Spar wholesaler CJ Lang & Son Ltd has reported an increase in profit but warned of “tough times ahead”.
In the year to 30 April 2022, the business reported a pre-tax profits increase of 10.7% to £3.4m with margin up 0.3% to 23.3% while turnover dipped slightly by 0.1% to £212.3m.
The results have been delivered against the backdrop of an extremely challenging economic climate which continues to drive changes in shopping behaviour. The relaxation of COVID-19 restrictions saw a return to some pre-pandemic shopping behaviours, while the habits of shopping locally were retained by a noticeable proportion of consumers who had discovered the benefits of shopping at their local convenience store.
CJ Lang reported that its company-owned stores have grown in profitability, aided with the acquisition of Dalbeattie, the first such addition to the portfolio in over five years. The business has also expanded its independent estate, includes the recent announcement of David Sands joining Spar Scotland.
CJ Lang & Son Ltd CEO, Colin McLean, said: “The previous 12 months saw changes continue in the retail landscape as we finally emerged from COVID-19 to move into the cost-of-living crisis and a very uncertain future globally. We know that there are tough times ahead for all and our primary focus is to offer a value proposition to help support our customers and staff through the ongoing uncertainty. Being solely Scottish focussed has enabled us to adapt quickly and react flexibly to the changing retail landscape and to continue to provide a first-class service to our independent retail customers, consumers and communities at a time when they have needed us most.”
Speaking to ConvenienceStore.co.uk, McLean explained the past four years have been “chapter one of the book” and they’re now working on “chapter two”.
”It’s very much about a transformation program for the business. How do we actually invest in our product proposition? Getting fresh right and taking food to go to the next level? How do we address our supply chain? We had a lot of help from consultants last year on recognising what is a sizable commercial opportunity to fix our supply chain.
“There’s a lot of work to be done around systems and we have some amazing data. But perhaps we are not utilising the most modern ways of understanding and modelling that data, and there’s a big prize there for the right system solution.”
He added that CJ Lang has worked hard over the past four years to “fix its supply chain”. “We worked very closely with suppliers and received the supplier advantage report every year in which suppliers highlighted and offered feedback on us as a wholesaler alongside a number of others to benchmark where we are. Four years ago, we were bottom of the list of 12 well-known symbol group retailers and we are proud to say that we are now second, but the feedback still from suppliers is that we can do more around forecasting and demand planning.”
Last month, CJ Lang announced that David Sands had joined its ranks however with the market in Scotland gaining new players such as Eddy’s while Greens Retail goes on an acquisition hunt – how does CJ Lang retain and attract retailers?
“We’ve been here for 100 years and we’re taking a long-term view. I’m always disappointed to see retailers move on and leave Spar but clearly people will come to their own decisions. I think there’s a lot of money being thrown around in the convenience business for acquisitions. The market is quite frothy right now and I think that will stabilize and we will look for the right opportunities. It’s not a numbers game, it’s about picking up the right stores at the right time and making sure they fit with our strategy.”
Cost of living crisis
McLean said that while it was early days in terms of changing shopping habits due to the rising cost of living, its retailers have noticed some shifts. “We’re certainly seeing a slowdown in frequency of visits and basket value going up, driven by inflation. Customers are shopping less often but spending more when they are shopping.
”I think the biggest noticeable shift that’s going on at the moment is cigarettes and vaping, particularly the explosion of the latter - whether that’s down to cost of living or whether it’s just actually because vaping is so on trend at the moment it’s difficult to say. BWe’re seeing some quite noticeable shifts in the category.”
He warned that the sector could be facing additional challenges with the introduction of the Deposit Returns Scheme. “Nobody is going to argue with the fact that recycling is the right thing to do - of course it is. I think the challenge is the complexity of what is being proposed and the significant additional costs that we are potentially facing. Our modelling suggests it will lead to some significant hits to our business from August next year.”