There is a kind of perfect storm in the drinks market at the moment, says Jeff Stanton, chairman of logistics provider London City Bond. He explains why times are tough to Lucy Tesseras.
“There is basically too much wine.” As a nation renowned for liking a tipple it’s hard to believe, but that is the view of Jeff Stanton, non-executive chairman of drinks logistics provider London City Bond.
“There is a kind of perfect storm in drinks at the moment,” he says, and as such it has been a tough time for those operating in the market because while bottles might be flying off the supermarket shelves there is now more wine than we know what to do with; “particularly coming from Australia”.
That combined with the fact the pound has taken a nose dive against other currencies, the general recession and the environmental impact of packaging and transport, has made it a tough time for the drinks sector.
“The market place is very competitive,” says Stanton, who joined LCB at the end of 2007, shortly after his departure from rival drinks logistics company Cert Group where he was CEO.
“In our business you have a number of players delivering to the same point on a regular basis and frankly from both an environmental point of view and a cost perspective it doesn’t make sense.
“If one thinks of the drinks industry as a whole there has been huge consolidation among the suppliers of wine and spirits, and among the retailers, but not yet among the logistics providers. My prognosis for five years hence is that there will be fewer players.”
He believes co-operating with competitors, which he calls “co-opertition” will be essential for survival.
“You’d have to be a brave person to say fuel costs are going to reduce, and whereas rents may have stabilised in the recession things like council tax have increased. Energy prices are also expected to rise, so it’s difficult to imagine that costs relative to storage and distribution are going to go down.”
LCB is one of the longest established wine and spirits logistics companies in the UK with nearly one and a half million square feet of bonded warehouse facilities across the country. The company increased its storage capacity by some 40 per cent last year after opening a 270,000 sq ft warehouse in Barking, which has the capacity to hold more than three million cases of stock and handle over ten million cases a year.
“We got to a point at the end of 2007 when we recognised that we needed more space. There are no rubber walls in a warehouse and you can’t keep stuffing product into a given space.”
The economy looked to be in reasonable shape at that point so the company had no qualms in taking on a larger building than it initially anticipated with a view to move some customers over from older sites, as well as winning new business.
“We didn’t know what was about to hit us though,” reflects Stanton, “and with the benefit of hindsight clearly we might not have taken such a big warehouse.” The site is currently 50 per cent full, but if the recession hadn’t hit, Stanton reckons it would be at 75 per cent – well beyond the break-even point.
Nevertheless it has been a busy time for LCB after signing more than 40 contracts in the past year, including a six-year deal worth more than £6 million with wine producer, importer and distributor Boutinot, alongside deals with Adel UK and Latour.
“Our strategy has been to first of all have people involved who understand the customer, because to me what a customer likes is that you understand their business, not just your own.”
LCB may not be the largest player in the sector, but Stanton thinks regardless of size the most important thing is that your customers have trust in your ability. “It’s about having a dialogue. I’ve worked for a number of big logistics companies over the past few years and they may have economy of scale but they don’t have efficiency of decision making and in this business it is much better to be able to deal with the customer and react quickly rather than having to go through half a dozen committees to get a decision.”
Stanton got into logistics primarily by accident. He is a qualified accountant and held a number of financial director roles before setting up his own consultancy and then being headhunted by Cert.
He has worked across many industries over the years, but believes the basic principals of business are very similar regardless of the market. “It’s all about growing a business efficiently, understanding what the customer wants, delivering what the customer wants, looking after them, recognising the changes that are happening around you and proactively changing to accommodate them.
“The key is to not get blinded by the jargon – and in logistics there’s lots of jargon. It’s important to understand the business and know all the facts before trying to make any changes.”
His fundamental philosophy is to question everything. “I think that has held me in good stead over my career,” he says. “Whatever you do you have to question why you’re doing it, constantly consider if there is a better way and if necessary do it differently. If you stick with what you’ve always done then the world will overtake you because things change fast.”
2007 – Joined LCB as non-executive chairman.
March 2007 – Set up Jeff Stanton Associates providing strategic supply chain consultancy to the drinks sector. Clients have included Kuehne+Nagel, Norbert Dentressangle and Cobra Beer.
1994 – 2007 – Joined Cert Group, later becoming chief executive. Stanton left the company after 13 years following a disagreement on future strategy with the owner.
1993 – 1994 – Became divisional director of financial services at consultancy Oasis Group.
1992 – 1993 – Joined the Consolidated Insurance Group as chief operating officer.
1991 – 1992 – At Granada Group, Stanton held a number of roles, latterly managing director – Granada Computer Services UK.
1988 – 1991 – Stanton joined Granada UK Rental and Retail as managing director – financial operations
1982 – 1988 – Joined Dixons Group as finance director of Currys responsible for finance operations including management of insurance and consumer credit operations.