How C&C Group has put Matthew Clark and Bibendum back together again

By Richard Siddle

It’s just over a year ago since the C&C Group stepped in like the PLC equivalent of a knight on a shiny white horse to save what remained of two of the UK’s most important national drinks distributors, Matthew Clark and Bibendum PLB, from the corpse of what had been Conviviality PLC.

The fall from grace of Conviviality was as spectacular as it was unexpected. One minute the darling of the UK drinks industry, winning plaudits from producers, suppliers, operators and City  analysts alike.

The next it was having its insides ripped apart and dissected all over the financial press as investors ran for the hills, its suppliers risked losing thousands of pounds in unpaid bills and customers were left high and dry with no orders, deliveries or drinks to sell.

Quite what went wrong at Conviviality has been largely brushed under the carpet, but wrong it did. But what made its collapse such big news not just in the UK, but all around the world, was how far its influence went.

Producers, wineries and drinks brand owners the world over faced major losses as wine was stuck lost in the Conviviality supply chain.

That is until C&C, the Irish-based global drinks distributor and producer, responsible for big name brands such as Magners, Bulmers, Tennents, came in and not only rescued Matthew Clark and Bibendum, but also set about making sure everyone caught up in the Conviviality collapse had their debts and bills paid.

It’s certainly not been easy. In C&C’s lastest annual report, chief executive, Stephen Glancey admits “the last 12 months has been very intense for all involved”.

It also shows that whilst it bought Bibendum and Matthew Clark for the nominal sum of £1, it has spent £76m, to date, in turning them around.

Its annual report goes into more detail and says the company “assumed a portion of outstanding bank debt (€116.5m)” a “collection risk on €196.2m of customer and other debts and €274.3m of supplier and other liability, including an outstanding tax liability of €35m to the UK Exchequer”. It also “took ownership of €61.2m of stock and €4.3m of other associated tangible assets.” So, in reality, a bit more than £1.

Turnaround strategy

The immediate challenges were clear. The basics of drinks distribution and getting the right products to the right customers at the right time had fallen off the cliff in the last months at Conviviality.

As Glancey explains in C&C’s annual report: “There had been a complete breakdown in financial control triggered by a flawed IT integration project. The most basic accounting reconciliations had not been performed for some time. We also had to agree repayment plans with thousands of suppliers and ensure that cash flow controls were restored.”

It’s particularly interesting to see how C&C regarded Bibendum and Matthew Clark when it took them over: “They had been operating under severe financial and operational stress for an extended period and stock availability, customer service levels, supplier relations and financial controls were in our view significantly below the appropriate level.”

The good news now for the respective management teams at Bibendum and Matthew Clark is that C&C now regards them as having “made excellent progress in stabilising these businesses, with operational performance and customer service now fully restored”.

Noticeably C&C did not look to bring in outsiders to put the businesses back on track. Instead it went back to the individuals that had made Bibendum and Matthew Clark attractive enough companies for Conviviality PLC to want to buy in the first place.

Which meant inviting and bringing back Michael Saunders and Steve Thomson as the chief executive and excutive chairman respectively at Bibendum PLB and Matthew Clark.

Right time, right place

It was very much the right opportunity at the right time for both parties. For C&C, Saunders was seen as the perfect management solution with the right “industry experience” and “knowledge” to “restore confidence with employees, customers and our partner suppliers,” according to chief executive, Stephen Glancey.

For Saunders the call to return could not have better timed. Even in the short months he was out of work he realised how much he missed the day-to-day of management and leading a team. It’s certainly uplifting to hear him describe his time back at Bibendum as “being the most rewarding 12 months of his career”.

But crucially for an overall UK drinks distribution sector that notoriously operates on threadbare profitability, C&C has put all the emphasis on the Bibendum and Matthew Clark turnaround strategy on driving “margin expansion”. Delivered, it states in its annual report, through “simplification and optimisation programmes” that “deliver unrivalled portfolio strength, value and service”.

As Glancey explains: “A cross business project team was established and activity was divided into three quite distinct phases. The first through to Christmas was stabilisation of service control and supply. The second, which we entered this calendar year, is seeking to simplify the organisations to somewhere near where they used to be. The final phase is themed around optimisation which will seek to secure synergies both in revenue and cost.”

Which shifting through the management speak essentially means getting back to the basics of drinks distribution. Giving your customers the right products at the right time at a price that drives margin and profitability for both.

The C&C factor

Behind all this is the C&C factor. Yes, it is another PLC, but it is a very different beast to Conviviality. This is a PLC that brings strength, security and profitability to the table. And then some.

Having the power and solidity of C&C behind it, which also just happens to be the UK and Ireland distribution arm of AB Inbev, the world’s biggest brewer, has also put Bibendum in a completely different place to where it was before.

It has also benefited C&C. For its purchase of both Bibendum PLB and Matthew Clark has, in the words of its chairman, Stuart Gilliland, “transformed C&C into the largest last mile drinks distribution business across the UK and Ireland”. “The drinks distribution platform we have now created across the UK and Ireland gives us unrivalled access into the on-trade drinks channel,” he adds.

For all the suppliers and customers who had been more than just a little shaken and stirred by the fallout from Conviviality, they now had a PLC business to work with that was not only willing, but also capable of paying back all outstanding debt and taxes within nine months of taking over.

With Bibendum and Matthew Clark they now had businesses they could not only work professionally with, but make some money with too. Rather than worry about not being paid or whether their next delivery was going to turn up or not.

Bigger picture and smaller detail

What makes C&C such a potentially good partner for Bibendum and Matthew Clark is that it’s a PLC business that works just as well on the bigger, global picture, but has the ability to drill down and focus on what needs to be done locally as well. Which is what any good drinks distribution business should be all about.

Or as Gilliland explains: “We are a local business at heart, imbedded in the local communities we serve. Our size and proximity to customers and markets allows us to spot opportunities (commercial and strategic) and move quickly and professionally to secure them.”

But still giving Bibendum and Matthew Clark the autonomy and independence to make the majority of their business decisions for themselves.

Saunders says C&C look at him and Steve Thomson as “entrepreneurs” willing and able to control their own respective businesses.

Moving forward

Going forward the C&C board see the PLC’s overall financial strength giving both Bibendum and Matthew Clark a key competitive edge, particularly in terms of how it can re-assure supplier and  customers alike.

As Glancey explains, again in its annual report: “A real issue for many market participants is the availability and cost of credit insurance for product sold to UK retail. A number of high profile business failures has somewhat restricted credit availability particularly for those with high leverage. The strength of the C&C group balance sheet and our cash generative capability we believe will give real longer term competitive advantage.”

Saunders likens customers wanting to work with Bibendum as “a flight to safety” thanks to the security of C&C. “We’re not going to go away. Brexit or no Brexit."

“We also now have a fantastic route to market that no-one else has in the UK because we can cover England, Scotland, Wales, Northern Ireland and Ireland to the extent we can. We are now a very compelling company to do business with, secured by having C&C behind us, which I can’t stress enough.

“Very few businesses in this country are making any money, and they are independent businesses. Bibendum is not making a fortune either, but we have the parentage of a company that is very secure.”

It’s a drum he admits he is quite happy to beat on a regular basis.