Coronavirus and the future of wholesale

Coronavirus wholesale industry

The coronavirus pandemic has affected the wholesale channel on a level never seen before. Paul Hill investigates how the industry reacted and what the future holds


The wholesale channel has dealt with numerous challenges throughout history, but nothing could have prepared it for the issues the coronavirus pandemic has brought and the speed at which they’ve taken place.

Following the chancellor’s announcement on 17 March that a £330bn loan guarantee would be made available to businesses affected by the virus, the prime minister then addressed the nation three days later ordering all cafés, pubs and restaurants to close.

Then came a 23 March televised address in which the prime minister announced a UK-wide lockdown. It was during this address that he instructed the public to stay at home, except for certain, and very limited, purposes.

Although the warning signs were there, with the likes of Italy and Spain already introducing similar measures, the sudden announcement in the UK led to some wholesalers needing to completely revamp their business model overnight, with some companies losing between
70-100% of their customer base.

James Bielby, chief executive of the Federation of Wholesale Distributors (FWD), was quick to point out that the coronavirus crisis support package that had been introduced did not work for the wholesale sector, due to its high overheads and lack of cash coming in.

James Bielby FWD
James Bielby, of the FWD, has been in constant dialogue with government officials throughout the coronavirus pandemic

He also described how the FWD had been and still is engaging with Defra right up to the secretary of state, with the officials understanding the unique pressure on foodservice distributors. “What we haven’t yet seen is a commitment that this fundamental link in the supply chain to thousands of catering and hospitality businesses will get the cash injection it needs to carry on serving its customers,” he said.

The FWD then set up a discussion forum for its members to share intelligence and ask questions regarding the coronavirus crisis, with guidance for wholesalers on its website.

“We have interpreted the guidance as it applies to wholesale and taken legal advice where necessary,” said Bielby.

Further down the line, the FWD stated that it was still highly concerned for its members that operate solely in the foodservice market, as it appealed for extra measures to help them get through the next few months.

“For the members that serve retail and foodservice, they can shift resources internally. For the pure foodservice distributors, no customers means no cash and nowhere to go. This is the section of membership that we’re most concerned about,” he added.

Supply issues

With foodservice firms having to rethink their entire operations, wholesalers within the convenience sector were experiencing the complete opposite issue of not having enough availability due to the initial panic buying by large sections of the general public.

Bestway Wholesale managing director Dawood Pervez called on its supplier partners to offer a balanced approach regarding delivery of orders, with the supply chain facing difficult decisions over who to supply first and where to prioritise.

Dawood Pervez Bestway
Bestway’s Dawood Pervez was quick to point out the supply issues at the start of the pandemic

“There is enough stock to meet everyone’s needs, but the shift in consumer behaviour alongside challenges in the continuity of business resourcing in line with government guidelines is leading to supply shortages.

“Local independent retail stores and community shops are proving to be essential to their local communities,” he explained.

Thankfully, things began to improve, with wholesalers seeing an increase in stock availability after a meeting between the FWD, industry figures and government officials. Availability returned to relative normality.

B2B to B2C

However, the issue of foodservice remained front and centre for the industry as businesses sought innovative methods to remain profitable.

One common solution was to open up product ranges to the general public – products that were lying in warehouses collecting dust and approaching their sell-by dates.

Innovators within the digital and ecommerce sectors were aware of this and began offering their app- and website-building expertise to wholesalers, with Richard Fletcher, of Foodservice Online, and Rob Mannion, of RNF, both presenting a free service to the industry.

“Hopefully this gives foodservice companies a much-needed revenue stream and takes some of the pressure off other parts of the supply chain,” Fletcher said
at the time.

“We’ve seen a huge surge in demand for digital solutions in the current climate,” added Mannion.

“New technology means we can now get wholesalers online in double-quick time.”

By the end of the first quarter, the wholesale sector was experiencing record-breaking figures, with a 66% increase in total transactions using a wholesale app compared with the same period last year. There was also an 84% increase in the total number of orders.

This dramatic increase was recorded by RNF’s Beam Commerce platform.

The platform also showed the average basket size up by 4%, representing a significant increase in value for what was already the industry’s only growing sales channel.

Adapting

As the industry looked to adapt to this new way of business, some were becoming more successful than others. Southampton-based Harvest managed to get back on track after the initial shock of losing 85% of its customer base overnight. The foodservice wholesaler gained more than 8,000 newly registered members on its system within the first month
of lockdown.

Blakemore Foodservice and Henderson Foodservice, meanwhile, launched click & collect services in which they allow members of the public to buy food in family-size quantities during the coronavirus pandemic.

Mark Stewart-Maunder, Henderson’s business development director, explained that the service enables the Northern Irish wholesaler’s customers to view and purchase top food and drink brands, as well as its own bespoke collection for professional caterers from the Country Range Group.

“We plan to add new products and ranges over the coming weeks and will take into consideration customer feedback as we develop and tailor the service to suit customer tastes and requirements,” he said.

Collaboration

Perhaps the most surprising event to take place since the start of the pandemic has been traditional rivals Brakes and Bidfood joining forces to take on a government contract.

This ensures vital food supplies reach the country’s most vulnerable people during the crisis.

The project sees the two foodservice giants working together to deliver weekly care packages across the UK to people at high risk from the virus who do not have easy access to food.

The parcels contain more than 20 essential items, including pasta, cereal, tea bags, fresh and tinned fruit, milk, bread and biscuits, as well as non-food items such as toilet rolls and shower gel.

In addition, Brakes Scotland has lent its logistical expertise to Dundee-based CJ Lang to help manage delivery of increased volumes at its Scottish stores.

With demand increasing, the Spar wholesaler began utilising Brakes’ driver and vehicle resources to increase existing delivery and logistics capacity.

“We have access to a constant supply of food and drink products from our warehouse as we continue to experience a huge increase in orders from our Spar stores,” said chief executive of CJ Lang Colin McLean.

“The company’s logistics operation is running smoothly; our warehouse team and drivers have been tremendous in maintaining this constant supply.”

The future of wholesale

However, despite all these positive stories of innovation and partnerships, the fact remains that they are just stopgaps that can only temporarily fill a huge void. The foodservice sector faces huge losses if government help isn’t forthcoming.

A survey from the FWD members showed that 33% could face financial ruin without government support.

“We are calling on the government to offer some sort of tax relief on products that, through no fault of their own, wholesalers are having to dispose of,” explained Bielby.

Furthermore, at the time of writing, the initial government projection is for some cafés to open at the start of July and other foodservice outlets, such as pubs, to open in August or September. This would be too long for certain wholesalers to survive, and even then, it wouldn’t mean a sudden return to normality.

In all likelihood, it will be another six-to-12 months until the UK is back to some resemblance of normal life. The wholesale industry will look significantly different unless Boris Johnson’s administration is prepared to to offer the same support it is offering wholesale customers.

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Paul Hill
Paul Hill is the Editor of Better Wholesaling. Paul can be found on Twitter on @BW_PaulHill, or can be contacted via paul.hill@newtrade.co.uk and 020 7689 3376.

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