Brewer's scoop
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Last month Exel Logistics and Bass created Tradeteam, a joint venture which distributes £90m-worth of drinks a year. Unions and subcontractors accused the partnership of calling time on pay and conditions. Were they right to be bitter?
WhenTradeteam was launched in the summer it was heralded as a "momentous" initiative which would revolutionise distribution in the drinks industry.
Exel Logistics and Bass were understandably proud of the joint venture they described as an "unprecedented" concept. Other operators and workers in the drinks distribution sector were less impressed by the £90m-a-year national drinks distribution organisation, which has taken over Bass's distribution and also offers its services to the rest of the sector. There was much talk of Bass workers and haulage subcontractors getting the raw end of the deal, but just over a month after the start of Tradeteam's operation matters appear to have calmed down.
Managing director Mike Parish declares himself "delighted" with Tradeteam's progress. He also has reason to be pleased by the latest comments from the Transport and General Workers Union, and by the tranquillity that has descended on the subcontractors.
The TGWU has certainly changed its tone. Following the Tradeteam launch in August it accused Bass of "dumping" its 2,000 workers on another company without consultation. TGWU drinks industry national secretary Brian Revell also condemned Bass for trying to "achieve by the back door" CO-a-week drivers' pay cuts, after failing to impose such a pay cut earlier in the year.
Union anger has subsided following Tradeteam's assurances that terms and conditions will remain intact and that workers will gain as the Tradeteam operation wins new clients. But Revell is not totally appeased. It is clear that he continues to eye the company with suspicion, watching for the moment Tradeteam management makes any attempt to downgrade wages.
Subcontractors who had voiced fears over their future also appear to have fallen silent following the company's declaration that they will see the advantage as Tradeteam grows. The answer to long-term harmony seems simple. To keep everyone happy—including Bass and Exel's parent company NFCall Tradeteam has to do is find itself a few more clients, According to Parish that should be easy, "The phone hasn't stopped ringing since Tradeteam's announcement," he says, predicting that by next autumn there will be another major customer on the books, possibly even another brewer.
More products
Tradeteam certainly has the capacity to carry more products through its network. About eight million barrels of beer, or around 40 million tonnes, will be delivered for Bass in Tradeteam's first year of operation, but there is scope to "sweat the assets more" by handling volumes several times higher, says Parish.
He points out that the pub distribution market is worth £700m a year, with most of the work handled by the brewers' own organisations and therefore, Parish believes, ripe for exploitation. He estimates that distribution for the rest of the drinks industry is worth another £700m.
Much of this potential business has been generated by the Government's reduction in the ties between brewers and pubs. That effectively freed half of Britain's pubs to deal with more than one brewer, opening the door to distribution companies able to deliver more than one company's products.
City analysts who watch the performance of Stock Exchange-quoted transport companies also believe the Tradeteam concept is the way of the fut. ure, and not just in the brewing sector. According to one, information technology will have far reaching effects. "It is an increasingly important investment for stock control," he explains, "and distribution companies need to be a certain size before it is viable to shell out for IT Large joint ventures are the shape of things to come, albeit slowly, and they will help towards the consolidation of the industry by taking out the smaller players who are unable to afford to compete."
With Parish's own forecasts backed up by the City it will be an embarrassment for Tradeteam if it fails to win business from other brewers and drinks manufacturers.
But the brewing industry has traditionally been a tough one to break into and Tradeteam's public confidence no doubt hides some private caution. Other large companies have found this a more difficult market to crack than first expected. The most recent victim was the Transport Development Group which earlier this year was pushed out of a section of its major contract with Courage (CM1119 April).
Tradeteam could also be hampered by the existence of another entrenched Exel division, which until now has devoted its efforts to promoting the marvels of dedicated distribution arrangements to the drinks industry
Full freedom It appears unlikely that Tradeteam's sales hounds will be allowed full freedom by the NEC huntmaster to chase the ,L12m of drinks haulage already secured by Exel (including a contract with cider producer Bulmers which began at the same time as Tradeteam's public launch).
But brewery customers investigating the possibilities of contracting out their transport could be excused for being confused by seemingly contradictory marketing hype from both Tradeteam and Exel's dedicated unit. Pitted directly against Exel's explanation of the benefits of a dedicated operation is Tradeteam's sales pitch, "Dedicated distribution brings control and sophistication but the next stage is to look at the cost penalty of such an operation," says Tradeteam's Mike Parish. "We plan to keep contwl within a shared user context while retaining the skill of dedicated work."
Whatever difficulties Tradeteam is up against, the pressure is on for its market-busting rhetoric to be quickly converted into results. This necessity is not simply rooted in corporate pride. The balance sheet of its Exel parent is in urgent need of revival Exel has recently undergone another reorganisation in the hope of "managing a rapid recovery in financial performance".
With so much on the line it would seem that the TGWU at least can sit comfortably for the moment. Despite Parish's admission that on the subject of efficiency improvements "the evolution will continue" a head on confrontation—if it ever comes--looks to be some way down his list of priorities.
by Karen Miles
ROLL OUT THE BARRELS