By Karen Peattie

FOOD and drink wholesale, described by industry body the Scottish Wholesale Association (SWA) as the “hidden part of the supply chain”, needs more Government support if it is to survive long term and remain viable in the short to medium term.

Colin Smith, chief executive of the Edinburgh-based group, welcomed grant support of £1.9 million for the industry from the Scottish Government’s Pivotal Enterprise Resilience Fund (PERF) scheme, and praised Fergus Ewing, Cabinet Secretary for Rural Economy and Tourism, for acknowledging the key role of wholesalers within the food and drink supply chain.

But he warned that much more help will be needed as businesses start to rebuild. “Despite many food and drink wholesalers losing as much as 90% of their business overnight when lockdown was introduced, they received no rates relief, said SWA chief executive Colin Smith.

“While we managed to help some of our members secure lifeline grant support from the Scottish Government’s Pivotal Enterprise Resilience Fund (PERF) scheme, or their local council, the majority of food and drink wholesalers received nothing. The hospitality, tourism and leisure industry accounted for over 40% of the food and drink wholesale market in Scotland before lockdown so it’s a critical sector for our members.

“It’s going to take a while for the industry to recover and many are still facing extreme challenges trying to keep their businesses afloat and, crucially, food and drink supplies moving.”

One business that did not receive Government funding is drinks wholesaler Inverarity Morton. Steve Annand, sales director at the independent Glasgow-based firm, described the last few months as “tough” with the business operated by a skeleton staff after furloughing 90 per cent of its people when the industry closed down overnight in March.

“As a 95% on-trade and wet-led business – wines, beers, spirits and soft drinks – and supplier to many of the most successful and highest-profile businesses in the Scottish hospitality industry, it was extremely tough to see it all disappear the way it did,” said Mr Annand. “We clawed back some business as customers moved to home delivery and we also launched our own home-delivery business so we managed to pivot into other sectors.

“Furlough has been as lifeline for so many sectors but we’ve had no other Government funding and there’s no rates relief,” he added. “We’re seen as big enough to cope and the advice from Government is to take on debt, but that is a short-term solution and not the route to viable sustainability in the long term.”

Although the industry is getting back up and running, “it all comes down to consumer confidence”, Mr Annand said. “The hardest thing for us is to forecast demand when many customers are just starting to open their doors again not knowing how busy they are going to be and we have to try to predict sales across 5,000 product lines.

“Quite rightly they’re being cautious because they want to see how their customers react to the way things have to be just now – they have to build confidence in the experience of what they offer so people feel safe. Wholesalers are the squeezed middle – we’re the guys who keep the supply chain moving but the wholesale model is predicated on volume meaning that coronavirus has been a perfect storm for us.

“We need to have sufficient stock so we can supply our customers and help get them back trading and while many customers have paid us we also have a lot of outstanding debt from pre-lockdown,” he continued, pointing out that with limited cash flow now in the food and drink supply chain, some wholesalers were facing severe financial challenges.

Wholesalers, Mr Annand said, were being squeezed by credit insurers and suppliers which would inevitably lead to pressure on their ability to supply customers on the same credit terms they were on before the crisis.

As the industry starts to open up again and Inverarity Morton has been able to bring some of its 200 staff back from furlough, the firm has sadly had to look at redundancies. Mr Annand said: “The stark reality is that business will not return to anywhere near pre-lockdown levels until at least April next year.”

Last month, the Scottish Wholesale Association called on Chancellor Rishi Sunak to extend business rates relief to the wholesale sector to bring it into line with its customers in tourism and hospitality. It also called for an extension to the furlough scheme to secure jobs which are under threat and a VAT cut to stimulate the wider hospitality, tourism and leisure industry.