Booker Plc.

views updated

Booker Plc.

85 Buckingham Gate
London SW1E 6PD
United Kingdom
Telephone: +44-171-4115500
Fax: +44-171-411-5555
Web site:

Public Company
Incorporated: 1900 as Booker Brothers, McConnell & Co. Ltd.
Employees: 23,056
Sales: £6.14 billion ($9.49 billion) (1999)
Stock Exchanges: London
Ticker Symbol: U.BOK
NAIC: 42241 General Line Grocery Wholesalers

Booker plc is a leading food wholesaler and distributor in the United Kingdom, operating a network of over 180 cash-and-carry warehouses that serve retailers and caterers rather than end consumers. Though Booker controlled a far broader empire as recently as 1997with substantial agribusiness, food service, fish processing, and literary enterprisesheavy 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. 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 100,000, include independent grocers, convenience stores, and news agents, while the 300,000 caterers that rely on its cash-and-carry warehouses encompass restaurants, pubs, cafes, hotels, nursing homes, as well as independent caterers. The company also awards the annual Booker prize for fiction.

Bookers Founding and Early Enterprises

Bookers history is inextricably linked to Europes 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 regions natural resources. The Booker brothersJosias, George, and Richardwere 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 course of 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 a 1987 essay in Milton Moskowitzs The Global Marketplace, 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. McConnells 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 and 1960s

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.

Campbells hedge-building investments in the United Kingdom, Canada, and central Africa varied widely, from engineering to super-marketing 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 authors 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 Bookers stable.

The Authors venture soon spawned another celebrated aside. According to Bookers 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), which is bestowed upon the best novel published in Britain by a writer from the British Commonwealth. P.H. Newbys Something to Answer For won the first Booker Prize, which has become the most coveted and highly esteemed award in British book publishing. The recipient of the honor receives a cash award, and the status of the prize is so great that novels that are short-listed for the award often see dramatic jumps in sales.

Booker Enters Agribusiness and Food Distribution in the 1970s-80s

Bookers 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 firms acquisitions included poultry breeding operations and fish breeding and processing businesses during this time.

One of the companys first transitional moves came with the 1978 purchase of ten percent of International Basic Economy Corporation (IBEC). IB EC 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 IB ECs 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, Nelsons son, served as chairman of Arbor Acres Farms and on Bookers 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 Bookers business. The company bought W&F Fish Products in 1978, Atlantic Sea Products in 1987, and Marine Harvest International in 1994. By that time, Bookers 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 Britains 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); Cope-man 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 Britains 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.

Company Perspectives:

Bookers food wholesaling business is one of the largest in the U.K., supplying more than 400,000 independent grocers, CTNs, convenience stores, and caterers. Its national network of cash and carry branches now includes many that have extensive specialist departments dedicated to the needs of caterers.

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

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 companys 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.

Bookers 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 companys 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 Bookers 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.

Restructuring 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, Bookers 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 Bookers 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. Bookers agribusiness ventures in the U.S. and the U.K., 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 authors work) were all slated to be sold. 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, Bookers stock price plummeted over 46 percent, lowering the companys 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.

Key Dates:

Booker Brothers & Co. is established.
Booker Brothers, McConnell & Co. Ltd. is formed.
Company makes its first public stock offering.
Guyana wins its independence from Great Britain; this compels Booker to diversify.
Company name shortened to Booker, McConnell Ltd.
The first Booker Prize is awarded.
Booker acquires International Basic Economy Corporation (IBEC).
Company renamed Booker plc.
Booker acquires Marine Harvest International.
Booker commits to focusing on food distribution business.

After pledging that cash-and-carry was to be the companys lifeblood, Rose and new Chairman John Napier instituted a series of measures to boost the divisions 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 Chefs Larder products for caterers offered Booker enhanced margins.

The results of Bookers 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.

Principal Subsidiaries

Booker Belmont Wholesale Limited; Booker Cash & Carry; Booker Cemasce Cash & Carry; Fletcher Smith Limited (65%).

Principal Competitors

ASDA Group Plc; J Sainsbury plc; Safeway plc; Somerfield plc; Tesco plc.

Further Reading

Agatha Christie Helps to Bolster Booker, Financial Times, September 11, 1998.

Bidlake, Suzanne, Booker Boosts Small Stores in Price War, Marketing, January 23, 1992, p. 6.

Booker Buys Aquaculture Firm, Wall Street Journal Europe, October 24, 1994.

Booker Fish Division Finally Goes on the Block, Frozen and Chilled Foods, July 1, 1998.

Booker to Focus on Distribution Business After Strategic Review, AFX News, June 2, 1998.

Bykov, Dimitry, Andrei Nemzer, and Alia Latynina, First Booker Russian Novel Prize Awarded, Current Digest of the Post-Soviet Press, January 13, 1993, p. 16.

Caribbean Sugar: Come Back, Slavemasters, Economist, January 23, 1993, p. 83.

Jarvis, Paul, Booker Chief Confirms Woes; Shares Plunge, Wall Street Journal Europe, November 11, 1998.

, Booker Reaches Financing Deal With Its Banks, Wall Street Journal Europe, April 16, 1999.

Management-Led Team Buys Booker Food Manufacturers, Frozen and Chilled Foods, July 1, 1997.

Moskowitz, Milton, The Global Marketplace, New York: Macmillan Publishing Company, 1987.

Radical Retailer Turning Over a New Leaf at Booker, Financial Times, June 6, 1998.

So Far, So Good, Investors Chronicle, February 12, 1993, 21.

Wray, Richard, Booker Says Chief Executive Bowen Was Asked to Leave, AFX News, March 17, 1998.

April D. Gasbarre

updated by Rebecca Stanfel