Sainsbury's '3%' Net Margin going forward - the 'new' role for NAMs?

If Mike Coupe is acknowledging the end of 5% net margins in UK grocery margins, and implying a more likely 3% going forward, the issues for suppliers have to be:

- Can 3% Net Margins work?
- How can my brand help?

Essentially, as you know, the driver of share price increases is ROCE, and given that ROCE is a multiple of Return/Sales and Sales/Capital Employed i.e. Net Margin x Capital Rotation, then it matters little whether a business chooses to operate a high margin, low rotation, or a low margin, high rotation business model.

It is the combination that counts, and 15% ROCE provides an acceptable reward for risk...

Therefore, if 3% Net Margin is the retail 'norm' going forward, then the multiples need to focus on increasing their capital rotation - with the help of suppliers - in order to compensate for the lower margin in producing an 'acceptable' 15% ROCE.

Increasing Capital rotation i.e. Sales/Capital Employed i.e. increasing Sales and/or reducing Capital Employed

Given that the retailers are already doing everything possible to drive sales, we shall focus on ways of increasing capital rotation, a less costly option for NAMs:

As you know, Capital Employed = Fixed Assets + Current Assets - Current Liabilities

Fixed Asset optimisation:
Fixed Assets in retail means sales space, and helping the retailer to increase space productivity - i.e. sales/sq. ft. - has to be a way forward in making their Fixed Assets more productive, using £1,000/sq. ft. per annum as a benchmark.

This means increasing basket size, and trading up the shopper. This is where in-store theatre, and shopper marketing can play a role. It also means de-listing of any overlap and de-duplicating within the assortment in order to simplify the offering to increase its shopper-appeal.  This is what Dave Lewis doing via the 30% product cull...

Incidentally, all retailers will pursue this approach to a point where they begin to sell off unproductive outlets, or risk becoming uncompetitive. Hence the store culls in the pipeline...

Current Asset optimisation:
Currents Assets = Stock + Debtors + Cash
Here the emphasis has to be on Stock optimisation i.e. increasing stockturns, without compromising on-shelf availability. This means smaller, more frequent deliveries to produce annual retail stockturns of 20+ i.e. 18+ days stock. For a retailer, this results in less capital tied up in stock, less wastage/shrink, and faster throughput.

Current Liabilities optimisation:
Current Liabilities = Bank Overdraft + Creditors
As Current Liabilities are a negative, retailers should try to increase Bank Overdraft and take longer to pay suppliers, in order to increase their Current Liabilities. However, since the global financial crisis, retailers have been trying to pay down debt and reduce exposure, thereby closing off this option

Meanwhile, taking increasing amounts of free credit from suppliers has breached politically acceptable limits, and will probably be progressively reduced in the future, thus closing off another option for retailers.

Thus the NAM needs to focus on space and stock optimisation.

In other words, doing a little more of what you are already doing, but relating it more to the top-of-mind concerns of the buyer in the future, in terms of its direct impact on the retailer's ROCE and thus the share price...

...while others turn up the volume on their traditional selling points, as they await a return to normal...

Diageo U-turn on threat to extend supplier payment times - a step on the way to fair-play?

According to The Telegraph, Diageo has reversed its intention to extend the number of days it takes to make payments from 60 days to 90 days on all new contracts and tenders. In doing so, they have reduced the likelihood of being quoted by retailers as an excuse to extend their payment terms to a new 'norm' of 90 days...

However, this move again highlights the inadequacies of the Prompt Payment Code.

Whilst ‘Prompt payment’ and ‘On-time payment’ can focus attention on the pressures caused by extended credit, I believe that these conditions miss the point in commercial relationships. The issues are the length of time taken to pay, and that suppliers are having to contribute to the working capital of a customer by giving free credit in excess of the time taken for the customer to convert their output into cash i.e. Trade credit was originally intended to bridge the gap between supply of a product to a retailer and payment by a shopper.

In the case of supplier-retailer relationships, a retailer is usually more powerful than its suppliers and often has access to a number of different sources of supply for the same type of product. This means that the retailer is usually in a position to dictate terms of payment on a ‘take it or leave it’ basis, i.e. 30, 60, 90 or even 120 days, if they prefer.

Whilst the Prompt Payment Code has recently been strengthened by introducing a 60 day maximum payment term, and enshrining a 30 day payment term as a norm for all signatories as standard practice, the fact remains that payment period should reflect the time taken between delivery and resale in order to qualify as 'fair-play' trade credit.

In other words, different categories should have different payment times, e.g. Perishables should be paid for more quickly i.e. say 5-10 days, whilst goods that have a retail stockturn of 12 times per annum - 30 days stock - should be paid in 35 days.

With UK Multiples holding an average of 20 days stock, their average payment periods should not exceed 25 days...

Inconvenient convenience at Morrisons - an iceberg tip in retail property revaluation?

Morrisons latest results indicating the likely closure of 23 convenience outlets, coupled with the 25% write-down of its property portfolio is simply an overt acknowledgement that Bricks & Mortar UK retail is over-spaced.

Essentially, this means that given the emergence of the squeezed-middle issue, coupled with the development of online, physical retail space - and large stores in particular - are now not as valuable as before the global financial crisis. In addition, given that there are no alternative uses that can deliver sales of £1k per sq. ft. per annum, then the property values have to be written down to market value, in order to satisfy the auditors.

However, if all mults placed their redundant properties on the market simultaneously, market values would be driven down. Therefore actual property sell-offs will be gradual.

Incidentally, this means that in the short to medium term the mults will be in the market for innovative use of their redundant space via productive in-store theatre...

In addition, retail net margins are unlikely to rise in the flat-line price-cut future...

Meanwhile, as far as the stockmarket is concerned, the mults' fixed asset base is over-valued, meaning that the reduced net margin vs. excessive capital employed relationship is driving down the ROCE, and with it the share price...

Morrisons is simply grasping this property write-down nettle now, partly in readiness for the arrival of Mr Potts, whilst Mr Higginson is allegedly departing for the beach, hopefully leaving his mobile switched on...

Finally, given their Tesco heritage, the Morrisons' team will not have missed the fact of Dave Lewis' radical-cull moves to eliminate product/people/property overlaps in simplifying the Tesco onshelf offer.

The results are already coming through via increased growth for Tesco, and other retailers not implementing similar programmes, could find themselves left at the station, as the post-modern retail train gathers pace...  

The Tesco-Schweppes Pricing Spat - really about ownership of the Consumer?

In my early days in marketing, I was always surprised that my UK colleagues agonised for hours re every shelf-price increase of a few pence, whilst my continental colleagues focused on back margin and hardly touched on shelf prices. The answer came in a negotiation session with a major French retailer when a reference to shelf-price impact was slapped down with ‘when we buy your product, the selling price is our business. Now tell me about the back margin’…

In this era of post-modern retail – think game-changing 2007 financial crisis, a new world of multiplicity, diversity, contingency, fragmentation and rupture which accepts that we now live in a state of perpetual incompleteness and the permanently unresolved – an era where the 4x4 consumer has morphed into a basket-carrying shopper searching out daily bargains, and consumer-ownership has become the issue.

In other words, Tesco – and later the other mults – are simply clearing the decks, simplifying the offering and taking control of the shelf, especially pricing.

In terms of the consumer, if ‘ownership’ is defined by extent of knowledge, then retailers combining Clubcard and scanning data to produce a shopper-profile that includes name, address, age, sex, family structure, income-level, state-of-health, recreations and travel, dietary habits, insurance, debt-profile and bank-balance, have to have a greater claim to ownership of the consumer than a marketer knowing that the consumer is probably grey-haired and living alone on the outskirts of Oxford, two children having left home… This was a battle for ownership that was lost way before 2008.

In other words, we now have to accept that a retailer in the midst of a 30% product cull, and in the rifle-sights of the SFO and GCA, is not going to take any prisoners, much less tolerate any interference re how they market to ‘their’ consumer-shopper...

In reality, however, the consumer is now ‘ownerless’, savvy, willing and able to shop around, and is determined to accept nothing less than demonstrable value for money…

Welcome to the new world of post-modern retail…

120 days credit - when the customer makes you an early payment 'offer you can't refuse'....

Given the possibility that 120 days credit may become the ‘norm’, and the likelihood that retailers may offer ‘easy invoice’ arrangements for suppliers in need of cash, it may be useful to explore the financial options in advance…

In other words, when the choice amounts to 120 days net, or ‘early’ payment @ x% off invoice, what financing are we talking about?

Assumptions:
Annual invoiced sales to the customer/annum = £9.5m
Customer wants to pay in 120 days
Supplier wants to be paid in 5 days (after all, little point in going back to your current 40 days if you need money now)
i.e. a 115-day reduction in payment period

At 120 days, customer pays 3 times per year i.e. 365/120          

At 5 days, supplier wants to be paid 73 times per year i.e. 365/5                          

Amount customer owes when paying in 120 days
                                                = £9.5m/3          = £3.17m
               
Amount customer owes when paying in 5 days
                                                = £9.5m/73         = £0.13m
                                                   
i.e. Cashflow saving = £3.17m - £0.13m
                                                  = £3.04m

Say the cost of borrowing is 10% interest per year
Then the cost of borrowing £3.04m for a year
                                                  = £0.304m

Which is equivalent to 3.2% of supplier sales to customer
                                          i.e. £0.304m/£9.5m x 100%
                                                     
Then any extra discount above 3.2% is more beneficial to the customer than investing the money at 10%.

A 3.2% discount off invoice seems reasonable?
If the above supplier is making a Net Profit margin of 5%, then the £0.304m discount represents incremental sales of £6.08m, a mere 64% increase in sales to the customer, to recover the discount…

NB. Best check the above application to your latest annual results with Finance, before leaving the building…

Segment 7: The older savvy consumer – a need for understanding?

In our world of in-store theatre, with consumer-shoppers merely playing their parts during store visits, it might be useful to segregate them into seven ages for closer examination.

Given the increasing age-gap between older shoppers and those charged with meeting their needs, it might be useful to start with Segment 7, our older members of population.

By understanding the difference between their willingness and ability to buy, and taking into account the real factors determining their purchasing behaviour, it may be possible for suppliers and retailers to do more about optimising their store visits. 

The following extract from Nora Ephron’s ‘I Remember Nothing’ may provide new insights…

“In these days of physical fitness, hair dye, and plastic surgery, you can live much of your life without feeling or even looking old. But then one day, your knee goes, or your shoulder, or your back, or your hip. Your hot flashes come to an end; things droop. Spots appear. Your cleavage looks like a peach pit. If your elbows faced forward, you would kill yourself. You’re two inches shorter than you used to be. You’re ten pounds fatter and you cannot lose a pound of it to save your soul. 

Your hands don’t work as well as they once did and you can’t open bottles, jars, wrappers, and especially those gadgets that are encased tightly in what seems to be molded Mylar. If you were stranded on a desert island and your food were sealed in plastic packaging, you would starve to death. You take so many pills in the morning you don’t have room for breakfast.

You lose close friends and discover one of the worst truths of old age: they’re irreplaceable. People who run four miles a day and eat only nuts and berries drop dead. People who drink a quart of whiskey and smoke two packs of cigarettes a day drop dead. You are suddenly in a lottery, the ultimate game of chance, and someday your luck will run out. Everybody dies. There’s nothing you can do about it. Whether or not you eat six almonds a day. Whether or not you believe in God.” 

Nora Ephron: I Remember Nothing

120 days credit - a supplier own goal?

Yesterday’s Kamblog post re Lidl’s alleged request for 120 days credit raises some important issues for NAMs.
I believe that this first (?) move by a retailer in the UK is an unintended consequence of supplier attempts to reduce the cost of trade credit given to retailers by passing demands for extra days credit back up the pipeline to their suppliers...

In other words, the genie has been released from the 120 day credit-bottle, and we are now headed towards an era of universal 120 day credit.

Government intervention?
If governments are really serious about protecting small and medium sized enterprises, they will abandon the meaningless ‘on time payment’ condition and legislate to ensure that payment periods truly reflect order cycles and delivery frequencies, so that trade credit fulfills its original function - a bridge between buying and reselling..

Size of the problem - the calculations:
Say UK annual sales of Big 4 multiples   (2013/14)     =   £117bn ex VAT
Assuming average retail Gross Margins of 25%
Then Supplier sales to Big 4                                      =   £88bn ex VAT
Assuming average payment periods of 40+ days
Then retailers pay suppliers approximately 365/40 = 9 times/annum
Meaning the 4 retailers are holding a total of £9.8bn free credit from suppliers at any time i.e. £88/9
Assume cost of credit = 10%
Then it is costing the supplier base £980m p.a. to give interest-free credit to the Big 4
Which represents 1.1% of supplier sales i.e. 980/88,000 x 100

If the payment period moves out to 120 days, the same calculation shows that supplier cost of credit will move out to approximately £3bn, i.e. 3.4% of supplier sales…!

Action for NAMs

1. Why not calculate your current cost of credit for each of the four multiples?
2. Then calculate the cost to you of 120 days credit in each case, and the value to your customer in incremental sales….
3. Then ask yourself about the impact on your bottom line, and practice reverse-negotiating the difference...

It will still be tough, but at least you will be way ahead of the supplier-pack…

120 days, just a Lidl bit of extra credit?

According to The Sunday Times, Lidl UK are allegedly asking some suppliers to accept 120 days payment terms.

Apart from the usual cost/risk balancing act required in unprecedented times, suppliers have to ask themselves why the extending-credit option is now featuring so prominently in supplier-retailer relationships.

Given that a retailer's working capital is made up of bank overdraft and creditors (i.e. suppliers, mainly), minus stock, debtors (i.e. shoppers, mainly) and cash, when profits are under pressure, few squeeze-options remain.

With price-cuts obligatory, bank overdrafts expensive, stock rotating 20 times/annum, the retailer's only opportunity to supplement the bottom line is via extended trade credit - apart from selling off underutilised stores (!)

Obviously, some suppliers will try to pass the cost of additional credit back up the pipeline by taking longer to pay ingredients and services suppliers. But, given the difference in added value within supplier and retailer business models - ingredients cost a supplier say 10% of their trade prices, whilst retailers pay 75% of their Net retail sales for products - a supplier would have to take 10 times longer to pay, in order to neutralise the cost of trade credit given to retailers. So a supplier is only reducing some of the pain by extending their supplier payment periods to 120 days.

However, the real issue is the need for fair payment - based on order cycle time i.e. the gap between delivery and payment by shopper - rather than the current justifications such 'on time payment' in compliance with current legislation, and trading 'norms'.

With some major suppliers moving to 120 day payment of their suppliers (see Ad Age, KamBlog) there is a very real danger that a new 'norm' of 120 days (4 months!) is being established by suppliers(!)...and retailers would be unwise not to move to this new credit period 'norm'.

In fact, it could be said that Lidl UK are simply first out of the frame, again...

Tesco - playing the waiting game

Given the amount of uncertainty in the Tesco pipeline - Product cull, SFO Commercial Income investigation and GSCOP checkout - it is tempting for certainty-seeking NAMs to await the output from each initiative before incorporating the results into their trade strategies...

This is almost as dangerous as ignoring their existence and ploughing on regardless, using the tools and skills that were designed to work - and did so effectively - when markets grew steadily at 5% in real terms!

But five years of flatline demand was never anticipated or budgeted for...

Pragmatic NAMs don't need to wait for inevitable conclusions - they take informed guesses at what will affect them and act now. They thus gain while others sit and wait.
OK, perhaps others stand and wait - looks better, but is no more productive.

Informed guesswork:

- The Tesco Product Cull - a mix of surplus products and sub-categories of up to 30,000 SKUs, eliminating those items that do not represent a sufficient point-of-difference to justify a place in the slimmed-down Tesco portfolio. If you have any doubt, consider it out...

But even if your brand is on the plus-side of marginal, consider whether it is worth trying to break through to the guys making the cull-recommendations, or is it best to devote your energies to establishing alternative distribution, before the lanes get jammed with other NAMs' cars...

- SFO Investigation - a long drawn out exercise that will hopefully result in a set of clear definitions of trade investment buckets, their purpose, their time-of-value transfer (to allow for defensible booking and auditing), and - without doubt - paid on results and in arrears...

Meanwhile, busy buyers will be tempted to pull these payments into front margin and possibly fund deep-cut prices with the 'surplus' profit.

- GCA Investigation: This will focus on Tesco's compliance with GSCOP in two areas:
Part 4 (paragraph 5) of the Code: No delay in Payments;
Part 5 (paragraph 12) of the Code: No Payments for better positioning of goods unless in relation to Promotions.

Whilst it is possible that Tesco may have been moving so fast in recent years that inadvertent breaches may have occurred, the GCA is still reliant on hard evidence of non-compliance with the letter of the Code, in order to pursue a case against a retailer.

Only when retailers and suppliers can be persuaded to define and comply with the fair-play spirit of GSCOP will the CODE become a day-to-day working tool* in the supplier-retailer relationship. The reference in Part 4 (paragraph 5) to 'payment within a reasonable time after the date of the supplier's invoice' goes part of the way, but 'on time' payment - whatever period has been 'agreed' - is still the 'letter-of-law' guiding principle for retailers...

KAMtip:
Assume that the three initiatives have panned out as indicated above, and take appropriate action now

* Making GSCOP a workable tool in the day-job for suppliers and retailers:
Why not submit your ideas to the GCA Team on what would make the Code represent fair-play? 
This would represent no 'whistle-blower risk' but could help in establishing a basis for a Mark 2 Code that might better reflect the realities of joint-partnership, with willing compliance a given....  

David Potts completes the 4-man solution to Morrisons rebirth

The combination of Higginson, Strain and Potts with hopefully silent partner Morrison, sharing a philosophy of down-to-earth common-sense retailing and their Tesco-in-common experience, constitute a grounded team that is hopefully well poised to implement Dalton Philips’ breakthrough strategy…

Appointed to pull Morrisons into the 21st Century via an injection of IT, global vision and democracy, Philips managed the five-year programme of heavy lifting, but was undone by the middle-squeezing impact of Waitrose and the discounters, at a time when a return to basics was required in retail…

In the interim, with his pragmatic approach, Andrew Higginson has reduced the Morrisons’ message to basics and will probably go for growth via a shift from back to front margin, a focus on pricing and optimisation of his familiar like-minded CEO.

The new team will build on Philips’ improvement in operating systems, and moves into convenience and online (with possibly a re-assessment of the small-print of the 25-year Ocado contract...).

Within the business, the new chairman and CEO will sound and feel like Ken Morrison, which will not only provide internal reassurance, but will also ensure a couple of years’ silent tolerance from at least one key shareholder…

Back to the future for Morrisons?
Meanwhile, NAMs need to anticipate a return to the old Morrisons, but manage a retailer that is super-charged with the benefits of a visit to a future that was found to be not all bullshit….

The Tesco Cull - where does this leave product innovation?

Time was when getting a new product listed had to overcome the ‘we don’t have rubber-shelves’ barrier, allowing us to put forward a magnanimous offer to cull one of our current lines that was patently well past sell-by…

The key difference now is that the shelf is also being ‘shortened’…by up to 30%, to be precise…

This puts us in a whole new ball-park, given that one part of Tesco (via a third party) is busy finding ways of eliminating current lines /categories, seemingly without buyer intervention, whilst the buying team are presumably attempting to operate in a ‘business as usual’ environment..?

In other words, a new product now needs to represent a spectacular leap forward, in order to make a real difference. Moreover, given that the emphasis in Tesco will be on front margin, the usual trade investment package will carry less weight.

This means that the product will probably have to succeed elsewhere, i.e. via one of the other mults, proving that it deserves a place in the market, in order to enhance its Tesco-appeal, but at the same time denying our No 1 retailer the traditional innovator’s advantage… 

Hopefully, these mental gymnastics will help NAMs to think fundamentally about the meeting of real consumer need, better than available competition, and allow them to refine a bespoke trade package that really stands out in the marketplace, and proves it in practice…

Allan, key to the Tesco fine-tune?

If we assume that much of the heavy lifting has been completed at Tesco (???), then the appointment of John Allan has to be about tightening the bolts on the Tesco rebuild.

True, the SFO and GCA issues are still in the pipeline, but if the broad procedures anticipating their inevitable outputs are not already in place, then we are all in trouble...

Moreover, pro-active suppliers will already have anticipated the outcome of the Tesco product-cull (think obvious over-laps by function, undifferentiated me-toos, products that are in the assortment because of back margin, rather than consumer demand, and slow-yielding 'experimental' products outside the core Tesco offering) and pushed on half-open doors elsewhere...

So that leaves John Allan's probable MO:

Taking some key features of an Allen-key might provide some pointers:

• The tool is simple, small and light: an essential requirement in fine-tuning...
• The contact surfaces of the screw or bolt are protected from external damage: See Contract of Employment 
• There are six contact surfaces between bolt and driver: Having ensured driver-bolt fit, little scope for slippage in addressing problems
• Torque is constrained by the length and size of the key: Hopefully, given the retail experience, little danger of over-doing the treatment
• Very small bolt heads can be accommodated: Even minor issues will receive attention, just-in-case...
• The tool can be manufactured very cheaply, so one is often included with products requiring end-user assembly: "If the tool is right, don't ask the price..."
• Either end of the tool can be used to take advantage of reach or torque: A need to bend over backwards for sensitive issues?
• The tool is L-shaped: Perfect for current flat-line environment (An L-shaped recovery involves a sharp decline in key metrics followed by a long period of flat or stagnant growth).

Finally, remembering that we are still talking about Tesco, with a variety of heritage problems that may resist first attempts, the tool can be reconditioned using an electric grinder by removing the worn-out part, and then works like new...

* Apologies to the Allen Manufacturing Company of Hartford, Connecticut...

YouTube 10th Anniversary: How the Video Streaming Site Changed your Audience Gateways..., hopefully?

On St Valentine's Day, 10 years ago, Chad Hurley, Steve Chen, and Jawed Karim, three former employees of PayPal, registered a new company devised around a simple idea: that there should be one website where people can upload and watch videos.

In an era of increasing media fragmentation, amidst falling TV viewing figures, well-targeted YouTube content provides an unprecedented means of engagement for marketers everywhere.

According to The Atlantic, YouTube is now the third most viewed website in the world, boasting over one million viewers who watch more than six billion hours of footage each month. Each minute, users upload 300 hours of video to YouTube's servers.

Whilst amateurs strike lucky with worrying frequency, it can be a relief to NAMs to realise that 29 of the site's 30 most watched clips are professionally produced music videos.

In other words, the access process is easy, but getting attention requires skillful, creative targeting and professional execution...leading the consumer to NAM-engineered fulfillment at point-of-sale...

Getting it wrong upfront will not matter, in that your YouTube output, if it even floats, will quickly sink without trace. The real pain results from seeing a competitor that has managed to strip their offering down to the bare essentials, and succeeded in touching a consumer-nerve more effectively than available alternatives, race off the shelves....

In an ocean of distracting content, in unprecedented times, the consumer wants simplicity, clarity and a way of buying optimally, with all excess removed...

What else do you think is happening at Tesco?

St Valentine’s Day passing of Nutella-man

Saturday saw the death of Italy’s richest man, Nutella billionaire Michele Ferrero (89).

His father Pietro’s great idea in the scarce post-war years was to create a chocolate-like sweet using cheaper hazelnuts, which were abundant in the countryside around Alba, instead of expensive cocoa.

He is alleged  to have been so excited at the discovery of the successful recipe that he woke up his wife at midnight - she was sleeping - and he made her taste it with spoons….

No record exists re what happened next (!), except to say that his idea resulted in a new blend where a kilo of so-called “pasta gianduja” cost the equivalent of 30 cents in today’s money compared with €1.50 for a kilo of chocolate.

Michele Ferrero’s privately-owned firm is now famous for Nutella spread, Ferrero Rocher chocolates, Kinder eggs and Tic Tac sweets, turning over €8.1bn in 2013.

‘Never patronise a child,’
Ferrero’s greatest skill was knowing what children want, and never talking down to them, a strategy that anyone with savvy grandchildren will endorse…. Ferrero started in the family business when he was 20 and was leading it by 32, growing by undercutting the fine chocolates market with products that boasted “more milk, less chocolate”.

A simple idea, consistently applied and value that is obvious to all...

A template for re-newing Tesco?

A Friday thought: Walgreens Boots Alliance = Boots Global?

Given that Alliance Boots = 1/3 WBA, it would seem that Boots is an important but unequal part of WBA.

However, the combination of AB’s global experience vs. Walgreens’ US-centricity, the fact that four of the five divisions of WBA are run by Boots management, and noting that the acting-CEO has a major 16% shareholding backing up his global vision, might cause us to conclude that we are witnessing the emergence of the only truly global H&B player in the world.

Moreover, a key objective has to be the use of Boots UK Ltd impressive results (ROCE: 26.1% and Net Margin BT: 8%), as a financial target for the £74bn group.

Besides, the more pragmatic among us might conclude that on balance, given these unprecedented times, it is probably better to have Mr. P operating inside, rather than outside the WBA tent…