It’s been a challenging 12 months for the food and drink industry.
Whether it’s mitigating the impact of COVID-19 and the effect of the pandemic on the hospitality sector or preparing for the end of the Brexit transition period, businesses have been fighting for survival.
From farm to fork, missing links in the food supply chain have caused disruption and damage across the supply chain, and after more than a decade of continuous growth and success, the UK food and drink industry had a significant drop in exports in 2020.
But it’s not all bad news.
With manufacturers working harder than ever to ensure the nation is fed, companies have adapted at a rapid pace, responding to changes in demand, reimagining processes and demonstrating the industry’s ingenuity.
As the world opens up again and the UK begins to forge a new identity as an independent trading nation, there is significant room for growth in the sector, as well as a chance for the food and drink industry to show how resilient it can be.
So, from changes in the industry to rescue and recovery options, read on to discover what’s next for the industry and how insolvency law specialists McAlister & Co can help ...
The impact of 2020 on the industry
The UK’s food and drink industry and the wider ‘eating ecosystem’ of sectors it supports contributes £460 billion to the national economy, employing millions of people across Britain.
However, the COVID-19 pandemic has had a significant impact on businesses operating in the sector. Exports fell by 9.7% compared to the previous year, beginning with the first round of restrictions in February and March.
Despite easing of restrictions and sporadic re-openings throughout the year, exports continued to decline substantially throughout the duration of 2020.
Resources were squeezed, demand was impacted, and plenty of problems arose as a result, from hospitality suppliers to high-end restaurants and even those supplying into retail due to the additional costs of keeping things COVID-secure.
Of course, the COVID-19 pandemic hasn’t been the only problem faced by the food and drink industry in the past 12 months. EU border issues are also an ongoing issue, with export figures in January 2021 dropping by a staggering 75.5% compared to the previous year.
Additionally, the value of exports has also fallen by -8% in EU markets. In fact, most of the top 10 food and drink products exported by the UK were negatively impacted by both COVID-19 and the restrictions of movement.
So, what happens next?
With vaccines rolling out around the world, we should start to see the global economy reopen – and with it, the demand for hospitality too. Additionally, after years of uncertainty around EU exit arrangements, strong growth is predicted in other markets such as Asia and the Middle East.
However, there’s no denying that the pandemic has fast-tracked the transformation of the food industry. Global consumer preferences are changing, people are becoming more health-conscious and there’s more of a demand for fresh, healthy, additive-free foods.
People are also spending more time in their own kitchens, whilst food issues that were already on the radar due to their social and environmental impact are now in the full glare of public attention. As such, it has become more important than ever to rethink the future of food. Here’s how to do it:
6 ways to adapt your hospitality business for the future:
1. Cut costs
If you are going to turn things around and future-proof your business, it’s essential to cut costs. Not only will doing so improve your cash flow, but by closely monitoring your financial position, you can show any creditors that you are fully committed to dealing with the issues at hand.
Reviewing balance sheets to see what efficiencies you can make is a good way to save money and improve your cash flow, whilst other ways to cut costs include asking your landlord to pay monthly rather than quarterly, and you could also see if you can negotiate a better deal with suppliers to save you money.
2. Watch your waste
In addition, try to get lean and watch your waste. Food waste is an incredibly sore issue thanks to the pandemic, with 92% of consumers saying it was important that the ingredients in the food products they buy are produced sustainably – and reducing waste is the single best strategy for cutting restaurant costs.
In fact, food waste costs restaurants £682 million annually, which is a loss of almost £1 per meal. In countries where lockdowns have been in place, waste is at an all-time high, so, moving forward, it’s important to rebuild sustainable businesses that reduce the amount of waste.
3. Respond to customer demand
This leads on to our next point: more than ever, consumers are health-conscious and looking for fresh, additive-free food with traceable origins.
The pandemic has been hitting people with pre-existing health conditions, such as diabetes and obesity – and as a result, consumers are looking to improve their health through optimising their personal diet.
Whether it be focusing on meat replacements, or special products adapted to specific nutritional needs, the new normal will see consumers much more concerned about the nutritional value of their food.
Food safety concerns will also be further heightened in the wake of the pandemic, leading to more regulatory pressure, and premises will also need to be covid secure in order to reassure customers of their safety. Find out more about making your business COVID secure here.
4. Access government support
During the most recent lockdown, the government announced a number of new support measures to help struggling businesses, including a £4.6 billion relief package for UK retail and hospitality.
Top-up grants of up to £9,000 per property for retail, hospitality and leisure businesses were designed to help businesses through to spring 2021, and a further £594 million was made available to local councils to assist any business impacted by the lockdown but not eligible for the new payments.
If your business is still struggling due to COVID-19, the Coronavirus Job Retention Scheme has been extended until the end of September 2021, and there is also still time to apply for the second payment cycle for grants for businesses due to national restrictions.
Additionally, the Restart Grant Scheme has recently been launched to support businesses in reopening safely, with eligible businesses entitled to a one-off cash grant of up to £18,000 from their local council.
Finally, establishments can also use the Recovery Loan Scheme to boost finances. Up to £10 million is available per business, with the government guaranteeing 80% of the finance to the lender and the scheme is open until 31 December 2021, subject to review.
5. Consider a Company Voluntary Arrangement
If your business is currently struggling but you believe it still has a viable future, one potential option is to turn things around with a company voluntary arrangement.
A CVA is a legally-binding agreement that essentially allows you to draw a line in the sand and strike a deal with your creditors to repay them from future profits.
The deal is based on preserving your company, rebuilding sales and profits and paying something back over an agreed period of time, which means you can focus on continuing to run your business and navigating the new normal, so you have a chance to turn things around.
6. Restructure with a pre-pack administration
Another option available to struggling companies is a pre-pack administration. A pre-pack is a way of restructuring a business so that it can be packaged and sold to a new company that is often controlled by the same directors.
An administrator will be appointed to wind up your company, and a new company will then be set up who will buy the assets and business from the original business.
By buying back assets at market value, you can minimise the loss of assets and staff jobs – and once sold, the business is sold, you can restart without your debts. What’s more, your business can carry on trading during this process, too, giving you the chance to future-proof your future.
How McAlister & Co can help
If your food business is struggling to recover from the setbacks of 2020, McAlister & Co are here to help.
As insolvency law specialists and business rescue experts, whether you need advice on cutting costs, want help putting together a plan for the future or are looking for a legal insolvency procedure to provide you with the breathing space you need, we can point you in the right direction.
The sooner you seek professional advice, the more options you will have available to you. So, if your business is facing financial difficulty and you’re not sure where to turn, contact McAlister & Co today for free, confidential advice. Our team of insolvency law specialists will be more than happy to help!
