WaverleyTBS: Overcrowded wholesale market and slim margins responsible for failure

11-Oct-2012 - Last updated on 12-Oct-2012 at 07:41 GMT

An overcrowded wholesale market combined with slim margins were the major reasons for the failure of WaverleyTBS, leading drinks suppliers have claimed.

WaverleyTBS was placed into administration last week with 685 redundancies after Deloitte failed to find a buyer for the business.

Steve Graham, chief executive of the National Drink Distributors, a group of 24 wholesalers said: “For the last couple of years WaverleyTBS has been doing some very silly things with pricing and dragging the pricing down.

There is no doubt about it they just weren’t making enough money.”

“It is a very competitive market and there are some serious costs for a licensed trade wholesaler to operate. We have the distribution costs, sales force, telesales and it costs us to extend credit.”

His view was supported by Arran Heal, managing director, Ooberstock who said: “The industry is over supplied by wholesalers driving high levels of competition and slim margins and the need for differentiation of offer to the retailer.

"In such a mature market when retailer numbers start falling and volumes are depressed by a combination of the wettest summer in 100 years, weak consumer confidence and price increases ahead of inflation – mainly due to government policy – it is not surprising that there are casualties.

“It appears as though Waverley were not in control of their margins, sat on too higher cost base and have exhausted their working capital to make structural changes in attempts to bring that cost base down. Those two things miss timed with market and economic conditions have led to a cash crunch leaving them unable to pay their creditors. Many wholesalers will have a windfall as a result but the underlying structural issues remain.”
Graham predicted some longer term issues for the trade in the wake of the failure.

“I wouldn’t be the first to predict that banks will look at what happened to Waverley and look at the market and say the pub business and the on trade business and wholesale business is a difficult area to trade. In the same way the suppliers, particularly those who give extended credit to Waveley will pull the credit limits in. And that is going to put pressure on our people and anyone else there trading.”