Cost of living: A greater challenge than Covid?

With the cost of living crisis set to take an icy grip this autumn, wholesalers brace themselves for yet another rocky ride

A lack of protection against a maelstrom of costs across the supply chain and a lack of consumer confidence could be a bigger threat than Covid if allowed to go unchecked, according to one wholesaler.

With the energy price cap rise sending energy bills through the roof in October, the nation is preparing itself for a significant cost of living crisis – and Morris & Son Managing Director Andy Needham (below) says it’s almost impossible for wholesalers not to get caught in the crossfire.

Price increases from manufacturers have been landing with wholesalers for the past 12 months, but while many of those have, inevitably, had to be passed on further down the chain, this latest swathe of increases will need to be swallowed, says Needham.

“The costs us and every wholesaler can’t pass on easily are the extra fuel costs, energy costs and the incidental costs.

“For example, running your fridges for chilled products is a hell of a lot more expensive than it was six months ago. And it’s going to get a lot worse in the next six months. It doesn’t mean you can put another three pence on your costs to your customer.

“We’re having to absorb someof it and we’re trying to be more efficient and really adjust costs where possible – conserving cash is the key thing.”

BIG SQUEEZE

That’s easier said than done for many wholesalers that are still left counting the cost of Covid, though.

While Morris & Son is likely to see even greater demand for its wares due to its specialism in clearance and residual stock, other wholesalers aren’t so lucky, with less consumer spending likely to squeeze sales too.

“During Covid, some wholesalers didn’t have the same customer base – especially the foodservice guys – but still had the premises and refrigeration to pay for, so they’ve really eaten into their resources and savings over a number of years,” Needham continues.

“But there was support during Covid. As a business, we took the £50,000 bounce-back loan in case we needed it and paid it back six months later and other wholesalers took loans that need repaying. There was support there. This time, there’s absolutely no support being planned.”

With Liz Truss now confirmed as Prime Minister and government finally moving to ease the pressure on businesses and consumers, some form of help may emerge. But the expectation for many businesses is that they’ll still need to fend for themselves in the most part.

ACTION

Some wholesalers have already acted. Booker introduced delivery charges at the start of the year, while the likes of Parfetts and Blakemore have decided to up minimum delivery amounts to avoid doing the same.

“As an employee-owned company, Parfetts can reinvest in its customers’ businesses to help maintain and enhance its margins when the economy is facing a tough time,” Parfetts Trading Director, Gurms Athwal (pictured above), says.

“Rising costs are touching all parts of the economy and we’re doing all we can to mitigate the challenges for our retailers.

“Parfetts is committed to not introducing delivery charges. To support this approach and help drive efficiencies through the process, we recently increased the minimum order value for deliveries. It means we can be efficient in order picking, logistics routing and running full trucks.”

EFFICIENCY

Efficiency seems to be the buzzword that most wholesalers are falling back on, whether it’s looking to reduce transport, finding ways to save on energy prices or introducing measures to mitigate the costs coming their way.

As with many other wholesalers, Bestway has been working with suppliers to find the best solutions, but as Managing Director Dawood Pervez (pictured below) puts it: “How much can wholesalers and suppliers mitigate these future increases when the banks are talking inflation of 11%?”

DISRUPTION

Best-laid plans are almost for rises meaning that calculations are constantly having to be redone to cut the cloth accordingly. And Pervez says disruption is unavoidable.

“Over the past year, our trading teams have worked tirelessly to talk to suppliers daily,” Pervez explains.

“They’ve bought ahead and delivered real agility in our stock management to keep availability high and products on shelves.

“However, as we come into winter, there will be increasing pressure on the supply chain to balance energy, fuel and product costs. Price increases seem inevitable.

“Alongside this, there will be the need to drive efficiencies into manufacturer and wholesaler operations to help keep increases as low as possible. Logistics such as how they deliver and whether this is the right time and market for NPD are all important factors – and how can investment into decarbonisation continue to be accommodated under the tightening market pressures.”

Feature first published in Wholesale News September 2022. For more analysis and features, read the full issue online here.

A.F Blakemore AG Parfett and Sons Andy Needham Bestway Wholesale cost of living crisis Dawood Pervez energy fuel Gurms Athwal Morris & Son supply chain