Article: WH Smith sells its news distribution system

Between the lines – Scanned Document from Commercial Motor – 9-15th August 2001

Retail giant WH Smith first announced its intention to sell its troubled distribution business in March this year. The news was not unexpected: a trading statement for the 20 weeks to 20 January 2001 reported a 'disappointing' performance in the news distribution unit, with growth static at 1%. The retailer's distribution division also came under fire last year for plans to form an exclusive national arrangement with Tesco for distributing magazines.
WH Smith put an end to this strategy in January this year, and hinted about selling off the division a few months later. Future plans for WH Smith News, the UK's largest wholesaler of newspapers and magazines, still hangs in the balance, although the company insists it is "business as usual".
Currently, 65% of the business is outsourced to around 1,000 individuals with vans, Of the 35% of the operation that is run in-house, 3.5-tonne vans and 7.5-tonne light trucks are used to carry the goods from wholesalers to newsagents countrywide.
Jim Armitage, WH Smith transport manager, is reticent about future plans for the division, which is being sold for £215m in a management bid backed by ABN Amro Private Equity. "We anticipate carrying on much the same as before," he states.
But what is the bigger picture for other hauliers involved in newspaper distribution? For the few haulage companies that are involved, the sector is big business. Daily
newspapers are the fastest-moving consumer goods, and the operation to deliver them is one of the largest scale, time-sensitive operations in the haulage industry.
FTA chief economist Simon Chapman runs through some of the themes common to the sector. "It's a complicated supply chain, with an up and a downstream side. The upstream part of the operation is run from the printing press to the wholesaler, and the downstream side is from the wholesaler to the retailer.

time-critical

"It tends to be the big hauliers who are involved in the distribution of newspapers, which is a time-critical operation. The wholesaler needs delivery at very specific times.
"Another factor common to this sector is weight. On a Saturday and Sunday, the weight of each newspaper rises considerably, and the extra capacity can be very difficult to judge. It's a classic case for maximum vehicle flexibility."
Figures produced by the Association of Newspaper and Magazine Wholesalers (ANMW), which represents 99% of UK newspaper and magazine wholesalers, help to illustrate the scale of the national operation.
It begins at various print centres across the country, with the daily national newspapers transported to wholesale warehouses by large trunker vehicles, usually arriving between 3am and 4am. And then, in a window of three to four hours, over 14 million newspapers and 36,000 magazines are delivered to 55,000 nationwide retail customers.

The UK's national newspaper operation is now dominated by two haulage companies:
TNT and Eddie Stobart. Of these, TNT Newsfast retains a 90% share of the market, delivering 86 million newspapers weighing 16,500 tonnes throughout the UK every week
Since winning the contract to distribute the Daily Mail in late 2000, TNT Newsfast lays claim to carrying every national newspaper in the country. One substantial part of this operation is the company's £20m contract with News International.
This involves between 85 and 120 TNT Newsfast trucks converging on Wapping every evening from eight nationwide depots. By the early hours, the trucks are back on the road, transporting 9,000 tonnes of newspapers each week to 66 different wholesalers, who then forward individual loads to 55,000 different retail outlets.

First editions

On an average night, TNT operates a well established route, with the vehicles for outlying areas such as Devon, leaving Wapping with the first editions by 10pm, and the London run starting at 2.3oam.
But things aren't always quite so predictable. A major story such as the death of Diana, Princess of Wales, meant that an extra 203 vehicles had to be provided in a space of 36 hours to transport the extra editions being churned out from the print houses to the news stands.
The sheer weight of newspapers has also led to a huge increase in volume over the past few years. TNT now uses twice as many vehicles as it did in 1986 because of the growing size of the papers.
Andy Bull, Eddie Stobart's business man-
ager, also stresses that size and weight is now a major factor in the running of a newspaper distribution business. Stobart won the contract to handle all the Mirror titles out of Watford, to deliver to the South, in July
1998.

The operation uses 50 vehicles, from 3.5-tonne vans through to 41-tonne artics, every night, delivering to 85 wholesale houses each day. At the weekend, 90 vehicles a night are used to cope with the extra weight produced by the big Saturday and Sunday editions.
Bull says: "All the papers must be delivered to the wholesalers by 4am. The wholesalers must then pick and pack the papers before they are delivered to the retailer by 6am that morning. It's very much an 8pm to 3am activity.
"Generally, this is a very level business, operating 365 days a year, with few peaks and troughs," he adds.
The steady nature of the business means it is a potentially appealing sector for hauliers. Anne Preston, chairperson of Prestons of Potto, says: "Compared to other sectors, newspaper distribution is stable. People are always going to want newspapers to read, whereas, distributing something like soup would be much more cyclical-people don't eat as much in the summer.
"This sector tends to attract the larger finns. But it would be a great area for family-owned haulage companies, and it's certainly some-
thing we'd be keen to get into," she adds. Clive Hodgkinson, managing direct
Northamptonshire-based C Butts, agrees the constant nature of the work makes news paper distribution an attractive proposit "There would be nothing to stop a company our size going this way, as long as they had necessary distribution network," he says.

Smaller players

But this last point is important, and could prevent smaller companies making their way newspaper distribution. Robert Bedford managing director of West Yorkshire-bas Bedfords, suggests that forming a consortium could be a way for smaller players to ga foothold (see panel left).
"The sheer scale the operation that involved means haulage operator need to have a large level of credibility the publisher, as tb need to know you have a big enough team to carry out th job," he explains.
So what are the qualities needed for a haulage company to b successful in the newspaper distribution industry? News International's distribution manager, Peter Gibbons, reels off a few pre requisites: "Professionalism, reliability, con sistency, resourcefu]ness," he says. "This is huge operation, and the newspapers canno afford to be delayed in any way."
Although the future of WH Smith News appears unclear, a few facts stand out as black and white in this, one of haulage's most time. critical but level sectors. Aside from limited sub-contracting possibilities, this is over whelmingly a big player's market. And, unless we all stop buying newspapers tomorrow, that's unlikely to change.