Ken McMeikan delivered this year’s Arena Savoy Lecture at the glamorous London venue this week and Produce Business UK was there to hear the Brakes Group CEO discuss a wide range of issues, from Brexit, through the National Living wage to, of course, the imminent takeover of Brakes by US foodservice giant Sysco
Among McMeikan’s roles prior to joining Brakes Group in 2013 were stints as CEO of Tesco in Japan, retail online director at Sainsbury’s and CEO of Greggs Plc. Brakes Group, which currently holds a 21% share of the delivered wholesaling industry in the UK food sector, also claims 6% of the French market and 14% of the Swedish market – it delivers to more than 200,000 customers across Europe every day.
Since McMeikan took the reins the group has undergone a significant internal strategic, infrastructural and management rethink, raising sales by more than £1 billion while investing upwards of £125 million in infrastructure projects in the UK alone, as it prepared itself for sale.
As many readers will know, Brakes Group last year bought produce specialist Fresh Direct to consolidate what McMeikan describes as “the largest national fresh food company in the UK” and it is currently moving towards the end of the process of being purchased outright for a fee of around US$3.1 billion (£2.2 billion) by US giant Sysco. It is expected that deal will be rubber-stamped by July.
McMeikan said that the call from Sysco was a little unexpected when it came, as Brakes was being prepared to go down another investment route. However, he added that Brakes Group had been on Sysco’s radar for seven to eight years, certainly since it took control of Pallas Foods in Ireland in 2009.
“They [Sysco] have a fantastic culture and fantastic values, they know the Brakes business and they wanted a platform for an engine for growth in Europe,” he said. “We have a management team with incredible relationships in Europe and that will remain.
“We haven’t quite done the deal yet, and we will say much more going forward, but there is so much learning that we can bring from America over here. Being part of the Sysco family, I think we will deliver growth to the industry as a whole. Equally, there are learnings that can be translated and taken back over to America from Europe.”
Looking at current trends in the UK and Europe, McMeikan was extremely bullish about future growth potential in foodservice. He predicted that the out-of-home eating market will rapidly rise to represent more than half of all the food purchased in the UK (42% in 2014). He said that people are already eating out more, but spending a little less than they might have in the past, but stressed that quality has risen to become the number one reason for consumers to choose a particular outlet in which to dine.
“Fresh is growing faster than ambient and frozen,” he said. “That trend is set to continue, as we see the emerging trends of food on-the-go, increased demand for ‘authentic’ food from around the world and an increasing demand for locally sourced, fresh and provenance.”
Operators are driving innovation in the marketplace, McMeikan added. “Three years ago, I said I felt that this market was 10-15 years behind what was happening in the US in some areas. Today, that gap is definitely closing, but we still have to go faster as an industry and embrace ecommerce and technology.”
He pointed out that 3.2 billion people around the world are now shopping online and that is expected rise to 7 billion by 2020 and asked the industry whether it is prepared to be part of that fundamental shift in purchasing dynamics.
National Living Wage
A week after the introduction of the National Living Wage (NLW) in the UK, McMeikan told the audience that he supported the principle of giving everyone a fair wage for their work, but that the government made a misjudgement in the way it forced the NLW through. “I don’t think it’s right for the government to legislate for an increase without having first consulted industry and tried to understand the impact on business and some of the unintended consequences of the legislation,” he said.
The new NLW is set at £7.20 an hour, but government has made its intentions clear and wants to raise the bar to £9 an hour by 2020. McMeikan was pretty clear too in suggesting that one of the unintended consequences may eventually be a sharp rise in food prices to counteract the rising costs of production and provision.
He also called on the industry to do more to attract young people into its midst. Analysts believe the sector will need 11,000 new chefs to accommodate the increase in demand by 2020, he said, but the alarming backdrop to that is that more than half of the country’s culinary colleges are undersubscribed and suffering falling numbers.
“As a growth sector, we cannot afford skills and experience gaps,” he said. “That growth could be limited by a lack of people with the relevant skills; we need to invest in careers development and make this a more attractive option for the young. I don’t know what it is that’s stopping young people [entering our industry], but whatever it is we’re not doing enough to attract people. We need to step back and think how we can excite people about the outstanding opportunities that exist in this sector and that we are as exciting and innovative as other industries.”
McMeikan concluded his lecture by urging his industry colleagues to do more to combat the rising obesity issue. Issues like the sugar tax will force the issue, he said, but while people have to accept personal accountability, there also needs to be some collective recognition that the food supply industry can do more.
“We must take a leadership role,” he said. We are experts in food, so we must be able to do something about reducing the amount of sugar and hidden sugar in food. We’ve done the same thing with salts and transfats, so we know we can do it. It’s about doing the right thing – we have the power and the wherewithal to do something positive.”
Brexit or Bremain
When questioned from the floor, he also stated a business preference for the UK to stay in the EU after the referendum in June. “It’s finely balanced,” he said. “Brakes is a pan-European company and the uncertainty is really unhelpful. It’s down to the British public to decide, but how do they get the facts they need to make this incredibly significant decision?
“My biggest concern is how financial investors will respond if the UK outside of the EU. But it’s a complete unknown at this point and I’m just pleased it’s not too long before the vote. From Brakes perspective, we want to stay in; it’s better to be able to influence the EU from within than to be on the outside and I don’t think anyone would relish two years of renegotiating all of our trade relationships.”