Less than two years ago it looked as though Christian Salvesen’s days as an independent company were rapidly coming to an end. The company, which can trace its root back to 1846, had seen its profit margins (and share price) tumble, the chief executive had gone and potential buyers were circling. It would have been a sad end for one of the great names of the British logistics industry.
Despite all these pressures, the company managed to fend off the predators and find a new chief executive. And, in Stewart Oades it was fortunate to find someone who knew the business well. Oades came from Exel but before that he had spent a number of years in Salvesen’s food division.
Coming back, he says, was an opportunity to take a business “that had under-performed and try to build a new team”.
“Christian Salvesen was a powerful brand but it had lost the habit of growing. The most fundamental thing was the lack of clarity over strategy. It was very operationally (and bottom line) focused but it was not thinking about the customer proposition every day. It had stopped reinventing itself.”
He contrasts that with the situation he had left in Exel which “was full of good operators and delivering a massive pipeline of new business propositions”.
Oades points out that it is important to keep an open mind about new markets and business propositions because over time existing markets become commoditised. “We have got a huge opportunity to create a successful business that meets shareholder expectations.”
So far, he says, a basic strategy has been agreed dividing operations between those that are food-related and those that are transport-related.
The food-related businesses include the food and consumer operation, support services, and food processing. The transport-related businesses include what is still generally known as Swift along with Darfeuille in France and Gerposa in Spain and Portugal. This used to be known as the ‘industrial” business but with the decline in manufacturing in the UK it makes sense to position the business to take advantage of all transport-related opportunities.
Salvesen has been integrating these divisions and moving management of the key accounts on the a European basis.
However, at the same time Oades is decentralising operations. “The business had become quite centralised and I wanted to give managing directors the space to own their own strategies.”
This means the managing directors have to be more entrepreneurial as they have responsibility for growing their businesses and delivering an acceptable bottom line.
The results for the year to 31 March show that the strategy is having an effect with sales up two per cent and pre-tax profit up 18 per cent. While most of the divisions performed well, there are still problems in the UK transport business which slipped to a £1.7m loss.
This first stage of the strategy was put in place very quickly following Oades arrival at Salvesen and he is now moving on to the second stage of the strategy. “We can give it a lot more researched focus after a year.”
Clearly, the UK transport business is the focus of much attention. Historically, it has won most of its business in the automotive sector. Oades wants to maintain the motor industry presence but add business in other sectors. “We need to drive the UK transport business back to an acceptable level of returns and ensure that our customers understand out market proposition,” he says.
He points out that the business is delivering aftermarket products up and down Europe’s high streets so, logically, it would be an excellent vehicle for other retail deliveries.
He argues that the logistics battleground of the future will be transport. There is a whole series of factors, such as fuel costs and congestion, that are contributing to this.
“We have got the scale to give customers cost-effective solutions,” he says pointing out that some 70 per cent of Salvesen’s operations are shared user and that the competitive landscape for non-food retail is different from two to three years ago as the major food retailers have been moving into the market.
Contract wins totalling some £100m over the past year suggest that the strategy is having an effect. For example, its latest win is a five-year contract worth some £45m with Inter Link Foods.
Oades says it is also important to be able to absorb pricing pressure – the secret is to be more productive, he says. The group is doing a lot of work on systems development to achieve this.
Joint ventures also form part of the strategy. Salvesen announced the creation of Holistica in association with APL in December last year. The idea of Holistica is to provide the kind of close link between forwarding and contract logistics that Exel has built its business on over the past few years.
Oades says that one of Salvesen’s specialities has become the creation of industry platforms. The idea is to take over an in-house distribution operation and revamp it to bring in other similar products. He can point to successes with Danone in the food sector and Goodyear in the automotive sector as evidence that this strategy works.
Stewart Oades left school at 16 and went to work for British Steel as a trainee. There he was sponsored to do a degree in business studies. He moved on to SPD, part of Unilever distribution business led by the legendary John Harvey. He was employed in the Carryfast express business when it was sold to its management (it later became part of UPS).
He was then approached to join the Argyll Group which owned Safeway. Oades was taken on to run a new distribution centre at Wakefield. He moved from Wakefield to the head office in Hayes to take on a new supply chain project.
His next move was back into third party sector joining Heron Distribution.
In 1993 he moved to Christian Salvesen as a director in the food division. In 1996, Oades moved on joining NFC (now DHL Exel) where he was responsible for ambient foods later taking on responsibility for all the retail business and European operations.