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The past two pandemic years have seen huge challenges for the wholesale industry. In 2020/2021, the UK’s leading wholesalers grew by 3.7%, down from the 3.9% growth achieved the previous year, a new report reveals.
Lumina Intelligence’s UK Wholesale Market Report found that the decline in the market was driven by foodservice wholesalers, who have been deeply impacted by Covid-19 and the closure of hospitality during the lockdown periods. Some large wholesalers saw their turnover decline by as much as 34%. Independents in this sector also failed to make progress over 2020 and 2021, with sales down as much as 80%, according to the Federation of Wholesale Distributors (FWD).
At the same time, traditional and hybrid wholesalers were boosted by the massive growth in spending at food retailers. They reported their turnover grew by 10% in 2020 due to the rising demand for grocery services.
“The last 18-24 months have been incredibly turbulent for the wholesale industry,” said Blonnie Whist, insight director at Lumina Intelligence. “Despite high sales, traditional wholesalers were faced with significantly increased demand that cause huge pressure on the supply chain. In contrast, foodservice wholesalers saw demand fall off a cliff.”
James Bielby, chief executive of the FWD, agreed that throughout 2020 and 2021, there were many challenges for wholesalers to navigate. “Food and drink wholesalers had an impossibly rough ride through 2020 and the first part of 2021. That was partly as a result of losing all their hospitality customers for months on end, and partly because the Government chose to support large retailers with Business Rates relief and hospitality with instant grants, but offered nothing to their supply chain partners,” he told Speciality Food. “Having weathered that storm, they then had to overcome staff shortages that left them struggling with both inbound and outbound deliveries.”
However, with the worst of the pandemic hopefully behind us, there is reason to be optimistic about the future for wholesalers. “As we come out of Covid restrictions, I think we’ll see them reclaim lost ground, as long as the customer base is still there,” James said. “They were bruised but not broken, and actually the efficiency and operational changes that were forced on them, first by the pandemic and then by staff shortages, will serve them well in the long run.
“They have already proved they are resilient, and we’ll now see how innovative and adaptive they are as they bounce back,” he said.
Lumina Intelligence’s report also discovered how retailers’ relationships with wholesalers changed over 2020/2021. A large proportion said they were not satisfied with guaranteed availability of products from wholesalers, with 40% of retailers scoring their wholesaler five out of 10 or less. Blonnie said it was “no surprise” and there was little wholesalers could do. “With restrictions easing, we expect to see a further rebalancing between foodservice and retail, which will enable greater normality and more robust demand planning,” she added.
Another issue that retailers took with wholesalers was over category advice, with 27% of retailers scoring their wholesaler five out of 10 or less. Of those surveyed, 44% of retailers said they hadn’t heard of the upcoming HFSS legislation, and that rose to 54% among independent retailers.
Half of respondents said they expect updates on legislation from their wholesaler. “The lack of awareness around HFSS should be a red flag for wholesalers, who should take this opportunity to show support to their customers and generate loyalty by nurturing them through the process with advice,” Blonnie said. “Whilst many won’t be affected, there is a duty of care on the industry to ensure everyone is aware of what is coming up.”
In contrast, accurate invoicing and billing, product quality, friendliness of drivers and ordering process are the areas where retailers were most satisfied with their wholesaler.