Culina boss - ‘Stobart lacked focus, hence the change…’

With Culina rocked by so many high-profile departures last year, it seems only fair to start our interview with chief executive Liam McElroy by asking if he thinks he’ll be here for the long term.

“In all honesty, my wife is pleased to get me out of the house,” he laughs in response. “I’m already part of the fabric and the furniture here, I’m well rooted and it’s going well.”

Five months into the job, McElroy is no doubt keenly aware that after such a turbulent period for the group, parent company Müller is now looking for stability as much as growth. There was a time, not so long ago, when many thought Culina was intent on taking over the world. But as MT reported last month, the talk is now about streamlining and cost cutting. Transformation is the new buzzword – “simplicity is key” – and the group’s aggressive acquisition strategy has been abandoned in favour of organic expansion.

The group lost about 230 years of management ­experience in a few months last year when the likes of group chief executive Thomas van Mourik, his deputy William Stobart and replacement Ian Smith all headed for the exit door. Veteran Stobart CEO David Pickering also departed.

But rather than dwell on the negative headlines, McElroy argues that the new board is more than a match for its predecessors. “My senior executive team has got over 300 years of experience,” he counters. “I intend to encapsulate that and use it accordingly. We’ve had some great growth over the last 10 years. We’ve had some fantastic acquisitions, when you look at the likes of Great Bear and the Stobart element coming on board. We’ve got a clear end-to-end supply chain capability that presents me with a wealth of opportunity that links into my vision.”

He also rejects claims that the current shake-up might have undermined trust in the business. The rumour mill has been working overtime on why so many senior figures have left, but he won’t be drawn into an explanation.

“I can’t answer for the past, I wasn’t around,” he says. “I know Thomas and William and my understanding is that they’ve stepped down and will be pursuing other interests and I think enjoying retirement. Ian, who I also know, has stepped down for personal reasons and I think the business respects that decision. I totally respect that decision having spoken to him. There are always rumours in the market.”

Understandably, McElroy has quickly decided to look forward rather than back. But he’s also keen to learn valuable lessons from how the group has previously been run. “As a temperature check, because of the way we’ve been structured we’ve not necessarily brought groups together,” he explains. “So we now have what I call the Top 100 call. I personally lead that. Three weeks into the job I knew we needed a bi-monthly call, we needed to communicate more. It’s something very similar to what I did at Wincanton but this is on a larger scale.

“In the past you would get individual messages to, let’s say, Stobart, and Great Bear, and Culina, and CML. But the danger of that is you get dilution and another level of communication that doesn’t necessarily come across as consistent.”

McElroy also swerves suggestions that his new broom sweeps clean mentality will mean job cuts across the group. “We’re streamlining, that’s for sure,” is all he’ll divulge, adding that he’s “considering all options”. 

To get the most from his senior team he’s now formed a “top 40 sub-group”, largely made up of his various MDs and CEOs. “I really want them to contribute to the way forward. That just hasn’t happened before,” he explains. “I’ve written to them personally, asking for their engagement. There’s no such thing as a stupid question. We’ve got an ambition and a structure and we can’t really deviate from that, but I want them to be part of the journey. The feedback so far is really positive – they’ve told me nobody has shared this information before.”

Back story

McElroy’s CV is impressive. His former roles include operations director at DHL and a six-year stint as MD of retail and consumer at Wincanton. His most recent post was as senior vice president of GXO Logistics, which he held between December 2021 and September 2022.

Meanwhile, the board now includes deputy group CEO Fabian Koehler, who joined from K+N last November, and chief finance officer Thierry Held. “Fabian has really good European experience and brings a very different perspective,” McElroy says. “Thierry is again K+N and has managed an £8bn portfolio. He’s gone through divestment and M&A. All that experience will be relevant to what I want to do over the next three years.”

Seasoned logistics specialist Stephen Taylor has also joined the group as chief executive for the Stobart division. “Steve segregates the Stobart business as CEO and he can clearly focus and deliver value into it whereas it was previously twinned with other parts of the business,” McElory explains. “I didn’t think that gave it the appropriate focus, hence the change.”

McElroy’s vision of a more unified group links neatly to why he took on the CEO role, he says. The scale of the group not only presents a bigger challenge but the chance to be in full control of future direction.

“I’ve got the train set and I’ve got the ability to build that train set and actually control it as opposed to being MD of a smaller area in retailer and consumer at Wincanton,” he explains. “The opportunity to leverage that scale and drive that synergy presents a really exciting opportunity.”

McElroy also insists Culina occupies a “slightly ­different niche” to competitors like DHL and GXO. “They’re £7.5bn to £8bn businesses and operate in different markets,” he says. “We occupy that niche at £2.2bn which helps us from a customer intimacy perspective – and we’re probably easier to deal with. What you don’t want to be is in that large pool where you don’t necessarily get that attention.”

At first glance, his transformation strategy is the sort of on-message corporate spiel you’d expect from a newly-installed CEO. But he’s clearly done his homework on the Culina business model and is happy to drill down into the details: “In the first three months we identified £75m of savings initiatives that will go back and we expect more,” he says. “We’ve basically got 11 trading units; we’ve got chilled and ambient, and we’ve got the transport capability. The assets, the systems and the infrastructure give us a great opportunity to drive out costs, so we can improve the efficiency. If we can re-invest that back into the business and re-invest our value proposition, which then links into offering better solutions to customers, that’s really powerful.

“We’ve got a fantastic business in chilled with CEO Steve Winwood,” he adds. “We’re seeing profit and revenue growth. I’m really pleased with what he’s doing. Chilled is our strongest division; IPS works with some of the best known brands and provides cost effective and innovative co-packing, co-filling and co-manufacturing.”

However, there’s room for improvement in some of Culina’s ambient areas, he admits: “We’ll hone in on synergies, optimisation and expanding that wider share of wallet,” he says.

The tough market has meant Culina has had to navigate some significant hurdles but seems well placed going forward: “Clearly we’re seeing a rising cost of living, a rise in the minimum wage and a rise in National Insurance,” McElory says. “We’ve successfully managed that which speaks volumes about our relationships with customers. Clearly there is pressure on pricing, so the ability to remove costs through synergies and integration will help us reinvest and remain competitive. That’s a really key point for me.”

Inevitably, the industry’s bigger players have been largely blamed for an aggressive race to the bottom on pricing that has seen unprecedented numbers of smaller hauliers hit the buffers. So are SMEs still at high risk or does he see the mood of the market changing?

“For the 12 months prior to July of last year, 454 transport firms had gone into administration”, McElroy says. “That brings home a message. At the upper end we’ve seen consolidation. We’ve seen the acquisition activity with Clipper, Culina and Stobart, GXO and Wincanton, the Post Office… But I expect that to quieten and for people to look inwardly.”

Decarbonisation

What McElroy calls the ESG agenda is another key theme. The group has got 5,000 vehicles on the road and is working with Microlise to anaylse driving style and improve efficiency. Fuel-wise, HVO has been a key focus for the past two years but electric trucks are also part of the plan. Culina has already had a 44-tonne and 26-tonne electric truck on trial, and is currently running a Mercedes eActros within the EU Stobart business. Hydrogen, however, is not mentioned.

“Clearly conurbations might be the first area to focus on because of the mileage and range, but beyond that we’re looking at a transport control tower, bringing all our planning under one roof,” McElroy reveals. “That will help us drive efficiency, hopefully less miles and less empty running.

“We’ll start looking at the regions to see if we can sweat the assets better – ie use them over a 24-hour period as opposed to 12 hours. That’s absolutely the right thing to do because if I de-fleet I can re-invest it back into our transformation and our customer proposition.”

Looking at the wider industry picture, McElroy agrees with our suggestion that the transition will stall until cost and infrastructure concerns are solved: “We need to play our part and I think more government support and sponsorship is absolutely required,” he says. “I think it’s fallen off the agenda slightly.”

“The danger is that only the bigger players will be able to afford electric trucks”, he adds. “Clearly therein lies a problem, so I still think you’ve only got a gradual transition. The government needs to recognise that and do more with bodies like the RHA to see how they can support companies, particularly SMEs. You’re dead right, they’ll struggle and all that will do is drive pricing north. You’ll get a more competitive landscape and you’ll probably have more companies suffering as a result. I think various bodies need to make that representation a lot clearer. The catalyst for support shouldn’t be when we’re falling behind on zero emissions targets. That support is needed here and now.”

Culina has made good strides in taking trucks off the road of late, and McElroy expects that trend to continue. “We will be releasing quite a number of vehicles, simply because we’re driving further efficiency,” he says. “As an example, if we take our chilled business and then take Warrens, which sits in our ambient business, they’re basically chilled consolidation. They go to common customer touch points, but we can now actually go to those customers with one wagon rather than two and make it very simple.

“I’m keen to get that transparency across our customer supply chains to understand where the addressable service offerings and revenue are, and that we have a point of value to offer those customers. I see so much opportunity here that I don’t think we’ve exploited in the past.”

The robotics and automation agenda is another area that McElroy says he is keen to invest in. “That’s alongside digital technology because I think there’s a change in the labour market as well,” he says. “If you look at the generation coming through, weekend working is hard, people are working from home, there are rising costs, so there are a number of factors that are going to make automation far more compelling in terms of investment and we need to be foremost in that. You’re seeing the evolution of technology at the moment – better pricing on automation and therefore better return on the investment. What would be really nice is to have that point of reference and work with our customers. Ignore AI at your peril.”

Ultimately, McElroy insists he’s happy with Culina’s direction of travel. “I’m optimistic if I look at our state of health and the support from our shareholders,” he says.

“One thing I need to focus on very clearly over the next six to 12 months is talent development and succession,” he concludes. “We’ve got a great MD programme, a manager development programme, and 200 apprenticeships ongoing at level 2 so we’re addressing the driver issue. The average age of a driver is 55, so it’s still a problem. We’ve also got an armed forces programme, but looking forward my more fundamental emphasis is going to be succession planning and further investment in our colleagues – welfare and wellbeing. They’re the lifeblood of our industry, and it’s important I focus on that and reinvest in it.”

LIAM MCELROY: THE INSIDE TRACK

Describe yourself in one word?

Focused. (Wife would say driven).

Best business advice you’ve received?

Begin with the end in mind. Don’t let perfect get in the way of good.

Your best boss?

Two individuals in Wincanton that shaped my career and presented an opportunity for personal growth.

What motivates you?

The challenge of what Culina can achieve.

Key advice to SMEs?

Prioritise cost management and pricing strategies. Listen to your customers and clearly understand the strategic priorities.

Key goal?

To deliver the ambitious target we have set ourselves underpinned with a clear strategy.

Best thing about the job?

The ability to shape Culina’s vision and strategy.

Most challenging thing about the job?

Balancing the timing and prioritisation of integration and transformation plans.

Favourite book?

Touching the Void (I’ve climbed numerous 4,000m Alpine peaks). It brings home the dangers. Also any Lee Child novel – they’re time to chill books for holidays.

Favourite film?

Goodfellas – an iconic cast. Also recently watched Once Upon a Time in Hollywood. Typical Quentin Tarantino film, with a twist.