Matthew Clark and the wholesale model
It seems Conviviality were as surprised as anyone by the way things came crashing down and we certainly didn’t see it coming. While it has been a tough time for those involved with Conviviality, it’s no doubt been just as tough on the independent chains and freehouses whose supplies have been cut. Matthew Clark have over 23,000 trade accounts reliant on them for their beer and other drinks – they rarely have buyers to bail them out.
While we greatly respect what Matthew Clark has achieved as a business, we do question their business model and that’s why we have taken a very different route. Many of you will know how Matthew Clark works. Rather than taking a brand-building approach, they are a classic goods wholesaler, with 18 warehouses all over the UK. They are not the importers of their products, instead playing the middle man and relying on huge volumes of mixed products to make their pricing and model work.
Given the lack of exclusivity on their brands, their pricing is often dictated by the large brands they buy from. With high volume targets set by them too, the temptation to offer loss leaders to achieve this volume is high. Immediately you can see that their margin for error must be very small indeed.
Implications go beyond pricing as well. Each of the 250-strong sales team has over 4,000 different products to sell, meaning any focus on particular brands is completely restricted to the bigger volume products. The small, independent breweries that have started to list with them don’t stand a chance of being properly represented or serviced. The customers will lose out too, with less technical, training and marketing support if they chose not to stock the larger brands.
By contrast, we have developed a closed-loop system, importing the beer ourselves before distributing the beer via our own fleet. This cuts out the middle man leaving us to pass on cost and time efficiencies to our customers. All this is based on the work of a small, highly trained (and very beer geeky) team of account managers and marketing experts who sell in a range of high-quality, specialist beers that are by-and-large exclusive to us in the UK. We are not alone in working on this system – there are other fantastic smaller, independent beer merchants out there – and we doubt any are shocked that the macro approach to distribution in a quickly changing industry hasn’t worked out.
That said, we're hugely relieved most of the jobs will be saved and have sympathy with Matthew Clark as a whole. Many of the big drinks brands do not get involved with distribution, instead taking their on-trade business to wholesalers and dictating the margin. This means the wholesaler takes the financial risk, and here it has been their undoing. What will happen under C&C group with AB InBev funding we can’t tell, but it will involve an even greater focus on the large volume brands, which isn’t what the customer wants or deserves.
Beer distribution is messy, unregulated business and as pubs look to improve the quality of the products and service they offer, we passionately believe they are best off working with smaller, independent suppliers who are not reliant on larger players.