Food & drink

The collapse of Palmer & Harvey – a salient warning to us all…
14 December, 2017
by: Cripps

The collapse of Palmer & Harvey, the UK’s No. 1 wholesale delivery business last month sent shock waves through the industry. Despite the fact that its cash flow problems were widely known, many held firm in the belief that P&H was somehow immune from administration due to its size and large supermarket customers.

 

So why could a buyer not be found for a business that supplied over 90,000 stores, ranging from independents to the behemoths of Tescos, Sainsburys and Costcutter?

 

Murky financials may well be the primary reason. Cash flow issues are one thing: losses doubled over the period 2015-2016, with operating profits being wiped out by the cost of servicing loans. But there are also allegations of mishandling of company funds. The revelation that almost £70m has been stripped out of the business by way of interest payments on preference shares and dividends since the MBO in 2008 is disconcerting to say the least, particularly when it emerges that part of the money was taken from staff benefit trusts. Potential buyers would also no doubt be put off by an estimated £80m black hole in the pension pot.

 

But financial issues can always be solved if the opportunity is juicy enough. So what else put buyers off? The answer seems to be the fundamental shift in the market, where retailers are increasingly moving into the distribution space. Tescos was one of P&H’s largest customers, making up over 40% of its business, so when it acquired Booker earlier this year the P&H board must have grown increasingly nervous.

 

None of the above helps the 2,500 employees who lost their jobs last month, nor the 404 more made redundant this week with rumour of a further 500 jobs still at risk. Nor does it help the legacy of a business that had successfully faced down numerous other challenges over the course of the last century.

 

And then there’s the businesses left with the threat of short supply on groceries and tobacco products at the busiest time of year. The ramifications of the ‘ripple effect’ could be huge, so what lessons can be learned?

 

The first must be to have contingency plans in place: don’t wait until a key supplier lets you down. Staying aware of the market allows you to formulate alternative plans should they be needed, and to make sure you maintain competitive terms with your existing suppliers.

 

The second must be to avoid placing all your eggs in one basket. Overreliance on any one source (even with a 100 year track record) is a dangerous strategy and increases the risk profile of your business.

 

The third, as trite as it sounds, is to remember that every crisis gives rise to opportunity. With P&H removed from the market, there are a whole lot of retailers out there looking around for new suppliers and doors which might once have been firmly closed are now wide open.

 

There’s no good time for bad news, but Christmas is just about as bad as it gets. Once the investigations are over, there’s more than one Bad Santa out there determined to hold those accountable for destroying so many people’s seasonal good cheer. And I say, good luck to ‘em.

 

If you have any concerns about your supply chain or any other aspect of your food & drink business, please contact victoria.symons@cripps.co.uk.


Pubs decline whilst craft beer booms
12 December, 2017

Whilst the popularity of craft beer is increasing in both pubs and supermarkets, there’s been a rapid decline in the number of pubs in Britain. So where will independent breweries sell their beer?

 

The number of breweries has soared in the last 5 years. There’s been a growing interest in producing beers that have an individual character alongside the increase in young people travelling the world and trying a range of different beers.

 

Statistics are showing that the number of pubs across Britain is in rapid decline. London alone has lost a quarter of its pubs in the last 15 years. Pubs in Britain overall are down approximately 10,000 in the last 10 years.

 

Pub managers have to tackle increasing business rates and conflicts with residents. There’s also the threat of developers buying the freehold and pushing the tenant out with high rents on lease renewals.

 

Tax on beer has also been steadily increasing together with the overall cost of a pint. It was recently revealed that Surrey is the most expensive place to buy a pint overtaking London!

 

However, the government recognise that the British pub is a staple of British culture. In the recent budget it was announced that there will be a freeze on beer duty. They attract vast amounts of tourists in cities and are often the heart of the community in smaller towns and villages. They are a large part of the economy in London.

 

Craft beer is certainly a way forward for pubs to draw in customers. Pub managers are always looking to try new things to make their pub stand out. If they have the resources to brew their own beer it could be a great way to put an individual stamp on the pub. Selling other craft beer from local breweries will also attract those looking to try new beers and support local businesses.

 

Independent breweries might be tempted by selling out to larger corporations. Of course big companies want to buy into craft beer as they see its growing popularity, but a large part of the reason people buy craft beer is the independent ownership and the fact that some are not produced on a large scale.

 

And so despite the decline in the number of pubs, what is plain to see in most towns and cities is the growing popularity of craft beer which if utilised could be great way of keeping our favourite pubs running. It’s a testament to how much Britons love our beer that breweries continue to grow even though pub numbers have gone down. Hopefully this will continue to be the case and pubs will begin to grow in number again instead of declining.


What can a chocolate bar teach us about contract law?
22 November, 2017

Did you know that whenever you buy a chocolate bar you are entering into a contract?  You probably haven’t given it much thought, but this everyday scenario can teach us quite a lot about contract law in England and Wales.  These principles apply whether you are buying a mid-morning snack or are entering into a multi-million pound commercial agreement.

A contract does not need to be in writing (or signed)

Each time you buy some of your favourite confectionary you do not enter into a written agreement, but this does not make the contract you enter into any less binding.

Terms can be expressed or implied

Take a second to think about the words that will be exchanged each time you buy something.  It may be impolite, but it would be possible to buy the chocolate without any words being exchanged. 

Also, it is likely that the chocolate you are buying is covered in protective wrapping and the contents are not visible prior to purchase.  This means that when making the purchase you are assuming that the contents will be as described, be fit for consumption and that the contents will be delicious. 

When is a contract formed?

For a contract to be formed an offer must be made, which upon acceptance forms a binding agreement.  In these circumstances it is worth thinking about when you are legally bound to buy the chocolate bar.

Is the shop making you an offer by placing the bar on the shelf?  This is what most people would think, but if this was the case then you would be obliged to buy the chocolate when you pick it up.  The correct interpretation is that you are making an offer to the shopkeeper to buy the goods when you take them to the till.  The shopkeeper may then decide whether to accept your offer or refuse your custom.

Does the shop have to sell the chocolate to you?

Until a contract is formed there is no obligation for the shop to sell the chocolate to you.  It is a common misconception that a shop has to sell you the goods at the advertised price.  If an error has been made when the chocolate was priced then the shop can correct this error at the time of purchase.  You then have to decide whether to buy the goods at the correct price, or refuse the transaction. 

What if I get a receipt?

A receipt is a proof of purchase.  As this is received after the transaction has completed (when the shopkeeper agrees to take your money) it cannot impose terms into the contract.  Similarly, an invoice is a demand for payment for an agreed transaction.  Attaching terms of business to the back of an invoice is not sufficient to show that they have been incorporated into the contract.


“Meal Deals” – not so sweet anymore?
7 November, 2017

The government has over the years introduced measures to reducesugar sugar-related health diseases including: a sugar tax on soft drinks; a “traffic light” system (grading the health-risk of a product); and restrictions on marketing of unhealthy foods to children. However, In light of alarming increases in diseases such as obesity and diabetes, it is clear government efforts are not working effectively. This week Action on Sugar suggested high street retailers should be forced to only sell healthy meal deals.

Research by the pressure group Action on Sugar has found that many of the meal deals on offer contain four times an adult’s recommended daily intake of sugar and are therefore contributing to the various health diseases which are crippling families and the NHS. Yet the demand for meal deals is on the rise as customers increasingly desire fast and cheap food on the go. The issue is exacerbated by the fact that many people have difficulty accessing healthy foods and rely on meal deals – at breakfast, lunch and dinner – for their daily nutritional intake.

Is it time for retailers to take a leading role on promoting and providing more healthy eating options?   Forcing retailers to only sell healthy meal deals, as suggested by Action on Sugar, is not a realistic solution. If, however, retailers are encouraged to see the benefits of providing and promoting healthy options and make healthy products more accessible for their customers it is likely to have a greater impact.  It could provide retailers with an additional opportunity to engage with their customers, develop their brand and in turn increase their sales. 


The rise of ‘clean supreme’ in the food and drink industry
27 October, 2017

With increased demand for clean and simply labelled foods it seems that ‘green’ is becoming ‘the new black’.  So what is the ‘clean supreme’ trend all about?

It’s about healthy, natural food products for the everyday consumer with full transparency in terms of ingredients, the supply chain and nutritional values.  This approach has been gaining momentum with clean and clear labelling becoming the new global standard.

Kellogg’s have recently bought into this idea with their $600 million acquisition of RXBAR.  Each variety of RXBAR proudly lists all its 6 or less ingredients in large letters on the front of its packaging.  They also claim to be “upfront and honest about everything we do, from the inside out.”

Hello Fresh, an online food ordering service, has marketed itself in a similarly simple way. Not only does the company’s name itself connote clean and simple food, but consumers are enticed by the array of organic offering that is advertised on an easy-to-navigate website. Such companies have successfully addressed the “complicated simplicity” of current consumer demands.   

Transparent product labelling

There’s also a clear shift towards food label transparency.  Time-strapped consumers want ready access to nutritional information without having to agonise over masses of text.  The average consumer spends 41 minutes in the supermarket per trip but there’s a trend towards shorter more frequent visits.

Food giants including Tesco, Campbell Soup and Walmart are moving away from complicated labelling in favour of simplistic alternatives.   

Whilst Nestlé in the UK have been using the UK Government’s ‘traffic light’ nutrient profiling on wholly-owned products since 2013, they’ve recently pledged to bring in line all their UK breakfast cereals which are manufactured and sold by a joint venture company.

Restaurant efforts

Transparent menus in restaurants are on the rise too with clearly displayed calorie counts and nutritional values becoming more common place.  Some eateries even post on their walls explanations of how their ingredients are sourced or have social media campaigns profiling their suppliers, something which is increasingly appealing to consumers. 

So have you considered how ‘clean and clear’ your business is?  Could you clean up your ingredients and labelling or be clearer about their origin?  Remember that simple packaging won’t be exempt from compliance with food labelling regulations so an effective balance between attractive branding and regulatory compliance will need to be struck.


1 2 3 5