The Food and Drink Wales Retail Plan is set to create new opportunities for small food and drink firms. Samantha Noble, area director at Lloyds Bank, looks at some of the benefits the initiative could bring for Welsh SMEs and start-ups and provides advice on how firms can put themselves in the best position to make the most of these.

The Welsh Government’s Food and Drink Wales Retail Plan, launched in July, is set to help more businesses get their products to market and on the shelves of major retailers.

This will be welcome news to the vast number of ambitious food and drink start-ups and fast-growing SMEs in Wales.

According to Food & Drink Wales, the food and drink supply chain contributes approximately £22bn to the Welsh economy and employs nearly 230,000 people.

As such, a thriving food and drink sector can play a vital role as the country looks to recover from the impact of the coronavirus pandemic, and it is pleasing to see the Government committing to further support for the sector.

Retail sales have remained strong throughout the pandemic and securing listings with major retailers can help to provide a sense of stability for food and drink businesses.

However, scaling up to meet the demand of larger retail customers can pose additional challenges for smaller firms, who may need to make a significant investment in new equipment or staffing.

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As they look to expand their business and capitalise on new opportunities, there are a few simple steps food and drink firms can take to make sure they’re at the front of the queue when it comes to making the most of the growing number of retail opportunities.

The first place to start is by looking at working capital to understand how much they have available to invest in their day-to-day activities.

By effectively managing working capital, firms can ensure they have the liquidity to invest in new opportunities and account for drops in trading caused by unexpected shifts in market conditions, often at short notice. The pandemic has proven just how important this is.

For many food and drinks firms there will be added complications as demand for their products may fluctuate, particularly when it comes to more seasonal items that may see a surge in popularity at key calendar moments such as Christmas. As such, agility is essential, particularly in areas like staffing and stock levels.

Even with more clarity following the easing of restrictions, forecasting customer demand can be difficult.

Will there be a drop off in retail sales as hospitality venues reopen, or will more occasions continue to take place in the home? Will customers return to shopping little and often, or opt for bigger, less frequent shops? And will online grocery shopping continue to become more popular?

We cannot be certain about any of these factors, but they can have a significant impact on retail suppliers.

Food and drinks firms taking their first steps into retail must consider how these could impact demand and subsequent outputs and forecast how this will affect their working capital.

The best way to prepare is by modelling for different scenarios, which will help to determine whether there is enough cash to cover operations at varying levels of capacity and how their cashflow position may need to change in response.

Firms may still require additional funding to support their growth ambitions.

As well as looking to government support, firms should explore some of the specialist financial tools that can be used to release excess working capital, freeing up funds to invest in growth.

One example of this is Newport-based Tiny Rebel Brewery. Following a surge in sales of lager packs as more people stocked up on food and drink to enjoy at home, the brewery invested in a new canning line to help it begin production of multi-packs across its headline brands.

The boxes have been sold in Sainsbury’s, as well as several independent stores and the business’ own website.

Tiny Rebel Brewery was able to use an asset-based finance facility to support its investment, which meant it could spread the cost of an asset over its lifetime, avoiding the need to make a potentially sizeable outlay upfront.

There are a number of other options available that can help food and drink firms achieve their ambitions.

For example, invoice finance allows companies to access up to 90 per cent of the value of an invoice within 24 hours of it being issued and can provide a useful boost to cashflow during periods of uncertainty. Businesses should explore different financing options to find the one that best suits their needs.

The Welsh food and drink sector is thriving, and the retail plan can be an important step in putting it at the front and centre of the nation’s recovery from the coronavirus pandemic.

There will undoubtedly still be challenges ahead for smaller businesses – the shortage of HGV drivers continues to pose problems – but by taking the time to plan ahead and exploring the different tools available to support them, SMEs can ensure they are prepared to make the most of the opportunities that come their way in the months ahead.

And they don’t have to go it alone. At Lloyds Bank, we aim to be by the side of food and drinks businesses as they look to get their products on more shelves across the UK, providing the expertise and specialist tools they need to prosper.

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