BIDCORP’S BERSON ON CONSUMER TRENDS
Bidcorp listed on the JSE at the end of May. Chief executive, Bernard Berson, discusses the food services asset’s success and growth trajectory, as well as how the group manages its various interests so well.
brian Joffe is the embodiment of The Bidvest Group – which reflects his management and business style, his strategic vision and his attitudes. When he announced his impending retirement from the industrial group and the unbundling of its major food services asset, now called Bidcorp, he left Bidcorp in the hands of Bernard Berson, who is very much a person groomed and moulded into “the Bidvest way”.
Berson, an accountant by training, started his working life at the then two-year-old company, Bidvest, in 1990. He left in 1993 when he emigrated to Canada, and he subsequently moved to Australia soon after Bidvest’s 1995 acquisition of a majority share in Australian company Manettas – its first offshore acquisition.
It was not going well, and Joffe asked Berson to have a look at it. Berson came back into the Bidvest fold and it took two years, and a AU$6m loss, before the business was back on track. But once the group had turned it around, established a bit of a track record and gained some confidence, it proceeded with what has become a massive offshore expansion.
Bidcorp, which distributes wholesale frozen and fresh food and related non-food products to the foodservice and catering industry worldwide, was valued at around R100bn when it was unbundled from Bidvest in May. It now has businesses in 30 countries on every continent except North America. South Africa now accounts for just 8% of its profit. There was, therefore, some surprise that Bidcorp listed on the JSE on unbundling.
Berson said Bidcorp is a global business with a global footprint, but it “didn’t make sense to do it [a listing] anywhere else at this point in time. Maybe at a future point in time another listing may be relevant when we need access to capital.”
How soon it may need access to capital is unclear, but its propensity to make acquisitions is undisputed. Despite its rapid growth, there is still some way to go in Bidcorp’s growth trajectory. It will do this through organic growth, acquisitions and “organic acquisitions” – where it sees the opportunity to buy small
Bidcorp, which distributes wholesale frozen and fresh food and related non-food products to the foodservice and catering industry worldwide, was valued at around R100bn when it was unbundled from Bidvest.
built-on businesses that are relatively small, inexpensive and low risk but help build scale, Berson said.
Toggling its numerous interests in multiple areas must be difficult, but Bidcorp sticks to the well-versed Bidvest strategy of identifying good businesses, making sure they fit and then leaving them to get on with it. There is close monitoring, specifically on finances, but there is a decentralised model including the empowerment of heads of businesses to do what they know best.
“The model that works is to understand that each business is different. It is very important that we get the right team for us. The difficulty is making sure we have a cultural fit, and a common vision of where the business could and would go. What we contribute is global knowledge, scale, access to systems and procurement, but they have the knowledge of their own business,” Berson said.
“There is a lot more that is similar about industries than is different. We can see the spectrum.”
In Bidvest’s latest results, for the six months to December, the food services division, or what is now Bidcorp, increased turnover by 14.6% to R68.2bn (more than half of the total group turnover) and trading profit by 22.8% to R2.3bn. Turnover in Australasia fell, but trading profit ticked up nicely while emerging-market turnover was up 9.3% and trading profit up over 20%. In the UK, turnover grew over 27% and trading profit over 37% while in Europe turnover was up over 13% and trading profit 27.5%.
All in all, Bidcorp is producing strong growth, despite no or low inflation in many countries it operates in and varied economic conditions across its operations.
“We did go through a couple of tough years. Europe was pretty tough. We would love to take credit, and this is partly true, but the reality is that the world started getting better about two years ago, and we are in an industry where the macro factors are favourable for our industry.
“It is not the same as buying a house or a car. When things get a little better you go out and eat a bit more and spend a bit more, so we get the impact of that confidence relatively quickly. The impact of low oil prices also had a stimulatory effect on the consumer. We are definitely one of those businesses that benefits from that quickly. People like food and eating out.”
In emerging markets, improvements are being seen across most of its businesses including in Africa, China, Singapore, Chile and the Middle East. Sales and profit fell in Brazil, but were affected not only by a challenging economic environment, but also distribution centre relocation costs. Berson said Bidcorp’s emerging markets businesses are doing fine. “Even in Brazil we are doing okay.”
Unlike many developed markets, emerging-market countries often have fragmented and underdeveloped industries where new entrants have the opportunity to create a base from which to develop the market and grow into a reasonable size business.
Developed markets like North America, on the other hand, have large and established players which create different challenges. Bidcorp is not actively looking for acquisitions in North America, the only continent where it does not have a presence.
Bidcorp’s listing in late May was expected to release value for shareholders. It listed at R270 and closed at R304 on its first day of trade, but has since dropped to R262. Bidvest, following the unbundling, is trading at R132, with a market cap of R44bn, half that of Bidcorp, with a market cap of around R88bn. Bidvest now comprises automotive, financial services, freight, travel, rental, industrial, electrical, office & print and services businesses.
Brian Joffe Former CEO of Bidvest Group