INDUSTRY INSIGHT 5-3 THIRD-PARTY IN

INDUSTRY INSIGHT 5-3 THIRD-PARTY INNOVATION
Tradeteam is a joint venture of Exel Logistics, along with its parent company NFC Plc., and Bass Brewers to provide a national distribution network service to the U.K. beverage industry.
Tradeteam was developed in response to changing pressures and shifting market conditions in the industry. The beer market in the United Kingdom had been in long-term decline, with pub consumption shrinking at approximately 1 percent per year. Overall, the industry had been suf¬fering from excess capacity and lower margins. On top of this, the government had required brewers to divest themselves of their interest in pubs, a directive with major marketplace impli¬cations. Between 1992 and 1999, for example, pub ownership by regional and national brewers declined from 74 percent to 33 percent. The end result was typical of low-growth industries: Brewers were consolidating and repositioning and were in need of a fresh approach to market¬ing and distribution.
As the United Kingdom's largest provider of brewery distribution services, Exel Logistics had a significant interest in protecting a business that was under pressure from individual brew¬ers and emerging pub ownership groups. Exel's idea was to take over one major brewer's exist¬ing distribution infrastructure to achieve the critical mass associated with that company's market share. Leveraging that infrastructure, it would then offer cost-effective logistics services to other beverage suppliers. This concept led to the formation of the Tradeteam joint venture between Exel Logistics and Bass, which already was the industry's low-cost producer.
Tradeteam is now the U.K.'s leading independent logistics provider to the beverage industry. It has annual revenues of $200 million and delivers approximately 280 million gallons of beer and other beverages to more than 27,000 retail customers on behalf of a number of beverage suppliers. Uniquely situated as a multiuser distributor between the consumer and the supplier, Tradeteam has revolutionized the beverage industry supply chain.
Results to date have been encouraging. Tradeteam has enabled the brewers and beverage suppliers to reduce their operating costs, increase revenues through market expansion, and pro¬vide superior service levels to their customers. Market share for this innovative joint venture has reached the 40 to 50 percent range. In fact, this represents the largest outsourcing initiative yet undertaken in the United Kingdom.