Covid-19 is still presenting challenges to the industry and just-food spoke to a number of packaged-food manufacturers operating in the UK for their latest views on trading.
Winterbotham Darby
Winterbotham Darby, based in Surrey, south of London, produces olives, antipasti and continental meats, as well as pickles and ferments under its brand Vadasz. The UK group also manufactures plant-based food through its vegan brand Squeaky Bean and distributes the products of Dutch plant-based business Vivera in the UK.
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The company is converting one of its manufacturing facilities into a dedicated plant-based site and CEO Steven Higginson believes, in a more health-conscious environment, prompted by the Covid-19 outbreak, “there is an appetite from consumers to reduce their meat consumption”.
In terms of the immediate effect the virus is having on Winterbotham Darby, he says: “Less than 20% of our business is in foodservice so that is not as strong an area for us as with some others.
“A lot [of focus] has been re-directed into retail which is where we are strong so all of our areas have done pretty well.
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“These were growth categories anyway but some of them are doing especially well during the Covid period, such as antipasti and Continental meats. Our charcuterie products, such as chorizo, have seen a 40% [sales] uplift during the Covid period. And Squeaky Bean has done particularly well, growing over 200% year-on year [in sales terms] while the total plant-based business has grown by 65%.”
“We are all trying to figure out what the new normal is. There’s not going to be a 100% return to the office anytime soon so building in convenience into the proposition is important in terms of lunch, snacking etc. This is a mission-led proposition.
“From an economic point of view, there is likely to be a little bit of a divergence between a focus on value parts of the range and indulgent treats and social entertaining-type solutions. There will be a flight to premiumisation and a flight to value.”
St Pierre Groupe
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St Pierre Groupe co-founder Paul Baker |
UK bakery business St Pierre Groupe – formerly Carrs Foods – manufactures bread brands such as Paul Hollywood, Baker Street and St Pierre. More than half of its revenue comes from the US.
Paul Baker, co-founder of the business, based in Manchester in north-west England, says: “We are very fortunate in that people have retreated to their homes and premium bakery products have featured quite highly on shopping lists.
“We were already a high growth business before lockdown. We have had a meteoric rise. We are now the number one brioche brand in the US.
“We rose to the challenge [of Covid] but nothing is ever perfect. We could have done with a lot more product. The demand put on brands has been immense.
“But sales have been up across the board for us – 30% year-on-year across the business. All our products have come into vogue in their own particular ways. It might be brioche burger buns because people might want to treat their family to a nicer quality burger bun or Baker Street products because they have a longer shelf life.”
“Prior to lockdown our exposure to foodservice as a proportion of our revenue was relatively low but we were actively developing products for that channel and that’s still the case.
“There are still challenges in the supply chain because of social distancing and there is still restricted capacity on some product lines.
“People in a recession don’t necessarily compromise on product quality”
“We know we are heading into a recession and there has been a fear that premium brands will suffer but we don’t buy that so much. It is all about the value proposition. People in a recession don’t necessarily compromise on product quality – they will just be more discerning about what they want to buy.
“The move to online shopping has massively accelerated. That shift is well underway and that holds huge challenges and opportunities. But we are investing heavily in our brands. We are not frightened. One constant in our business is change. If you take this outlook, when there are big shifts you are better able to cope with them.
“But a six-month view is that we will still be dealing with this. We are preparing ourselves for a long, slow, trek out of this period.”
Kind
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John McManus, managing director of Kind’s UK arm |
John McManus, the managing director for snack-bar firm Kind’s UK business, says the company doesn’t expect the demand seen in January or February to return until around October next year.
“We have gone a few different routes the last couple of months in terms of how do you plan for this. When we were in the midst of it [Covid-19], our planning cycle, even short term, just went out the window.
“We are not preparing for a second wave. We feel confident that any second wave will be either regional lockdowns or there will be a slightly different strategy. But what we are planning for, and we’ve already put it into our 2021 plans, is a seriously slow return to pre-Covid levels.
“We really have to be cognisant of how we forecast. We don’t want to be overly optimistic like we were this year. We are going to err on the side of caution.”
“The data tells us from the 2008 recession that consumers really backed into the leading brands, so now is the time for us to act. When we get into recession – because we think it’s going to be a fairly long one – we need to be front-of-mind for these consumers, so we are trying to turn the concern into opportunity to grow the brand awareness.
“But I think we are in for a year or two where this category especially … we are going to see a lot of brands in decline and we are going to see a lot more brands using price as a tactic, which is something we don’t encourage because ours is an expensive product and we are premium-priced for a reason.
“We did so much work before coronavirus on Brexit, especially with our raw materials and what impact that would have, so we’ve done a lot of work and preparation on a trade deal or no trade deal. So I feel we are in a good place with it but it definitely went to the back of our minds. And I would also say it went to the back of customer’s minds as well. We expect this to be back on the agenda very very soon.
“We’d like to say we are insight-driven but, the insight right now is pretty much on real time.”
Noisy Snacks
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Noisy Snacks founder Noel Allen |
Noel Allen founded the UK-based business two years ago. The company aims to start its own manufacturing in the next few years and will list in Tesco in its home market of Northern Ireland in October.
“As we are still a small brand, we can adapt and rotate to problems as they come and do it quite fast, and that’s kind of what we’ve been trying to do.
“We’ve created a few white-label products and if we were manufacturing that would set us up for stronger relationships to build with retailers in the future.
“Covid-19 has made it harder with regards to us as a business to get investors. As a challenger brand, it puts you in a difficult position because it’s a higher-risk investment. There’s a little bit of power in regards to the investor side because they are going – ‘Well, loads of people are going to need money’ – and they are going to use that as a negotiation technique.
“But it’s going to take more than Covid to stop us achieving our dreams. It’s something else we are going to have to deal with and everyone else is going to have to deal with it, too. At the end of the day, we are on a level playing field. We just have to try and out-think the competition.
“Hopefully there isn’t a second wave. That would probably be a disaster with regards to most businesses and most industries. It’s definitely going to be challenging regardless of which way you look at it.
“There’s going to be a huge boost toward value offerings, which makes it very difficult for challenger brands and smaller up-and-coming brands to meet the commercial needs of a value price point.
“It will be interesting to see what happens with Brexit and coronavirus on exports. Will countries support more local brands?”
“It [Brexit] is on our minds but it’s one of those things that’s now in the back of my mind with the whole coronavirus thing because in hindsight it’s not important at all compared to progressing and getting through.
“The big thing we were always really fearful of was this tariffs scenario because we get our products manufactured. We source all the ingredients and the products come from the EU and it’s all packed in the UK. A big concern for me is are we going to bring all this stuff in and have to pay tariffs in the UK? Then the stuff’s going to get shipped over to Northern Ireland and do we have to pay a tariff there?
“It will be interesting to see what happens with Brexit and coronavirus on exports. Will countries support more local brands? Is that maybe going to reduce the opportunity for exports? We just don’t know.
“There will always be survivors in regards to these types of things, and if you want to be one of them you’ve just got to come out and start fighting.”
KK Fine Foods
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Yves Regniers, CFO of KK Fine Foods’ parent Ter Beke |
Belgium-based manufacturer Ter Beke has two businesses in the UK market – one supplying pâte from Belgium and KK Fine Foods, a ready-meals supplier, based in Wales, serving the retail and foodservice channels.
“The pâte business has been pretty stable through Covid, steady going. We’re focused on large volumes and specifically on two products – Brussels and Ardennes pâte. It’s sold through retailers. There’s very little foodservice business.
“Our UK ready meals business, KK Fine Foods, sells frozen ready meals in the UK market. The business we purchased in 2017 was historically focusing on foodservice. We bought our retail experience to the business and have grown retail, which is now about 30% of their products, which you can find back in the likes of Iceland, Waitrose etc.
“But foodservice is still an important part, and that’s obviously where Covid has impacted us quite a bit. Those sales have virtually dropped to zero during the lockdown period.
“We’ve unfortunately released some staff. We had more than 500 staff at the facility. It’s about 200 staff less now than there was historically. We initially obviously furloughed those people, we’ve made an estimate of where the running-rate of the business will be and we’ve adjusted our cost base to that, which is never a pleasant thing to do obviously but we believe we needed to get profitability back to a normal level in the second half [of 2020].
“As the market comes back, I think we will be able to attract the workforce and gradually build it back as business comes back but we didn’t want to keep staff on our books and then risk that, when furlough schemes are over, to have staff that we can’t really give a daily, steady job to.
“July [and] August were in line with our projections or even a bit better. In August, we saw the impact of the ‘Eat Out to Help Out’ scheme that was launched by the UK government. We’re still a little bit cautious because once the ‘Eat Out to Help Out’ scheme finishes where is it going to settle? How quickly is it going to pick up? Is there going to be second wave? Will there be local lockdowns or not?
“We did see increased sales with our retailers but not enough to compensate the foodservice loss. We continue to believe there’s further growth in the retail landscape. We continually win new business. We’ll continue in foodservice but there will not be huge growth in foodservice. There will probably be growth from other concepts – home delivery, where KK is well placed to pick up a role in the future, as we see central kitchens for some of the delivery providers. Within that foodservice landscape, some concepts may decline a little bit but others will probably grow, such as home-delivery items.
“We are expecting a gradual recovery. We are cautiously optimistic, and we’ll continue to build our retail franchise. I think we’ve got the right products to achieve that. Obviously we’re a little bit dependent on the overall recovery of the foodservice industry there but I’d say cautiously optimistic.”
