purely on the basis that we were the only ones tendering for the project that they could get credit insurance for. It was in their interest for the business to go through us because they knew they would get paid.”
“We show nearly £2m of assets on the balance sheet and if we ever need to borrow money, it’s there.”
The overarching business strategy is: “We don’t want to be the biggest, we want to be the best at what we do,” revealed Drazen. “We’ve never really been a company that chases tenders; we establish long lasting trading and commercial relationships with key customers, becoming a part of their business.
“There are two types of selling you can do: fishing and trawling. Big companies tend to trawl, throwing their net out there to catch anything and everything. We tend to fish – we look at potential customers where we can really fill a need. That means we have got like-minded customers, fewer in number, but we can give all our resources and experience to them.”
Reporting that all Caterware’s business comes from referral and that the business sets out to impress everyone, he believes that last year’s 40th anniversary can back up claims to customers. “We are in a ‘what’s in it for me?’ culture, so when we show how we can give our customers a market edge, being around for 40 years validates the talk. It means we’re not just speaking off the cuff and making promises, but over 40 years we have managed to back those promises up, so at least some of them must actually be true!”
Drazen knows what he is talking about, as he has been with the firm almost since its inception. He was staff member number four, joining Caterware just a couple a years after his father Bernard established it in 1977 in the back of a gas showroom in Thornton-Cleveleys. Starting out performing duties such as warehousing, post and packing, once Drazen passed his driving test his father sent him out on the road with old stock: “In a typically old fashioned method he said ‘Don’t come back until you’ve sold it’,” he recalled.
As his father’s background was in light equipment, working for Sheldon cutlery, a company that eventually became part of Nisbets, Caterware initially focused on the light side of things. “We soon realised that it was the customer connection that meant everything,” said Drazen. “Once you’ve got the customer connection, there were plenty of things you could sell to them.”
This was why, 4 years after he started at the firm, he led the drive into the heavy equipment sphere. Although his father initially disagreed with the move, Drazen reported: “My father went away on holiday and by the time he came back I’d sold £30,000 worth of kit, and all of a sudden he realised the margin was there.”
But Bernard’s misgivings about heavy equipment needing repair came to fruition months later and therefore the company took on a service engineer. “We started marketing ourselves as offering servicing and as a result we were selling even more, which is when we started doing some small schemes,” said Drazen.
Within 3 years Caterware had four engineers and a service manager, and was taking on salespeople and designers to cope with bigger schemes. Beginning with small local cafes, the distributor’s repertoire expanded to pubs and Toby restaurants and even Butlins holiday resorts.
Having bought premises in Queen Street in the centre of Blackpool in the early 1980s, by 1994 the firm had outgrown it, as it had to take three other warehouse spaces around town, causing a bit of a logistical nightmare. Therefore Caterware made its biggest investment to date, buying its current building from virtually new in the Little Marton area of town.
The distributor converted the divided premises back into a single unit and installed a well-stocked showroom. Now boasting a 14,000ft2 warehouse, the new headquarters meant that the dealer could keep bulk selling light and heavy equipment items in stock onsite. “It also acts as a warehouse for collating products before we deliver them onto large schemes,” said Drazen.
He feels that this makes the company efficient, as it doesn’t have to hire in warehouse space, and as it has two delivery vehicles too, it doesn’t need to pay carriers for most deliveries either. Also in the company’s fleet are 12 service vehicles, plus it provides the relatively rare perk of company cars for its staff.
Nowadays Caterware’s project coverage is national, with Drazen reporting it actually does more business in London than the north west. Logistically this is fairly straightforward for its team, who are only just over 2 hours away from the capital by train. “We went where our customers took us to and if they were opening restaurants in the south east or Scotland, that’s where we went,” he said.
Historically the company’s work mainstay has been high street restaurants. “We tend to pick them up when they are small and grow them until around 50 site size and then the money men take over and the projects aren’t about value-add any more,” commented Drazen.
Comptoir Libanais, Carluccio’s and Homeslice are a few of the major names Caterware has worked with. However, its customer profile has changed over the past year or two, with the recent downturn in chain restaurant fortunes. Chain hotel business has gone some way towards filling any gaps in the orderbook though, with Crowne Plaza, Marriot, Hilton, Indigo and Holiday Inn some of the big brands currently investing.
Drazen was also keen to emphasise that Caterware still takes on small projects such as cafes and colleges, though he reported the education sector work has virtually stopped due to lack of government funding. However, he analysed: “We have noticed a massive surge in independent restaurants coming up with new concepts, wanting to invest in proper projects and finding prime sites in the middle of major cities.”
Schemes, contracts and heavy equipment sales still account for around 65% of business, with 20% from the service department and the remaining 15% from light equipment, sundries and one-off sales.
To ensure that the dealer’s customers get quality kit, Caterware has built up long term supplier relationships. “Over the 40 years we have worked out which ones we can and can’t work with,” revealed Drazen. “That’s not just from a product reliability basis, but also taking into account commercial aspects. We like to work with suppliers who don’t have large sales teams and are reliant on manufacturing good products, companies that need to have people like us to find customers for them.”
Employee numbers at the firm are around 28 now, despite rarely actively recruiting, as Drazen explained: “We have met people that even if we didn’t need them at the time we know they’ll come in useful so we take them on and they develop their own niches.
“We’ve got a steady income stream and because of that we have the ability to retain the right people. Some people have been here for over 25 years – more have been here for over 10 years than under. We often joke in interviews that this is a job for life and unless we think you have the propensity to stay here for the rest of your career we are not going to take you on.”
One of the key reasons Caterware has such a high retention rate is the training it offers. “We always say that we are keen for people to develop and as long as we’re profitable we will pay for those courses,” said Drazen. “I remember at an old CEDA Conference, delegates were saying even then that the biggest problem is we train people, put a lot of resources into them and then they leave. One of the speakers, business guru Sir John Harvey Jones, said ‘What’s worse is if you don’t train them and they stay’.”
As for his own career progression, he hinted: “I’m currently 56 and in a few years’ time I’ve probably got to start to think about what I am going to be doing when I’m 66, and the best way forward for the company. If I think at that time the best way is to take it into a larger organisation then so be it. I’m not one of those that believes you have to stand there and be independent: you have got to do what’s best for the business and what’s best for you.”
And looking ahead at Caterware’s direction, he further surmised: “We are still interested in steady growth and looking for a similar type of business to what we have now. The size we have been over the last 10 years, we fit into that bracket of big enough to cope and compete, and small enough to care.”
While high street restaurants were typically the keystones of Caterware’s clients, it was starting to work with Manchester City Football Club in 2008 that pushed the distributor into the stadia and arenas sphere to a significant degree. The main £2m outfit took place in 2013 and off the back of that, the firm also won a scheme at Watford Football Club, installing new executive lounges, a main kitchen and all food kiosks.
The high end pedigree is also evident in the dealer’s restaurant work, such as the Street XO outfit it undertook for the youngest three Michelin star chef in the world, David Munez. Two years ago, Caterware completed the project in upscale Mayfair, London, installing a 15metre-long bespoke cooking suite.
Meanwhile, it is also finding a rich vein of work in the hotel chains sector. Among these is a major £500,000 project it has just finished for Crowne Plaza in Manchester, which was an unusual scheme as the top six storeys of the 10-storey building are taken up by sister aparthotel brand, Staybridge Suites. Linked to Manchester Business School, the venue has to cope with both short and long-staying guests and delegates.
The project scope took in designing the main restaurant, which doubles up as production kitchen, plus a banqueting kitchen for 400 covers, an executive lounge kitchen, and various break-out areas for the business school itself.
According to Caterware MD Mark Drazen: “There were so many parties involved that the conflict of interest was probably the biggest project constraint. We revised and adapted the design many times over the 18 months we worked on the scheme.”
Currently the distributor is helping to develop the second Wood restaurant, owned by Masterchef winner Simon Wood, which is to open within Hotel Indigo in Chester next year. The £250,000 project will involve adapting the hotel’s kitchen to be able to offer hot breakfast and room service.
Caterware MD Mark Drazen is very forthright when it comes to his opinion on how the UK catering equipment industry has progressed in recent years. “It’s definitely gone in two directions: one-off internet type purchasing, and value added scheme work,” he said.
Acknowledging that in the first years of the internet explosion his own company had a difficult time, he revealed that: “Over the last 5-6 years customers won’t go to the internet to buy equipment because they have developed an understanding of what value we add. If anything, the internet has made them appreciate us. They accept that there has to be a premium paid over and above internet prices for what we do.”
However, he advised fellow distributors: “What we do, as far as a client is concerned, is the easy bit – opening a restaurant. The hard part for them is running it and making a profit out of it. So when a customer says they have to make a return on investment and that’s why they’ve got to reduce the cost, they’ve got a good point.
“They’ve done their sums, and we should be pleased that they are, because it shows they are thinking about their business and behaving in a responsible manner. They have worked out the maximum amount they can afford to spend and we have to respect and accept it.”
He added: “I always say I love customers who argue over every penny, because you know they have every intention of paying you. When price isn’t a problem and they don’t argue about it, it could be because they have exhausted their existing credit lines and they think you’re the only one that’s going to give them any credit.”
In terms of future industry direction, Drazen believes that dealers will have to find more ways to add value, while the internet market will also grow. An element he previously mentioned during a panel session at last year’s Commercial Kitchen was the evolution of the ‘super distributor’. “I can see potentially within 5-10 years there will be super distributors created by mergers and acquisitions. They could maybe buy fabricators or import products on a larger scale, develop their own brands and have large contract and project management sides,” he believes.
He can foresee these behemoths splitting their businesses in different ways, with separate divisions for projects, internet sales, after service and light equipment. However, he feels: “I don’t think any one company in the industry will develop a big market share, the pond is too big and diverse.”
Drazen further suggested that another recession may be heading this way. “Our industry is always 12 months behind the issue. Around 12 months ago, our major customers stopped looking at as many new sites, but they did not cancel their active negotiations. By the same token, when it ends and they start looking again it probably takes them another 12 months to find the sites.”