Staying on the menu: the food and beverage industry’s response to COVID-19

The Food and Beverage industry, especially that part of the sector covering restaurants and hospitality, has been hard hit by COVID-19 through forced closures and other restrictions. Along with tourism, the industry is arguably the one who has been hardest hit by the pandemic and, just as there was some hope with an upturn in trade for Christmas, the Omicron variant has begun to bite.

However, there has been much innovation in the sector highlighting the resilience of the people running businesses. This is evidenced by the increase in home deliveries from businesses which had not previously used this route to market, along with the developments of meal kits and recipe boxes delivered to customers. All this innovation means you could benefit from tax reliefs, and should be discussed with your advisors. At a time when managing cash and working capital is critical, maximising tax reliefs such as Research and Development tax credits, can be beneficial.

Businesses that chose to operate home deliveries had to adapt rapidly - improving websites, working with delivery firms, improving logistics, adapting products to differentiate their offering from others. The challenges this brings involves restructuring the businesses, updating and continually flexing forecast, refinancing and restructuring debts which, we have been able to support our clients with. With continued uncertainty, it is critical business owners continue to adapt and revisit business plans, and carefully manage stock and working capital so that they can survive and take advantage of opportunities where they present themselves.

Growing and maintaining the customer base

From a business perspective, this requires those running the business to identify new types of customers, look at new methods of getting the product to those customers, considering new types of funding, assessing the pricing of the product and making sure they either have the resource to deliver the product or that they link up with a third party that is reliable and provides the service at the right price. Over and above this, the best will look at branding and marketing to ensure they maximise both market share and longevity of the business. Overall the pandemic has taught us the most successful businesses are those who can adapt quickly and are able to be flexible. Those businesses who can diversify have also proven to be the most resilient.

Technology clearly plays an important role, both directly through websites and also through innovation, in reaching new markets. An example being, a local business that adapted to providing cocktail making classes to businesses for entertaining staff and clients via Teams/Zoom. These types of business will no doubt evolve again post-pandemic, to retain their customers and build on the successes achieved during the pandemic.

A change in consumer habits

The pandemic has also resulted in consumers refocusing and, in many cases, reaching for new and more healthy products such as meat free products. This has been further enhanced by the focus on the environmental benefits leading to notable changes in consumer demand. This has significantly increased consumer demand for products which were previously less mainstream. In doing so, many companies have decided to invest in new products in order to ensure they are well positioned in this growing market.

External pressures

More recently, the sector has also had to deal with staff shortages as demand returned. This also contributes to the strain on business, who are already impacted by supply chain issues. This week, the BBC reported that Food Industry representatives warned that the UK is facing a “worsening food supply chain crisis” with the National Farmers Union calling for the government to commit to retaining the country’s food self-sufficiency at 60%. Arguably, given the lessons that the pandemic and subsequent supply chain issues have caused, you would have thought the government would need little prompting and would in fact be looking to increase the country’s self-sufficiency. This would not only help ensure that any food shortages are limited, but would also help with environmental targets by reducing food miles.