25 February 2022, 07:21 AM
  • As Covid-19 lingers, Brexit debates continue to rage and rising inflation heaps pressure on bottom lines, industry insiders find there are still reasons to be optimistic
How the food sector stands now

So far in 2022, uncertainty continues to be the watch word for the fine food industry. But while Covid-19 and Brexit continue to draw question marks over the future, the new year has already brought fresh opportunities for independent retailers, too. Support for small business is growing, and conscious consumerism has driven shoppers to spend at stores that align with their values. E-commerce offers growth options for shops seeking to boost their profile beyond their local community, and delivery services provide unrivalled convenience. Speciality Food delves deeper into the issues of the day to discover where the food sector stands now.

Indies’ secret weapon against inflation
Experts agree that one of the most significant hurdles facing independent retailers today is rising costs. Inflation has soared due to rising energy prices and supply chain issues, and many retailers are having to absorb these costs. “There has been an increased burden on business,” says Andrew Goodacre, CEO of the British Independent Retailers Association (Bira). “Business rates will be doubling compared to this year’s payments, cost of labour is set to increase by at least 6% and the cost of energy is increasing by 300%. There is also a cost of importing, which has increased to more than the consumer price index.”

This year, retailers should revisit their cost base and examine how the rise in the cost of living impacts their customers. As prices go up, consumers tend to shop around more for their food and groceries. “Value for money is front of mind, so independent retailers will need to be mindful of this and demonstrate value credentials to compete with larger retailers,” says Michael Freedman, senior shopper insight manager for IGD’s ShopperVista

This doesn’t mean slashing prices and endangering your own bottom line, however. Instead, highlight the true value of your products, from their environmental credentials to their support of local artisan makers. “Focusing on ethical and sustainability credentials is a way specialist independents can attract customers,” Michael says. “Our latest insight from ShopperVista reveals that sustainability is becoming more important to food and grocery shoppers, and we’re expecting this to continue to grow. Our data shows that the desire and aspiration for healthier and more ethical food is a trend that has been growing over the long-term. Previous periods of economic pressure, such as the credit crunch and recession in 2008, didn’t see shoppers abandoning this desire, so there is no reason to expect they will do now.”

Brexit drives ‘buy British’
Although the UK left the European Union on 31st January 2020, the implementation of Brexit has been far from straightforward. At the time of writing, disputes are still ongoing on the agreement’s finer details. Brexit requirements are also continuing to impact food and drink businesses’ exports and imports. A recent poll of members of the Federation of Small Businesses revealed that four in ten (41%) exporters reported a drop-off in international sales in the second quarter of 2021, as added Brexit paperwork mingled with supply chain issues and rising shipping fees. This was up 10 percentage points on the same period in 2019. With even more checks having been introduced this year, 21% have temporarily or permanently stopped exporting to the EU, and a further 7% are considering doing so.

One importer of fine Italian products revealed to Speciality Food that they were changing their shop’s entire concept due to the added costs of importing since Brexit and Covid struck. Instead of importing products from Italy, the online retailer Blake & Tate is championing artisan British makers of Italian-inspired products. Although the loss of any artisan European products is a genuine shame, the growing support for British producers can only be a good thing here in the UK.

Online and delivery offer route to convenience
While the demand for ethical products and British-made food and drink has boosted the independent retail sector, another side-effect of Covid-19 offers opportunities for those who have been prepared to pivot. “Online shopping has had the biggest impact on retailers,” says Nick Gladding, senior business analyst for Retail Analysis at IGD. “Last year saw an unprecedented surge in sales as shoppers switched from stores to online due lockdown restrictions, but it was unknown if this habit would stick once restrictions lifted,” he says. “From what we’ve seen, the shift appears to be permanent; online shopping for groceries is now only slightly lower than it was at the height of the pandemic.”

Bira’s Andrew agrees that retailers will continue reaping the benefits from e-commerce this year. “Indie retailers have to embrace technology to make the most of the positive trend for local shopping due to more people working from home. The indies must continue the work they have done to embrace social media, internet sales, consumer engagement and re-double their effort in 2022,” he says. 

Despite more than three-quarters of shoppers saying that supporting local retailers is important, according to Lumina Intelligence, convenience is still a big driver of purchases. On-demand grocery delivery services like Getir and Gorillas provide new options for shoppers – and retailers. “Mainstream retailers are now operating in this space; Tesco is now one of the most ambitious with its Whoosh within-the-hour service, launched at over 50 Express stores in the last six months,” says IGD’s Nick. With a growing market of delivery providers supporting fine food retailers, too, the playing field is being levelled. “Demand for delivery has shown little sign of slowing, giving retailers an opportunity to broaden customer reach and target shoppers that are not currently within their usual catchment area,” adds Blonnie Whist, insight director at Lumina Intelligence. Currently, one in 20 convenience store occasions are delivered, and shoppers who use delivery services tend to spend 128% more than in-store shoppers per trip, she says.

Although challenges remain, consumer behaviour trends shed light on how 2022 could be yet another strong year for fine food retailers.