Focus: The hospitality supply chain and its ‘overlooked’ victims of the pandemic

Naomi Ackerman
·8-min read
<p>Frankonia Bakery in action in south west London</p> (Frankonia Bakery )

Frankonia Bakery in action in south west London

(Frankonia Bakery )

The Federation of Small Businesses chair is among leaders calling for more attention to the "overlooked" hospitality supply chain.

Mike Cherry said that too many of the pandemic's hardest-hit firms have "been left in the lurch".

He told the Standard: "It’s easy to look at high streets and provide direct support to those obvious examples of need, but what about the critical businesses behind the scenes?

“Those further down supply chains... are still being overlooked. If we’re serious about a substantial recovery from the hardship wrought by this pandemic, that needs to change.”

<p>Ben Henshaw runs Indigo Wines, which supplies venues including Hawksmoor and Noble Rot </p>Ben Henshaw

Ben Henshaw runs Indigo Wines, which supplies venues including Hawksmoor and Noble Rot

Ben Henshaw

Kate Nicholls, Chief Executive of UKHospitality, has warned that thousands of jobs are at risk in small businesses hit by the fallout from restrictions affecting pubs, bars and restaurants ever since March. She said that there are one million jobs in the supply chain directly linked to hospitality, and that "if our sector is at risk, then a large proportion of those jobs will be, too".

Latest Food and Drink Federation surveys revealed a third of all supply businesses reported decreased sales even as society opened up in the three months to October.

Many of these suppliers now also face the prospect of their clients operating with limited trading for months under Tier 2 and Tier 3 restrictions, and the spectre of another lockdown in January.

Sarah Malone, the FDF's chief economist, said: "With some members selling up to 60% of their output to these sectors pre-COVID-19, we expect more businesses to have been impacted in the latter quarter of the year given further tightening of restrictions."

<p>Calixta Killander runs Flourish Producer in Cambridgeshire </p>Calixta Killander

Calixta Killander runs Flourish Producer in Cambridgeshire

Calixta Killander

London's hospitality industry is supported by a supply network spanning the country and reaching around the world, from capital-based importers to organic farms in Cambridgeshire, and small wine producers in developing countries.

Providers to venues such as Hawksmoor, Kiln, Som Saa, Noble Rot and Soho House today said they expect to see profits down up to 70% in the year as a result of the pandemic. Several said they know their business could not survive another shutdown, while others warned that an entire supply-chain ecosystem may be devastated long-term if office workers do not soon return to city centres.

Calixta Killander runs organic farm Flourish Producer in Cambridgeshire, supplying famous chefs directly with unusual and eco-friendly produce. Douglas McMaster of Silo and Kiln's Ben Chapman are clients.

Ms Killander had to turn huge volumes of good, fresh produce into compost when London’s restaurants shut in March and again in November. Profits will be more than 50% down on the year.

She said: "Unlike others in the supply chain, we are actually the producers, not an importer. We lost 100% of our business overnight, twice. We basically had no income.

"We started selling veg boxes just to try and not waste everything and to keep people on the farm employed.

"We love our restaurants, we love our chefs, it's what our farm was built for... We will try to diversify in other ways if we can, because the business will not survive another lockdown. We would have to close the farm for sure."

<p>Ben Henshaw supplies buyers including Harvey Nichols </p>Harvey Nichols

Ben Henshaw supplies buyers including Harvey Nichols

Harvey Nichols

Ben Henshaw has run boutique importer Indigo Wines since 2003, and today his clients include Hawksmoor, Noble Rot and Harvey Nichols.

Pre-pandemic these on-trade customers accounted for around 60% of company sales. He pivoted online, but will still see the business down by around 25 to 30% this year.

He said: "There are importers and wholesalers who have been less able to diversify. I know some businesses have already restructured completely because they were dependent on restaurants. They've laid off staff.

"Central London has become a ghost town, it's scary. This affects us as the importer, but also ultimately it affects the whole supply chain back to the small artisan producers we work with... We sell some mid-upper range wines, mostly in central London hospitality, and they are now more difficult to sell. In the end it's the producers all over the developing world who are suffering.

"Recovery [for the supply chain] all comes back to those places in the centres of cities where venues are dependent on the workforce coming back in a big way."

<p>Entertainment company Sound Generation provide live music entertainment and DJ’s to London destinations including Soho House</p>Soho House

Entertainment company Sound Generation provide live music entertainment and DJ’s to London destinations including Soho House

Soho House

Entertainment company Sound Generation provide live music entertainment and DJ’s to London destinations including Soho House, Camino and Sketch London. Even when society re-opened in the summer it saw revenues at just 30% of normal levels, and the last month of lockdown has seen them return to almost zero.

Birgit Gunz is owner of Frankonia The Breadhouse in Surbiton. Sales were down 90% during the latest lockdown, and 70% for the year. Despite recovering over the summer, London moving to Tier 2 pre-lockdown saw a downturn again.

She said: "We have no help, but had practically all our business taken away. It is all very well to send staff into furlough but payroll is only about 50% of overheads. These still need to be paid, despite having no income. It is utterly shameful that nobody thinks of the supply chain."

Amanda Thomson, founder and chief executive of Thomson & Scott winemakers, said the company had pivoted its business from 50% hospitality to just 20%, to focus on retail. She said the lack of focus on the supply chain during the pandemic is "a real threat to the economy".

<p>SIBA have said small breweries ‘now have no hope for the Christmas period’ </p>Shutterstock / Brent Hofacker

SIBA have said small breweries ‘now have no hope for the Christmas period’

Shutterstock / Brent Hofacker

Industry chiefs warned that the latest month-long lockdown has left many SMEs in peril, just as a new raft of restrictions are due to come into force.

Ian Wright CBE, FDF chief executive, said: “In many cases the survival of businesses supplying hospitality is now even more at risk. Thousands of jobs are under threat.

"Each time one of these businesses goes under the UK’s ability to feed itself is reduced.”

Indigo Wines owner, Ben Henshaw, added that although he "welcomes" coming out of lockdown, the outlook for hospitality over the coming months is troubling.

He said: "Clearly any operators within tier 3 will have no business during what is normally one of their most profitable periods. Furthermore, the announcement about Christmas family socialising, while welcomed on a personal level, does worry us in terms of the possible effect it might have on stricter rules from January."

James Calder, Chief Executive of the Society of Independent Brewers (SIBA), said this week that the tiers announcements mean small breweries around the country which "lost the vast majority of their sales with the closure of pubs... now have little hope for the Christmas period".

<p>Douglas McMaster, who operates Silo in Hackney Wick, thanked Calixta and the Flourish Producer team for their support </p>Daniel Hambury/@stellapicsltd

Douglas McMaster, who operates Silo in Hackney Wick, thanked Calixta and the Flourish Producer team for their support

Daniel Hambury/@stellapicsltd

He said: "Throughout the initial tier lockdown and national lockdown two we were seeing increasing numbers of breweries close for good. Without immediate Government support including Business Rates holidays, direct grants and compensation for spoilt beer, many more will follow."

Top chefs made it clear that being able to work with small businesses in the supply chain is "critical" to their own future success.

Andy Oliver, co-founder and head chef at City destination Som saa, and zero-waste chef, Douglas McMaster, who operates Silo in Hackney Wick, both buy from Flourish Producer.

Oliver said: "We have so much respect for what Calixta and the team do - Flourish have always been there for us, and now the industry needs to support its suppliers, as they’re critical to our success."

Supply chain pandemic successes: The picture is diverse, like the supply chain itself

There were business owners who realised they could make their business model work as well, or even better, by pivoting to retail and online sales. Then there are those who could not, because their business model is too dependent on urban hospitality.

Ian McCulloch, founder of Silent Pool Gin, operates the high-end brand's distillery near Guildford. He said that the company will "weirdly" be up year-on-year after pivoting to online.

He said: "I think there has been a structural shift.. we'll never see the sales patterns of last February again."

Bermondsey-based low-alcohol beer maker, Small Beer, had historically seen 55% of sales go to hospitality. By November, 95% of trade was in retail and e-commerce, with just 5% to hospitality.

<p>Stefano Vallebona is a long-time supplier to The River Cafe, Le Gavroche, Bocca di Lupo and Park Lane Hotels </p>Stefano Vallebona

Stefano Vallebona is a long-time supplier to The River Cafe, Le Gavroche, Bocca di Lupo and Park Lane Hotels

Stefano Vallebona

Vallebona, a long-time supplier to The River Cafe, Le Gavroche, Bocca di Lupo and Park Lane Hotels seized the chance to fulfil a long-term dream of opening a store as Londoners shifted their spend locally, and bought more ingredients for at-home cooking.

Founder Stefano Vallebona, who opened his Wimbledon store last weekend, said: "We've been supplying top restaurants for the last 23 years in this country. Since lockdown things have changed completely.

“The restaurants are going to be quiet for at least a couple of years,” he said. "Even if people go back to the centre, it will only be for a couple of days a week, so the whole picture has completely changed. We thought it was the perfect time to do something we really dreamed of… It's never going to go back exactly how it was before, and for some it is good."