Booker Cash & Carry Ltd. Business Information, Profile, and History

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History of Booker Cash & Carry Ltd.

Booker Cash & Carry Ltd. is a leading food wholesaler and distributor in the United Kingdom, operating a network of 173 cash-and-carry branches that serve retailers and caterers rather than end consumers. Though Booker controlled a far broader empire as recently as 1997--with substantial agribusiness, food service, fish processing, and literary enterprises--heavy debt and decreasing profits compelled the company to shed most of these other businesses. Leaner and more focused, Booker committed to bolstering its food distributing division in 1998. In 2000, the parent company, Booker plc, was acquired by Iceland Group, which was renamed The Big Food Group plc. With more than a 35 percent share of the industry in the United Kingdom, Booker provides a key link between independent retailers and caterers and the manufacturing sector. Its retail customers, who number over 400,000, include independent grocers, convenience stores, and news agents, while the more than 20,000 caterers that rely on its cash-and-carry warehouses encompass restaurants, pubs, cafes, hotels, nursing homes, as well as independent caterers.

Booker's Founding and Early Enterprises

Booker's history is inextricably linked to Europe's imperialist past. When the Congress of Vienna divided the northeast coast of South America among Great Britain, the Netherlands, and France in 1815, enterprising merchants from those countries moved quickly to exploit the region's natural resources. The Booker brothers--Josias, George, and Richard--were among these entrepreneurs. Josias was first to make the trip overseas. He arrived in the British colony of Demerara (later British Guyana) in 1815 and obtained employment as a manager of a cotton plantation. Over the next two decades, Josias and his brothers set up several merchant trading houses in Liverpool in anticipation of a flourishing sugar and rum trade. They capped their preparatory activities with the 1834 establishment of Booker Brothers & Co. in British Guyana and the acquisition of their first transport ship the following year. After Richard Booker died in 1838, Josias and George consolidated vertically, purchasing sugar plantations throughout British Guyana.

As is often the case in family firms, generational changes precipitated a dramatic transformation of Booker Brothers. In 1854, Josias Booker II (eldest son of Josias I) and John McConnell (who had worked as a clerk for the Bookers since 1846) created a separate new partnership called the Demerara Company. Upon the deaths of Josias I and George in 1865 and 1866, respectively, Josias II and John McConnell assumed control of all the Booker properties, including the sugar plantations and trading companies in Britain and South America. According to Milton Moskowitz's The Global Marketplace (1987), the new generation "became the principal shopkeepers of the colony," building a formidable trade during the late 19th century. Their "Liverpool Line," established in 1887, became one of the top shipping links between South America and Europe.

After Josias II died in the early 1880s, John McConnell inherited control of Booker Bros. & Co., George Booker & Co., and his own John McConnell & Co. McConnell's sons, A.J. and F.V., took possession of the three businesses in 1890 and merged them in 1900 as Booker Brothers, McConnell & Co. Ltd. Guyanan operations had by this time expanded to include sales of food and general merchandise at the retail and wholesale levels.

The company prospered throughout the early 20th century by maintaining its concentration on the sugar and rum trade and limiting its acquisition activities to the Caribbean region. Booker McConnell made its first public stock offering in 1920 and was listed on the London Stock Exchange that same year. (The company name was shortened to Booker, McConnell Ltd. in 1968; in 1986 it would be renamed Booker plc.)

Booker Diversifies in the 1950s-60s

Political unrest in Guyana during the early 1950s prompted John "Jock" Campbell, chairman of Booker from 1952 to 1967, to diversify both geographically and commercially. Diversification became imperative after Guyana won its independence from Great Britain in 1966 and elected a communist government. Booker was eventually compelled to sell its sugar plantations and other businesses in that country to the government. Ironically, Guyanan and other Caribbean officials asked Booker and other British sugar moguls to help manage their struggling operations in the early 1990s. Their request for management advice prompted the formation of Booker Tate, a joint venture with Tate & Lyle, in the early 1990s.

Campbell's "hedge-building" investments in the United Kingdom, Canada, and Central Africa varied widely, from engineering to supermarketing to agricultural consulting. One of the most unusual diversifications made during this era was a division the company called "Authors." This highly unusual sideline developed after the discovery of a loophole in the British tax code that allowed the conglomerate to purchase an author's copyrights, pay him or her a fat fee partly at the expense of the taxpayer, and then collect the royalties. Agatha Christie and Ian Fleming were just two of the bestselling authors in Booker's stable.

The Authors venture soon spawned another celebrated aside. According to Booker's 1994 annual report, Fleming suggested to Campbell over a game of golf that the company pump some of the millions it was earning on the backs of writers back into the literary community. Although Booker was reluctant to give the creator of the James Bond character full credit for the idea, his suggestion influenced the 1969 presentation of the first Booker McConnell Prize for Fiction (now the Booker Prize), bestowed upon the best novel published in Britain by a writer from the British Commonwealth. P.H. Newby's Something to Answer For won the first Booker Prize, which became the most coveted and highly esteemed award in British book publishing. The recipient of the honor received a cash award, and the status of the prize was so great that short-listed novels often saw dramatic jumps in sales.

Agribusiness and Food Distribution in the 1970s-80s

Booker's business focus shifted in the late 1970s and early 1980s. The company divested itself of its money-losing engineering interests, sold its last remaining import/export subsidiary, and made several acquisitions in agribusiness and food distribution. Perhaps anticipating increasing demand for low-fat, relatively low-cost sources of protein, the firm's acquisitions included poultry breeding operations and fish breeding and processing businesses during this time.

One of the company's first transitional moves came with the 1978 purchase of 10 percent of International Basic Economy Corporation (IBEC). IBEC had been founded by Nelson Rockefeller and his brothers in 1947 in the hopes of profitably boosting developing countries' economies. Arbor Acres, an American producer of broiler breeder stock that had been operating since before World War II, became part of the IBEC in 1959. Arbor Acres hoped to expand its chicken breeding network from the United States to Latin America, Europe, the Middle East, and Asia. However, when IBEC's sales dropped precipitously in the late 1970s, the Rockefellers elected to liquidate. Booker helped that process along, increasing its share of IBEC to 45 percent in 1980 and a majority interest by 1985. Rodman C. Rockefeller, Nelson Rockefeller's son, served as chairman of Arbor Acres Farms and on Booker's board of directors into the early 1990s.

Infrequent acquisitions of fish breeders and processors in the late 1970s, 1980s, and early 1990s slowly evolved into a significant sector of Booker's business. The company bought W&F Fish Products in 1978, Atlantic Sea Products in 1987, and Marine Harvest International in 1994. By that time, Booker's annual report boasted that it was the largest specialist seafood group in the United Kingdom.

Booker also invested heavily in health foods during the 1980s. The company made at least four acquisitions in this industry in 1986 alone and continued its buying spree in ensuing years. Health food holdings during this period included Britain's largest health food chain, Holland & Barrett; La Vie Claire, a prominent health food company in France; vitamin and nutritional supplement manufacturers in the United States and Great Britain; and several organic food producers.

During the last half of the 1980s, Booker acquired several wholesale food distributors, including E.C. Steed (1986), Copeman Ridley (1987), J. Evershed & Son (1988), Linfood Cash & Carry (1988), and County Catering Co. (1988). By the end of the decade, the company had amassed Britain's largest food wholesaling business. Its customers, which numbered in the hundreds of thousands, included independent grocers, convenience stores, and caterers. It was around this time that the company shifted its business strategy to concentrate primarily on food wholesaling and distribution to the catering trade. Booker sealed its leading position in that industry with the 1990 acquisition of Fitch Lovell plc, a leading processor and distributor of fish and other food products, for £279.7 million.

In keeping with its new focus, Booker divested several peripheral businesses during this period. In 1986, the company sold its chain of Budgen convenience stores, which had been purchased during the 1950s-era diversification. The French health food interests were divested in 1989, and those in the United Kingdom were sold in 1990 and 1991.

Booker purchased the balance of Arbor Acres' equity (10 percent) from the Rockefellers in 1991 for $22 million. Under its new management, Arbor Acres had grown to become the world's largest broiler breeding company, with customers in over 70 countries worldwide. It had emerged as the cornerstone of Booker's American agribusiness division, which also included North America's leading turkey breeder, Nicholas Turkey Breeding Farms, and CWT Farms International Inc., a producer of broiler hatching eggs.

Restructuring in the Early 1990s

Booker adjusted its organizational structure in the early 1990s by establishing four primary divisions: food distribution, which included wholesaling and food service; food processing, which incorporated operations producing fish and prepared foods; U.S. agribusiness, comprised of the poultry breeding operations; and U.K. agribusiness, which included salmon farming, plant breeding, sugar industry services, and forestry. Food distribution contributed about half of the company's net income in the early 1990s, while the international agribusiness and fish processing chipped in about 20 percent each.

Characterized as a "dull but worthy" company, Booker was dragged into the limelight as competition in the British supermarket industry intensified. In 1992, Booker launched its first consumer advertising campaign in support of the "Family Choice" branded products it distributed to thousands of independent grocers. These Booker clients were experiencing increased price competition from deep discounters that had entered the market to take advantage of recession-weary Brits.

Booker's sales increased steadily in the early 1990s, from £2.93 billion in 1990 to £3.72 billion in 1994. Net income increased from £49.9 million in 1990 to £59.7 million in 1993, then declined to £45.8 million in 1994. The company blamed the earnings slide on expenses related to the reorganization of the food wholesaling and food service divisions, as well as the acquisition and rationalization of Marine Harvest International, the Scotland-based salmon farming firm. Predictably, Booker chairman Jonathan Taylor expressed confidence that the company's reorganization would begin to pay increased dividends as Great Britain cycled out of recession in the latter part of the 1990s.

Rather than wait, however, Booker sought to remedy its slump through further acquisitions under the leadership of a new chief executive officer, Charles Bowen. In 1996, Booker purchased Nurdin & Peacock, a chain of wholesale cash and carry stores that greatly expanded Booker's food distribution network. As part of its effort to integrate the new stores, Booker launched an 18-month project to form a centralized distribution center the company named Heartland.

Further Changes in the Late 1990s

Despite these measures, Booker did not emerge from its slump. Saddled by enormous debt and sinking profits, the company sold Booker Prepared Foods group, its food manufacturing division, in July 1997. The enterprise, which supplied major U.K. retailers with a range of prepared food products, was bought by Prize Food Group for £57 million. Despite the revenues this transaction brought Booker, the company reported another net loss for 1997. In a unanimous decision, Booker's board of directors ousted Charles Bowen in March 1998.

Booker thereupon commenced a comprehensive review of its operations, a project which one company executive described to AFX News as "wide ranging and all-embracing." The process was overseen by Booker's newly appointed CEO, Alan Smith, and its chairman, Jonathon Taylor. In June 1998, the company released its findings. Committing to focusing on its food service operations, Booker pledged to rid itself of businesses outside this newly defined core competency. Booker's agribusiness ventures in the United States and the United Kingdom, its fish processing division, Daehnfeldt seeds business, its stake in sugar-related joint ventures, and its interest in Agatha Christie Ltd. (which held the rights to the author's work) were all being sold off. "We have decided that a dedicated food distribution group with a new management structure is the right way forward," Taylor proclaimed to AFX News on June 2, 1998.

Although Booker netted £156 million from initial sales, it was clear by November 1998 that even more cuts were necessary. Stuart Rose, who was named chief executive in October, announced that quarterly earnings were so low that Booker might breach certain covenants with its banks. In response to this announcement, Booker's stock price plummeted over 46 percent, lowering the company's market value by more than £130 million. However, by April 1999 the company had reached an agreement with its creditors. Contemporaneously, as part of an its effort to increase its cash flow, Booker sold Booker Foodservice, Recheio (its Portuguese food wholesaling joint venture), its Spanish cash-and-carry division, and Booker Wholesale Foods.

After pledging that cash-and-carry was to be the company's lifeblood, Rose and new Chairman John Napier instituted a series of measures to boost the division's sales, which had been below expectations in 1998. A sweeping efficiency program led to about 400 job cuts, and the central office strove to improve the appearance, service, and profitability of each branch store. A weekly "BlockBuster" promotion held at various branches was intended to drive sales. In addition to expanding the array of goods available at its stores, Booker committed to expanding its private label brands. Both the "Happy Shopper" line for retailers and the "Chef's Larder" products for caterers offered Booker enhanced margins.

The results of Booker's aggressive reorganizing and pruning could not be immediately determined. Though sales rose in the first months of 1999, company profits were eroded by the cost of restructuring the company. However, Booker remained optimistic about its future. As John Napier told Dow Jones Business News, "We look forward to a significantly better year."

New Ownership, Sharpened Customer Focus after 2000

After divesting numerous subsidiaries, Booker also made an acquisition in 1999. In November, the company paid an estimated £7.4 million to buy a convenience store chain called Trademarket from the Alldays group. Trademarket owned nine locations in Scotland and northern England and had sales of £128 million.

Booker continued to sell off units in 2000 as it sought to focus on its U.K. cash-and-carry business. Divested were the Foodservice Group, Booker Cash & Carry (Malaysia) Sdn. Bhd., Booker Cash & Carry (Thailand), Marine Harvest McConnel, Sezgingler, Arbo Acres, and Fletcher Smith.

Iceland Group plc, a British frozen foods supplier, acquired Booker plc in 2000 for stock worth £373.5 million ($552 million). Booker's distribution system was an asset to the online division Iceland was developing. The e-commerce business seemed to offer Booker growth prospects in the face of hard times for its customer base of independent retailers. Booker plc head Stuart Rose went on to lead the combined company.

The Booker Cash & Carry business continued as a subsidiary of Iceland, which was renamed The Big Food Group plc (BFG) in February 2002. Booker Cash & Carry got a new chairman, George Greener, and managing director, Jerry Johnson, in 2001 (Iceland founder Malcolm Walker had led the company briefly the previous year).

The Booker Prize also had a change in ownership. BFG transferred the award to a charity, which found a new sponsor for it in the Man investment firm. According to the Financial Times, Man agreed to pay £2.5 million over five years; the award was subsequently known as the Man Booker Prize.

Booker also sponsored the Booker Prize for Excellence, a slew of awards in various categories of the catering trade, including Best Restaurant, Best Hotel, Best Ethnic Caterer, Best Pub Caterer, Best Young Catering Business, Best Guesthouse, and Best Young Chef. The winner for each received a £1,000; the Best Young Chef also won a week-long residency with the notoriously demanding Gordon Ramsay. Ramsay had signed on as a consultant with Booker in 2000.

A number of new appointments were made in the marketing department in 2002 as Booker sharpened its focus on customer needs. Booker began testing an online shopping service, which included delivery, at a depot in Wolverhampton in the fall of 2002. This was expanded to 133 of Booker's 173 locations two years later. In addition, the company was expanding its range of Asian grocery items. Booker introduced a loyalty program called Spend and Save in March 2003. Depots were also redesigned to be brighter and more conveniently laid out.

According to The Grocer, Booker was aiming for a 34 percent market share by 2004-05. In 2004, Booker was supplying about 440,000 independent retailers, more than 1,700 bearing Booker's Premier brand, and 22,000 caterers. Booker provided members of the Premier retail club with branded signage and monthly promotions. Turnover was £3.5 billion in the fiscal year ended March 31, 2004, up marginally from fiscal 2003 but just under the results for 2002.

Principal Divisions: Booker Own Brands; Premier.

Principal Competitors: ASDA Group plc; J Sainsbury plc; Safeway plc; Somerfield plc; Tesco plc.

Chronology

• Key Dates:
• 1834: Booker Brothers & Co. is established.
• 1900: Booker Brothers, McConnell & Co. Ltd. is formed.
• 1920: The company makes its first public stock offering.
• 1966: Guyana wins its independence from Great Britain; this forces Booker to diversify.
• 1968: The company name is shortened to Booker, McConnell Ltd.
• 1969: The first Booker Prize is awarded.
• 1978: Booker acquires International Basic Economy Corporation (IBEC).
• 1986: The company is renamed Booker plc.
• 1994: Booker acquires Marine Harvest International.
• 1996: Booker buys rival Nurdin & Peacock.
• 1998: Booker commits to focusing on food distribution business.
• 2000: Booker plc is acquired by Iceland Group, which becomes The Big Food Group plc.