Surviving or Thriving?

A round table perspective on the South West’s Food and Drink sector by industry leaders

March 2023

About the author and why this report:

Webselect is a brilliant e-commerce agency based in the heart of South Devon for the last 25 years, providing tailored and consistently solid e-commerce software solutions for accelerating online sales. Webselect builds the technology and user experience being the ‘secret sauce’ behind brands online success and it's all engineered by a team who’ve been perfecting it for years. With a range of loyal clients across many sectors including fashion, lifestyle, gifting and food and drink, Webselect takes the time to understand a client's business, advising towards appropriate solutions in digital channels now and for the future. As a member of Food Drink Devon, Webselect wanted to better understand the thriving food and beverage sector in the South West, take time to temperature check feelings and confidence for the year ahead with business leaders and give that insight back to the sector. The theme was ‘Surviving or Thriving?’ 

Executive Summary

The South West food and drink market is facing several challenges, with supply chains being a major concern. Surcharges on orders due to fuel prices, product adjustments, additional staffing, and courier costs have led to a knock-on effect, where businesses cannot offer set prices or develop products due to ingredient availability. The fuel crisis and ongoing supply delays for rural properties have also led to challenges, with businesses forced to raise wages and product prices multiple times to retain staff, while labour gaps have emerged due to the lack of seasonal workers since leaving the EU. Additionally, the monopoly of courier services and their strikes have impacted the market significantly. Sustainability and B-Corp values were discussed, but there are concerns that the value of such certifications may be diminishing.

The discussion examined the impact of e-commerce channels on businesses and highlighted the benefits and challenges of using e-commerce platforms, hiring digital agencies, and shifting to online operations due to the pandemic. The use of e-commerce platforms can streamline processes and help establish relationships with customers, but can also have high costs and limitations if not executed well. Hiring a digital agency can help businesses with digital presence but requires trust, transparency and communication. The article also notes the importance of targeting customer needs and creating a strong relationship between the business and the agency. The challenges and concerns surrounding e-commerce and digital agencies create barriers for SMEs looking to grow their online presence.

In summary: the South West food and drink market is facing significant challenges in its supply chains and labour force, which are impacting pricing, product development, and overall business operations. Recruitment, staff retention and pressure on salary expectations is and remains a significant challenge with concern for the remainder of this year. Marketing and marketing budgets are being squeezed in tougher times but there is agreement that progressive brands see the opportunity to maintain or perhaps ‘double down’ on marketing to gain a larger market share where others are cutting back. It was agreed that digital channels are vital to relationships with customers and trade partners and supply chain and building a trusting relationship with partners is key to ensuring that the outcomes match the business needs. Business leaders in the sector need guidance to help their business grow.

Is 2023 a year of surviving or thriving for the South West food and drink sector? The panel were mixed, however despite many setbacks, and challenges ahead confidence remained buoyant and the term ‘strive’ seemed to be the middle ground.

Supply Chains

‘What are the key challenges to the Food and Drink market in the South West right now?’ The whole panel replied with supply chains. Amongst the issues raised were that prices are no longer set or predictable. An order may be placed and on receipt, the invoice may state a surcharge that was undisclosed at the time of order. These surcharges may be added to cover fuel prices, price adjustment of the product from the original supplier since the order was made and in some cases, additional staffing or even courier costs.

This has had an enormous knock on effect to the food and drink businesses present. They cannot offer set prices to their clients, or may have to review a price that was negotiated before their ingredients prices increased. Product development has been affected by ingredient availability. Popular products aren’t being made because the ingredients are too expensive or it’s not guaranteed that they will be made available in the near future. For fresh food producers, this has an immediate impact on the trade orders made fresh that week and whether they can fulfil orders to shops, delis, cafes and pubs. No one wants to make their produce and then find the customer can’t afford them or has to turn down their delivery, especially when fresh food spoils and can’t be reassigned to another customer on another order.

One business found this problematic as they are unsure how they are going to keep up with demand in a year where they are forecasting a 120% growth on last year, whilst a south west based soft drinks business are continually informing customers of availability on different lines each week, taking resources away from the business.

Cost of fuel

‘I bought some cask furniture (the closures for beer casks) and it came with an electricity surcharge of 19%’

Norm Lewis, Summerskills Brewery

The ongoing fuel crisis from last year was also highlighted as a significant challenge. Devon may have the largest road network of any county but it remains predominantly rural. Many domestic and few commercial businesses are ‘off grid’ and rely on oil as their main fuel supply. These properties did not and do not receive any fuel support like those on mains gas and electricity. They are held at the mercy of the supplier getting out to them ‘when they can’. Deliveries have been delayed to accommodate larger customers, or they simply fail to show up on the days they’ve arranged. Due to the rural nature of these businesses, delivery times can take longer so the profit for the supplier becomes less - the small business fails to become a priority for the suppliers.

Staffing costs

Last year, one company put their wages up 3 times in one year, and raised their product prices twice. This was to keep the staff happy and incentivised, feel valued and appreciated. The minimum wage keeps rising and to keep the skilled workers at the set rate above the minimum wages, there was a rise across the board. This equates to hundreds of pounds a week. Another business used to have a workforce come from abroad, seasonal workers, for 4 months. Since leaving the EU, they’ve not returned and a huge labour gap has been left. The business turned to a local college to try and fill these gaps but the staff turnover became high and increased the overheads for training and onboarding new staff. The problem still isn’t sorted or running as smoothly as it should, but they’re having to try different tactics to find a solution.

The term recruitment affected everyone at the table. With 71.4% of the table looking to offer jobs this year, here are a few reasons why they were not looking forward to the recruitment process…

• No one wants to work, or if they do it’s for 15.99 hours, the point at which it affects their benefits.
• Young people who would have typically gone out to get a weekend or holiday part time job - experiences at the table to date are that they have little work ethic. Common sense is lacking and there is no ‘gumption’ to just get the job done. They have more rights than ever and far better wages and work environments but this doesn’t appear to be enough.
• The hospitality industry is used as a holding ground before the ‘better, more desired’ job comes along.
• Agency staff are used to fill a staff gap but they cost the earth and usually don’t stick around long after training. They become transient. Any time taken to train or support new staff is time, money and energy lost and has led to some employers placing more work upon themselves - twist it around and it’s time saved, even though they themselves are then working harder. THis in itself is a risk to business as it is not sustainable.
• Businesses that had turned to the European market to fill seasonal vacancies lost out when Brexit happened and the UK market hasn’t stepped up to fill the gap.

The hospitality industry has been horribly underfunded for years and minimum wages have only served to attract temporary, low skilled, seasonal workers before they move on in their employment. After a 4 month placement, one worker left to start employment in her dream job. This was 4 months of time, training, effort, sharing of a passion… that was just wasted. It’s left a bitter taste in the employer’s mouth who is now finding it difficult to try and fill that place again, but rather just take on the extra work on themselves. When a small business invests in new staff, they are vulnerable to losing time and energy that could have been directed elsewhere in the business.

Reduced travel services and increased housing costs from ‘re-locating Londoners’ who do not invest in the economy all year round have crippled the labour pool of those people who love the area, who want to stay and be part of their heritage, landscape and culture. To buy into their community sometimes isn’t an option.

Sustainability credential / B-Corp

‘Is this something we should all do?’ If you’re doing it naturally and particularly if it's part of the owner/founder's personal beliefs, then Yes. The news of BrewDog losing their B-Corp status has shaken the table into deep consideration of ‘is it worth it?’ Views were shared that if your business genuinely holds those values, then an initial self audit can highlight whether you match the B-Corp values - on completion, you can determine whether it’s right for you. It was voiced that the B-Corp values can be used as a framework to support your business working towards those values without actually applying for B-Corp status.

The status of ‘being B-Corp’ was recently scrutinised when Innocent drinks gained their B-Corp certificate even though the parent company Coca Cola hadn’t. What made Innocent so different to Coca Cola if they are led by the same business leaders? BrewDog recently lost their B-Corp status leaving business leaders asking how it would affect them if the same happened to them. How would that tarnish the brand and what if it’s a factor out of their control, say a law or a change in supplier due to supply chain issues? Everyone agreed that it was a deeply personal choice taken by each business leader with many factors to be taken into consideration including those of the business culture accounting for staff, consumer and environment.

The panel was interested to discuss the emergence of a new target market. Whilst of a generation that were always the new up and coming generation, it feels like the pandemic has streamlined their requirements. Eco. Ethos. Brand values. This is a younger generation looking to reduce their carbon footprint and wherever possible, pay a little more to support their personal values and beliefs. They are far more engaged with social media and are more willing to showcase these values and brand support than previous generations.

The core dilemma for the panel was whether consumers and customers are making direct purchase decisions based on sustainability credentials and the cost of achieving a recognised accreditation, there was no clear understanding.

Couriers and outbound distribution

“We tried sending parcels to ourselves to get the full experience”

Cheryl Ingram, Jolly’s Drinks

The Royal Mail strikes in December 2022 really focused the spotlight on supply logistics with the inconvenience being emphasised just before Christmas. The whole table concurred that the situation had been stressful and created some difficult conversations and decisions, undoubtedly revenues and reputations were lost.

On the announcement of the strikes, businesses looked to couriers to fill the gap and couriers approached businesses to support where they could. With one less service being provided, it was placed upon the remaining services who in the time sensitive period before Christmas who then had their services oversubscribed. The perception was they’d been greedy. One leader had booked 300 slots for a courier collection which was hastily reduced to 70 leaving 230 courier pick up slots to be found. Some people turned to using 3-4 couriers and playing them off against each other to ensure a decent price and fulfilment of shipping goods. Others were ringing around trying to book slots at local shops and garages. A test run with 3 different couriers was made to allow the business to make the right choice for them - if they could see how they were treated and the product in transit, they could trust and rely on that courier as a partner.

2-3 weeks after the Royal Mail’s initial strike action had started, the courier's customer service became sloppy. Complaints ranged from no communications, late pick up and even no shows for pick-up’s waiting for them - they’d effectively been ‘bumped’ for the larger customers. Business owners and management teams were taking out delivery vans themselves, anything to make sure that deliveries were made. To date, not a single business has returned to Royal Mail.

A handful of Christmas deliveries were never received. Refunds were duly made to the customer and claims were made against the courier, who did eventually refund the £7 delivery charge. Why should the small business lose out because of the courier’s mistakes? As a small business, customer loyalty and product satisfaction is so much more important as every order or transaction is buying into someone’s time and passion. With spending contracted due to press stories of a shrinking economy, orders reduced and couriers failing to deliver, Christmas was a much tougher time than normal. Typically it is that Christmas boom that can support a small business through the quieter months of January and February.

The press coverage on the strikes did ensure the public were aware of the delivery crisis and softened some awkward conversations when customers were placing or chasing their orders.

Marketing in hard times

“If possible, you’ve got to try and maintain your level of marketing activity, so when

the economy recovers and consumer confidence returns, you’re at the top of the pile”

John Williams, Greendale

Universally, everyone agreed that they had thought to cut their marketing budget as soon as financial difficulties or priorities were changed. However, everyone also agreed that this was a ‘cutting your nose off despite your face’ reaction. When costs are going up and less people are investing in your produce, it’s natural to adapt your spending - we do it domestically and professionally. Long term however, it makes sense to have your brand known, still current and relevant for when spending does change and people are able to invest in that brand that’s been through the harder times with them. We just need to be smarter with it and adapt your marketing strategy to support a leaner budget. Be the business that people are excited to buy into when they are more able too.

One business at the table took the step of increasing their marketing budget when the financial news was building over the past 6 months. They wholly believe they are setting themselves ready for the upturn, when it happens.

Should producers sell online?

The majority of the table does sell online and have had a shop presence online since before the pandemic. Everyone has different volumes being sold online and this is typically product dependent. Drinks cans are heavy and cost more to transport; fresh foods and hampers require refrigeration; veg bags are ordered and distributed locally - everyone’s experience of online retail was different.

There was a definite growth in online sales as the pandemic hit March 2020. In fact they rocketed. What has been interesting is that while the return of foot-to-floor purchases have reduced online sales overall, they have not fallen back to pre-pandemic levels. The trend to shop online has remained.

People are enjoying the convenience of a product being delivered to their door. This was noted during and after the pandemic where visitors to the region have remained engaged with a brand on their return home and continued to support the brand from a distance by ordering online. One chance encounter and an e-commerce platform are allowing businesses to engage and create a loyal customer base, build a relationship over a distance. A slick e-commerce platform and gateway allows this process to be streamlined without too much thought, making it easier for the customer.

E-commerce platforms

“We got recommendations from established companies and got introduced and because the cost of implementation was reasonable”

Matt Szczepura, Brickhouse Garden

The ‘as a service’ platforms such as Shopify do a perfectly good job for the here and now and can be built quite quickly at relatively low cost, but there were concerns voiced over how to have the site grow with their businesses or support a business change and way of working. The platforms can be very linear, limited templates that don’t always sit cohesively with the brand. There are many charges too - monthly subscriptions, security levels, payment charges, extras for additional functions for example sale banners, increasing Stock Keeping Units (SKU) numbers - they all add up to an unexpected sum each month. The time it can take to build, maintain and support a site yourself can and does take up a disproportionate amount of time away from running the business and is a frustration.

Amazon and Etsy were also used as a sales platform. They are able to offer your products ads, SEO, CMS, all in one tight package - you can see their appeal. Over time these platforms were dropped once extortionate bills were coming through with confusing bill charges - if their product was featured in an ad, even if they didn’t request it, an additional charge was made against the profit made from that product, reducing margins.

It was noticed that once an original product was uploaded onto Amazon , within weeks or even days, replica products would be available for half the price. In the current climate, for the same looks, people are opting to save a bit of extra money. If any of these giants went bust - all product reviews would be lost (no one leaves reviews on the company website. Itt’s too many clicks away and consumers are inherently lazy by nature), all energies put into ads or SEO would be lost.

Amazon and Etsy are great for wholesale fulfilment to consumer models, but if you are artisan or small in any way, they will not serve you well with minimal margins to be made and a significant amount of time.

Trying to stay local to keep business in the area, but quickly realised the skill sets aren’t necessarily easy to find for digital support - you have to look for the expertise pitching at your needs and budgets.

Digital agencies

Sadly this topic evoked a collective sigh around the table. Small business owners are quick to put their hands up and state wholeheartedly that they do not know how to do everything - but when they don’t fully understand what they don’t know, they’ll often give it a go. This is the very reason that GoDaddy, Wix, WooCommerce and Shopify exist. Why buy from an agency when you can complete a template yourself and you have full autonomy over it. This is perfectly acceptable until… the business grows, you cannot give the website the time to grow with you, you need to add a new function to your e-commerce page.

Digital Agencies are full of all these people who have the skills to complete these tasks in the click of a finger - but you don’t know what you don’t know, until you find out you didn’t know it. Frustrations lay with agencies failing to be transparent with the client or not listening to the clients specific concerns. Not being able to tailor services to each business’ timeline or area for growth development. There’s no point growing a website’s SEO and the digital presence if the business is unable to scale up production in the same timeframe. This is untenable. And anyway, why is SEO important?

The digital space that we now rely upon to support our business presence, influence, existence is such a fast developing arena that it feels intangible. Once we’ve grasped e-commerce, we suddenly have to learn about social commerce. Speaking of which, which socials best suit our business or time that we can give it? It is these concerns that create a barrier to SME’s taking the digital steps with agencies and businesses to grow their presence online.

Why hire that agency?

It all comes down to education and transparency. If an agency could model and tailor their services they’re offering to suit your business size, growth model and immediate needs, the table believed that they would be more inclined to use an agency, gain trust with them that they were working for their clients best interests - even if this service had to be tailored month on month or quarter by quarter. Costings. Be transparent please. What does £150 a month site support include? Why are this month’s fees so different from last month’s? Show us the analytics that prove that the work you are completing is working. Work with us to grow with us at the speed in which supports us.

Everyone around the table had experience of an agency stating that they would deliver, but on closer inspection actually failed to ‘see’ the business therefore ingraining a culture of mistrust or scepticism over services that could actually and genuinely create a positive customer experience and engagement with their brand.

Contracts weren’t always signed on trust and transparency alone. One business was fortunate to be able to tender their requirements and based the final decision on trust, transparency, skill sets, price, portfolio comparison (is this agency taking us on, only to focus on larger clients?) and did they like the team? Could the relationship work? Whilst this established client is extremely fortunate to be able to accommodate this process, it was discussed that not everyone was able to and were dependent on budgets, stage of the business development and growth, and immediate market focus. In the first instance, you might be bound purely by cost however there was a recognition that you ‘get what you pay for’ and an investment in a good well built, structured e-commerce site was an investment in the business for the medium to long term.

Social patterns, disposable income and product value

“If people are going out less, they want something nice”

Cheryl Ingram, Jolly’s Drinks

Consumers are significantly changing their disposable income spending habits. The recent financial news and forecasts are being reflected in consumer spending. Eating out is happening still, but most definitely on a smaller scale. When people do eat out or are looking to treat themselves, they’re aiming for quality over quantity, treating themselves to locally sourced, or an affordable luxury to enjoy at home. If disposable income is limited, there is a market who wants to make sure they are spending it in the right way on the right produce. This must be reflected in the product - a £20 plate of food must reflect £20 of quality produce and credentials, brand and origin story to back the price point.

Meeting a brand on holiday in the South West and then ‘taking it home with them’ not only showcases the products on a national scale but highlights the ease at which e-commerce can support brand loyalty and the introduction of your products to further afield than your initial local distribution scale.

Premium perception

A few businesses at the table were able to discuss the evolving change of ‘premium’. Premium is starting to be aligned with locally sourced, artisan, small batch, local produce rather than internationally known products and brands. One small distillery isn’t anything to worry about, but a whole evolving sector of many small businesses that are garnering local support, are knocking the previous brands from their once revered heights. They may be small but in large numbers they have created a concern for the renowned brands who have in reaction to this realisation started to knock on smaller doors to create bespoke collaborations and retain their hold on the markets.

Product value

At what point will people stop paying for your product and look for cheaper? This query was posed and no one was able to answer it. Cheaper products are already out there and readily available. The products at the table are conscious choices made by the consumer to support local, artisan, reduced footprint, brand identity and no one could answer when they knew the point at which customers would then take that decision to support a cheaper alternative. The

many factors affecting these ‘push’ decisions go far beyond our control and into domestic budgets. These are personal budgets that our supply chains, business rates and staff costs have no significance over. This is worrying when a typical business year would see one price rise usually made in line with inflation and cost of living but some businesses at the table have had to make 2 price rises in one year even though their suppliers may have made 3 or 4 for them to absorb in the same time frame.

It was widely agreed across the table that transparency goes a long way to building trust, engaging new and existing customers with your product and brand. If you’re honest about why costs are going up, why your delivery is going to be late and are willing to hold honest and open conversations, people are more likely to understand. It might not fix an issue but at least everyone can gain a perspective and empathy towards one another. A working relationship may well be put on hold for factors beyond your influence, but it’ll be there another day if factors realign to enable the relationship again.

International monopoly

A high level of frustration was vented over the increasing international monopoly larger corporations hold over blocking markets for smaller scale businesses. Packaging, couriers, ingredients, market pricing, taxes on imports (10%) over local produce (20%) - whilst everyone was doing their utmost to curb the impacts of these giants over our industry, it all feels a little bit helpless.

What can and is being done to support the industry's tenacious business owners? Even though we’ve left the EU, we still have international companies deciding how they influence our supply chains and the regulations are still not in place to support our nation’s best interests or food security in these decisions, they are wholly out of our hands.

Packaging

The last few years have had an increasing awareness of being ‘eco’ and especially from your packaging. This really came to the forefront of businesses' consciousness during the pandemic when cardboard prices increased tremendously as everyone turned to online shopping. Small businesses were now competing on the same platform as larger wide scale businesses and decisions had to be made about whether the consumer would be focused on fancy, eco, lightweight, protective packaging. Those decisions were made rather quickly in the first instance and as time went on and more packaging was required, businesses were able to reflect on what mattered to them, their consumer and ultimately, what they could afford to purchase in a turbulent market.

Finding packaging for the smaller individual items was more challenging as larger businesses were able to offer up front fees to ensure their supply didn’t suffer or diminish which posed a significant problem to smaller scale businesses who were not able to offer this financial incentive. Cans and bottles were ordered and in some cases were more expensive once an additional surcharge was added on delivery. The monopoly over being able to order large scale quantities really impacted on the smaller businesses who had no perceived impact on the markets.

Customer engagement

Meet your target market! A discussion was had about the buyers of the products and there was often a stark contrast in product lines being popular with B2B compared to those preferred by B2C. Fayres, tasting events, event support, markets, trade fairs - anything that can introduce your product to a customer became so much more important after the Covid pandemic. We were re-introducing our brands and reminding people of who we were, that we were still here and in some cases had developed even more or different product lines. You simply cannot ‘try’ a product online so putting it in front of people and finding out face to face what people like about your product, or don’t, or where they can purchase it is all such valuable information and feedback that online just cannot offer. This goes for wholesale too as they are often bridging the gap and getting your product onto the shelves.

Business Forecasts - ‘Surviving or Thriving?’

The final question: Do the Panel see this as a year to survive or thrive?

Businesses are looking to thrive. Business plans and financial decisions are being scrutinised more regularly to support short term and long term growth. Of the businesses around the table, some businesses were less optimistic and see this is a year to survive whilst a majority was looking to thrive. It was wholly acknowledged that the next 6 months would pose challenges and would potentially be seen as the ‘survive’ months but beyond that, opportunities were being sought after, the pandemic mantra of ‘adapt’ was key to embracing a wholly unwritable or predictable 2023. International events and corporations will continue to have an impact on the decisions made, the directions taken and will ultimately shape how these businesses look to complete 2023 and indeed if they look anything like they did at the start.

The panel agreed that to be a food and drink business owner, you have to demonstrate a fair amount of tenacity and agility and whilst it appeared for a while that this would be dampened, this group of representatives are clearly seeking to stand their ground, speak up and be proud of their achievements to date. Overall, there is confidence in the industry, all businesses continue to strive and are looking to the spring summer season, it looks like 2023 might actually be a year to thrive. Watch this space.

The contributors

Location: Webselect, 1, New Walk, Totnes, Devon

Attendees: 

Harriet Judge
Marketing and e-commerce Manager, China Blue

Norm Lewis
Owner, Summerskills Brewery

Greg Parsons
Owner, Sharpham Cheese

Matt Szczepura
Director, Brickhouse Vineyard and Garden

Cheryl Ingram
Director, Jolly’s Drinks

John Williams
e-commerce and Marketing, Greendale Farm Shop

Clair Harrison-Jones
Business Development Executive, Webselect
Director, Shepherd Shack Catering

Matthew Hill
Managing Director, Webselect / Host of Round Table discussion

Reporting Authors: