RN April Jim Barry Interview

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The Retail News Interview

Barry Serves Up Stern Warning to Government Jim Barry, MD of Barry Group, pulls no punches in an exclusive interview on what the Government should be doing to help the Irish retail market, the proposed introduction of plain packaging for tobacco products and the continued strong performance of Barry Group.

JIM Barry is one of the strongest voices in the Irish independent grocery sector. His company, Barry Group, has grown to become one of Ireland’s leading wholesalers and distribution companies, supplying over 1,000 customers.

Originally founded in 1955 by Jim’s father, James A. Barry, the company today operates from a state-of-the-art distribution centre in Mallow, where it employs over 240 people. Under Jim’s vision and leadership, Barry Group has developed a huge franchise business, incorporating Costcutter, Carry Out, BuyLo and Quik Pick.

A well-known and respected figure within the trade, as well as a former President of Appeals of the IGBF, Jim is forthright in his views on the issues facing Ireland’s grocery sector and how they can be addressed.

How has Barry Group adapted its business model, given the harsh trading conditions of the last five years?

Barry Group has been continually evolving over the last four to five years. During the last 12 months, we have upgraded our processes in our buying and sales departments, as well as appointing new marketing partners.

These initiatives, plus many more, will greatly improve our service to our customers and support them in improving their offering to our valued consumers. It is vital for all businesses to constantly evolve and focus relentlessly on customers.

Do you think that the Government is doing enough in terms of helping Ireland’s retail grocery market?

I think that the Government has room to improve when it comes to helping the Irish retail industry, especially in the independent sector. I feel that it is reasonable to expect fair competition from larger competitors and not allow crazy behaviour like was experienced last December in the pricing of vegetables that were sold for as little as 5 cent. This made it impossible for honest, decent retailers to compete in the marketplace and to work with local producers. This behaviour should not be allowed by our Government. Larger retailers have, on some occasions, sold alcohol under cost.

This is totally irresponsible to consumers and unjust on retailers and should not be tolerated by our Government.

The independent retail sector has suffered from a lack of banking support. It is incredibly difficult for independent retailers to operate in a market where the banking sector is not properly functioning. This is an area where the Government should have done more.

I believe that the proposed introduction of the JLC on the independent and symbol sectors is totally unreasonable.

This type of thought process is unfair. Small and medium sized retailers cannot be treated in the same manner as multinational companies. The Government needs to be fair on the independent/symbol sectors in their final ruling in this area.

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Costcutter has performed very satisfactorily, according to Jim Barry.

The grocery and FMCG sector is a massive source of employment in Ireland. How do you think employment in this sector could be increased?

If the Government were to address the issues I mentioned in the previous question, I feel it would be of benefit to independent retailers to be more positive about the future. Many retailers are still in ‘cost containment’ mode and it is vital that they move to a more positive place. Ultimately, consumer spending needs to improve for retailers to be in the frame of mind to take on extra staff. It is evident that many retailers want to move on to develop their business but they need to see some evidence of recovery in their area, as well as bank support, which will hopefully lead to business growth and extra jobs.

Have we bottomed out? Are we starting to see a resurgent FMCG market? Why do you think this is?

There are signs of recovery in certain areas like Dublin, Cork and Galway. So in these areas, I believe that business is getting better. However, in many other areas, there are no signs of recovery yet in the independent and symbol sectors.

It is a mixed bag in that, in some areas it has bottomed out but I’m not sure you can say that for all parts of rural Ireland.

How can we improve consumer confidence to ensure Irish consumers start to spend again?

I won’t pretend to have the answer to as to how we restore consumer confidence, but I do feel that we have gone too far where taxation is concerned.

Many Irish people feel they do not see the tangible benefits of their taxes, which I feel has had a major impact on consumer confidence. In many cases, the money left for discretionary

spending is little and this has impacted hugely.

The Government needs to review the impact of the current tax system in the minds of the consumer and explore the impact of a reduction in direct taxation. The amount of disposable income would have a major impact on consumer confidence, which will most

“I feel that it is reasonable to expect fair competition from large business and not allow crazy behaviour like was experienced last December in the pricing of vegetables that were sold for as little as 5 cent. This made it impossible for honest, decent retailers to compete in the marketplace.” likely lead to an increase in spending, which is what we need to kick-start the economy.

The Government should benefit from an increased indirect tax take and could balance the books by adopting a more efficient way to manage spending,

Many small businesses, including grocery retailers, feel they cannot increase staff levels due to the high costs of doing business in Ireland (labour, energy, Local Authority charges etc). What can be done to relieve the burden on retailers, so they can start to hire new staff?

High costs of doing business in Ireland are a major challenge to most small and medium businesses. It is very important to realise that if a small or medium business does not make a reasonable profit, they will lose the confidence of their bank and large creditors, which could possibly put them out of business. The Government has to ensure that the cost base which the business operator doesn’t control is kept in line, in order to safeguard as many as businesses as possible.

In some cases, businesses can control their costs by being more efficient, but costs like rates remain static, regardless of how poorly a business is performing. ‘Upward only’ rent is another major challenge to businesses in these difficult trading times. Energy costs remain a major challenge for most small and medium businesses. The Government needs to ensure that the costs in these areas discussed are fair and affordable and if this balance is not right, not alone will there be further job losses, but there will be further business closures, which will also have an impact on tax take and will further weigh on the already overburdened working tax payer.

The cost of labour, in particular, is extremely high here. The Government’s plans to reintroduce JLC rates have been broadly slammed by the trade. Where do you stand on this issue?

I don’t agree with the reintroduction of JLCs into small and medium sized retail businesses. At this point in time, many small and medium retailers are already finding it very difficult to survive in business, due to difficult trading conditions. Most likely, the introduction of a JLC model will further impact on the already excessive costs of doing business. It is unfair on small and medium businesses to be on the same pay scales as a multinational operator.

The other big costs are rents, with a large proportion of landlords either refusing to engage with tenants on rent reductions or imposing upwardonly rent reviews, and local authority

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The Retail News Interview

The Carry Out off licence group has performed very well over the last number of years, leading to a growth in store numbers of almost 20%.

rates. What do you think can be done to alleviate the burden on retailers?

I think it’s imperative that landlords are approached in a professional manner when a retailer is looking for a rent reduction. The fact of the matter is that a retailer can only afford a certain amount on rent in order to remain profitable. Remember, it is no good to the landlord if a retailer cannot pay the rent.

I feel it is vital that the Government address the ‘upward only’ rent issue because I believe the current model will shut down more businesses. Rates are also an issue.

Many stores have experienced a large drop in turnover over the last five to six years but the ‘rates’ figure has remained similar. A system needs to be developed where a drop in performance in a business leads to a reduction in rates.

There has been a lot of debate on the issue of below cost selling and calls for a Grocery Code of Practice to regulate supplier-retailer relationships. As someone with extensive experience of the grocery trade, do you feel there is a need for a statutory code of practice and an ombudsman? Why? Under-cost selling has been evident in the market for many years. This is a completely immoral and unethical treatment of small and medium sized businesses that most likely do not have the resources to match below cost selling prices. The Christmas market period was an example where vegetables were sold for as little as 5 cents: similar products are now selling for well over a euro. The damage that ensues from this type of activity is an unfair perception that the shop is ripping the consumer off.

There is a claim that the Government want Ireland to be the best country for small and medium sized businesses to do business in.

When you have small and medium businesses operating in the kind of market that we experienced last December, something has to change if

they are to have any chance of success.

All markets need some type of regulation and fair playing field; otherwise, you will be left with a small number of players in the market, which is not good for the consumer in the long term. We don’t want the grocery trade to be like the banking sector.

Lack of competition is not healthy for trade. It is crucial that the Government introduce an environment where any large retailers cannot misuse product pricing to get consumers in store. This stamps out the type of activity we have witnessed in blatant under-cost selling efforts.

“The Government needs to review the impact of the current tax system in the minds of the consumer and explore the impact of a reduction in direct taxation. The amount of disposable income would have a major impact on consumer confidence, which will most likely lead to an increase in spending, which is what we need to kick-start the economy.”

Minister Reilly’s proposal to introduce plain packaging for tobacco products in Ireland will probably have many unintended consequences for retailers. How do you think plain packaging will directly impact on the retail trade in Ireland?

Essentially, there is no evidence that this policy actually works, and dissuades anyone from taking up smoking or encourages them to stop.

In Australia, there was a small drop in the value of cigarette sales, which

is likely accounted for by the impact of recession, and the fact that people bought the same volume of cigarettes, only the cheaper varieties. They became less brand loyal when branding played less of a factor: they did not stop smoking!

A major concern is that this initiative plays into the hands of those counterfeiting cigarettes on the black market, and makes it a lot easier for them. It is never wise with an issue like this to facilitate unregulated selling.

Through the proper retail channels, you can manage who buys cigarettes and when, and you can control price and availability. Forcing the market into illegal retail channels is a dangerous move on many levels, not least the lost Government revenue.

Government focus would be best applied to educating children about the dangers of smoking, and putting some funding into sports for young people and leisure amenities and other opportunities. The act of smoking appears cool to bored teenagers with nothing better to do. They are not brand loyal, so the look of the pack has little influence! What they need is proper education on the stark reality of dying young on account of smoking, plus facilities to foster other interests in life, like being cool by being a top sportsperson or musician or computer expert!

Creating a ‘nanny state’ is not the answer: educating people is! Look how effective the stark road safety and drink driving campaigns have been!

Even cigarette price increases have been seen to reduce the amount people smoke, although I am told that just one cigarette a day is too much. Following this line of thinking, medics would advise that food with high salt content, too much sugar, bad fats, artificial colouring etc. should all be plain packaged, so where does it stop?

There is a better solution to addressing the health issues around smoking, and it is not by facilitating supply on the black economy and by doing away with the legitimate retail channels.

What are your thoughts on the slippery slope argument, that it is tobacco today and potentially alcohol tomorrow? Don’t you believe this will cast a lot of doubt on Ireland as a place to do business?

Based on how the Minister has acted on the tobacco issue, nothing would surprise me. I believe there has to be balance in everything we do but I am concerned what the end game might actually be.

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Shelf Life In terms of your own business, how has Barry Group managed to perform so strongly despite the recession?

Barry Group as a company has performed well over the last number of years in what was a most difficult trading environment, mainly down to the hard work and commitment of our team. We are fortunate to have a great team who are open to all the change that was required and as a team we kept ‘upping the bar’ and still continue to do so. We have close relationships with our customers and put a lot of effort into providing the best possible service in all aspects of their business. We put a lot of effort into ensuring that our brands enable our customers to provide a quality service for the consumer at great value for money. This is vital in the current environment.

What does Barry Group offer clients that sets it apart from competitors?

We operate in a very crowded market, where it is so important to have the edge over your competitors. We have a great team who are prepared to go the extra mile for our customers on an ongoing basis. Part of our culture is to do everything possible to ensure that we exceed our customers’ expectations.

We believe that the offering to our customer is very competitive in order to enable them to be competitive and make a fair profit for their efforts.

As a team, we strive to be the best at what we do. This mind-set ensures that we keep challenging both ourselves and our processes to ensure that the offering to our customer is to the very highest of standard. This enables them to give the consumer the service that they deserve. The size of our business enables us to be close to our customer and on the other hand, big enough to buy at great prices to ensure that we give our customers great value.

How has Costcutter performed?

Costcutter has performed in a satisfactory manner, assisting Barry Group to grow its business over a most difficult trading period. We expect our recruitment for this year to be double digit growth over last year.

What about Carry Out? Carry Out has performed very well over the last number of years. The brand extension has worked very strongly, leading to a growth in store numbers of almost 20%. A similar growth is expected this year. This is a true market leader in the industry.

How do you see your business developing over the coming months and years?

I am very excited about the opportunities for Barry Group in the future, due to our ongoing fine tuning of how we run our business. We have just finished our latest upgrade to both the approach and execution of our business plans. We have identified many areas of new opportunity, which we look forward to rolling out over the next 12 months.

Considering the growth of private label in the last few years, can brands be brought back to a position of real strength in the market?

I think that brands will always have a very important place in the Irish grocery market but I do see more growth in private label. This view is held mainly due to the lack of disposable income and the impact of the discounters.

How important is the relationship with retailers to Barry Group?

Barry Group would be of the view that a positive relationship with customers is a vital ingredient to any successful business. We have many programs in place to ensure that the customer is front of mind at all times.

How important is innovation and new product development to the Barry Group?

Innovation is very important for all brands to ensure that they remain current and relevant. We have an ongoing approach to innovation in all aspects of our business.

There are many examples of innovation, from our development of chilled distribution to our range extension of Carry Out to include Carry Out Express, from our many exclusive brands, such as Apple Tree Cider and Mission Sudd wine, to our current focus on the fresh food offering with the Costcutter brand. It is vital to keep innovation at the top of the agenda.

With our new Costcutter chill distribution, the company deployed a team of 12 members for 18 months to develop the project. An investment of over €1m has been injected into the project, delivering a best in class IT system, as well as a host of other supports to ensure the success of the project.

This new retail IT system called BEACON has also been specially developed to support Costcutter’s chill distribution, with the retail software facilitating automated ordering, and giving store owners and managers

Jim Barry: “Barry Group as a company has performed well over the last number of years in what was a most difficult trading environment, mainly down to the hard work and commitment of our team.”

increased business intelligence on sales trends and pricing when placing orders with Barry Group.

You recently announced the launch of a nationwide chilled distribution system. How has this progressed?

We are very pleased with the roll out of our chilled distribution solution.

We are currently almost six months into what is an 18-month roll-out plan. The chilled distribution solution enhances our offering to our customers, increasing our capability in fresh produce, which is a vital part of our strategy to further enhance the Costcutter offering.

The chilled distribution solution is also proving to be a very exciting solution for our many independent retail customers, enabling them to strengthen their fresh offering.

A major benefit from chilled distribution has been our development of an own label offering, which is improving our value perception in this area.

What will it mean for Barry Group and its retailers?

Chilled distribution improves the capability of our customers to satisfy the needs of the consumer, as well as enhancing the value perception of Costcutter. This is a vital element of our strategy in providing value for money with a pleasant shopping experience. For me, chilled distribution is the final piece of the jigsaw.