How independent fine food retailers can survive rising inflation

Fine food retail is already facing an uphill battle as the cost-of-living crisis has changed shopper behaviour and caused consumers to tighten their purse strings in preparation for steep energy bill rises from October. 

In fact, according to Andrew Opie, director of food and sustainability at the British Retail Consortium, “Rising inflation is a significant concern for both consumers and retailers. The global price of many food commodities is rising, along with energy costs, supply chain costs and tax rises. The war in Ukraine is putting further pressure on global supply, particularly for wheat, cooking oils and animal feed, leading to higher prices for many staples.

The latest predictions from Citigroup indicate that inflation could rise to as high as 18.6% in 2023, a sharp increase from the current rate of 10.1%.

Rises like this are often unaffordable for independent businesses, and there is significant help needed from the government and local communities to help fine food retailers survive the winter. 

Self-help in the crisis
According to Tina McKenzie, policy chair at the Federation of Small Businesses, “To help themselves stay afloat in the coming months, we suggest businesses make sure they’re using all the reliefs available to them, including the Employment Allowance, which we successfully campaigned to have increased to £5,000 from £4,000 as part of the Spring Statement.

“It is also important to have an up-to-date business continuity plan and go through your outgoings and see whether there are ways of saving money. We offer a wide range of services to help small businesses bring down their overheads, including an insurance broker, legal advice line, finance platform, late payment support provider and free banking.”

Simon Jones, co-owner of Forest Deli in Colesford, added, “Our focus is cheese and local produce, and we maintain our relationships with all our suppliers which is vital to getting an advance warning on price rises. We buy direct from suppliers as much as we can, as that keeps our costs as low as possible and also ensures they are getting paid the right price. 

“The price of every product is increasing so stock management is critical, and sadly we have already lost two local suppliers who were unable to carry on.”

Support from consumers
Although shoppers’ budgets are stretched, it is up to indies to show they can get the same or better value by supporting their locals.

Tina explained, “Our Small Businesses Index shows retailers are hit particularly hard as households look to cut down on non-essential spending in the face of significant price rises. We encourage consumers to support small firms. 

“Many people will be tempted by large or discount supermarkets wrapping cost-of-living marketing around their products, but this is the time when your local small business needs you the most.”

Getting your customers’ support is essential to weathering the financial storm, and Simon has thought creatively about how to generate extra income while bringing the local community together and providing them with advice. 

He told Speciality Food, “We are pushing local as always for our regular customers and tourists, and keeping the cheese counter full with the favourites and always new ones to try, we are however having to minimise our stock holding. 

“We have also recently opened our ‘Tasting Corner’ which is an area in the shop we use in the evenings for small tasting sessions on a variety of themes. This generates extra revenue and also gets people talking about cheese, beers, ciders and also some of the cooking ingredients they may not have used before. By providing the recipes we help people stretch their food budget a bit further.”

More government action needed
But while indies can take advantage of current schemes and appeal directly to their customers, according to Tina, more help is required from the UK government. “We need to see energy bill support for small firms to match that given to households, extending the price cap to smallest businesses, a reduction in VAT on energy and a cut in fuel duty. 

“Cost pressures more widely could be eased through a reversal in the recent national insurance hike. Increasing the threshold of small business rate relief to £25,000 would take 200,000 businesses out of the rates system, including small retailers struggling with soaring energy costs”, she explained. 

As Simon concluded, “The government needs to acknowledge that all businesses are getting hit with costs that are spiralling out of control and the impact on SMEs is huge where our electricity costs are outstripping the rent on our premises. 

“My personal view is that all energy costs need to have a fixed cap as soon as possible so that households and businesses can at least budget for the next six months. Taking off or reducing VAT on fuel will help households but have no impact on businesses if they are VAT registered, so reducing the direct cost is the only way.”