As chief executive of the Wine & Spirit Trade Association, Miles Beale has had a lot on his plate over the last three to four years. But just when he thought nothing could be more challenging than trying to guide the drinks industry through the minefield of Brexit along comes the Covid-19 outbreak that doesn’t just throw all those dramas into the shade, but threatens the very existence and future of large parts of the industry his body is there to support. Here he explains to Richard Siddle what it has been liking to trying to keep on top of the most challenging time in business any of us have had to handle when all his staff working from home and you are trying to lobby the government via phone, Zoom and email.
Miles Beale of the WSTA has nothing but praise for the extraordinary efforts being made right across the wine and spirits industry to keep jobs safe and businesses going through this crisis.
“The last three of four weeks have probably been the last the busiest time we have ever had at the WSTA – and we’ve all been working from home.”
That’s how Miles Beale sums up the last month ever since the Prime Minister, Boris Johnson took to his podium in Downing Street to announce the lockdown of UK business and social life – other than for the essential services.
The following days and weeks in the drinks industry has felt more like trying to steer a tug boat through a storm, being buffeted this way and that as it looks to avoid the next wave crashing down on its decks.
Manning at least part of the wheel is Miles Beale and his team at the WSTA who, understandably, have been the first port of call for so many businesses caught in the full force of the Covid-19 storm, looking for any help they can get to see them through to calmer waters.He admits it’s been a very tough few weeks, but it has also been a time when the drinks industry has really shown its true colours of friendship and collective spirit. We might talk about this being a “people industry” – the last few weeks have proved it, said Beale.
Not that we are anywhere near getting through this crisis, or even at a point when we really know what the long term impact of the state of the industry is going to be.
“It’s hard to be coherent about what is going on as the impact has been so fundamental. We really have no idea of what is on the other side of it,” he added.
“This has shades of Brexit about it, but if it does it’s like Brexit on Red Bull.”
What is already crystal clear is that the impact of Covid-19 is very different depending on which part of the drinks industry you are in.
If you are on the retail side of the fence then, for some, the demand has never been greater with supermarkets and specialist retailers and online players, in particular, enjoying record sales that are on a par if not better than the usual boom Christmas period.
Some are enjoying sales growth of up to 1,000% online as week after week, at least so far, has brought enormous wine and spirts sales through the tills. “Some of our members just can’t keep up with demand – but we also think it’s stockpiling, and therefore temporary,” said Beale.
But it is a very different story on the on-trade side of the industry. There the impact has been total, wiping out sales 100% – and the picture is getting worse by the day, stressed Beale.
There has been some good news for restaurant operators, pub groups and bars, who have been helped enormously by the government’s Coronavirus Job Retention Scheme and the rent and loan support packages that have been made available to the hospitality sector.
Here Beale is quick to applaud the actions and lead taken by UK Hospitality and his counterpart Kate Nicholls for all the work they have been able to do which the WSTA has fully backed and supported.
Where Beale is particularly focused is the impact the crisis is having on those suppliers and wholesalers that are 100% focused on supplying the on-trade. Whilst they too can take advantage of the furlough job scheme and pay their staff up to £2,500 a month of their usual monthly wage, they have not, as yet, been given any extra wider business support or specific government-backed access to areas such as business rate holidays.
Instead they have been left, like the rest of industry, to battle it out with their banks to get any sort of financial support, that has, so far, been very thin on the ground.
Beale does not mince his words: “The impact on the drinks supply base has been cataclysmic. Many have lost all their customers overnight and have not been able to do any business at all.”
The WSTA is calling on the Treasury to treat suppliers as on-trade businesses in the same way they do a restaurant or a bar.
“There is no rates relief available unless you are hospitality business. We think hospitality suppliers are very much part of the hospitality sector and should get relief as well. We believe this is being considered by government at the moment.”
Where possible the WSTA has stepped up in to advise suppliers on how they can switch their business models over to going direct and any steps they need to take to acquire the right retail licenses.
This is where he has been particularly impressed by the “collegiate” nature of the support there has been across the supplier network, with companies looking to help each other out with advice and guidance where they can.
“Where there is normally a lot of competition, people are being very open and are willing to share what they know with everyone as they all want each other to survive. There has been such a fundamental impact on the trade that it has made people think and act very differently,” said Beale.
When you factor in the off-trade gains and the on-trade losses the overall impact is currently about flat, said Beale, according to the overall sales figure he has seen.
There are also signs in the off-trade that the initial mass buying will not last into May and June as people will wait before they need to purchase again.
And, of course, the emerging government narrative over the weekend was that hospitality will be the last sector of the economy to open up fully again – and not until the end of the year. “It’s going to be a marathon, not a sprint,” said Beale.
Beale admits it is not easy to keep looking one or two steps ahead when we are fire fighting through each day, but it is clear the real trouble, believe it or not, lies ahead.
Take the government’s Job Retention Scheme. On the face of it the government’s announcement it is to carry on paying out under the furlough scheme until the end of June is great news for all the businesses currently relying on it to pay their staff, explained Beale.
But the longer the crisis goes on the greater the pressure will be on businesses to continue to use furlough as their way through this crisis. For although it helps, it does not pay everyone’s full salary and companies are still having to dig deep into their own pockets to make up the shortfalls, which for a lot of drinks suppliers means paying far more than the £2,500 a month available.
“A lot of furloughed staff may well be let go,” warned Beale over the coming weeks as companies look to re-assess how they are going to get through what looks like being a prolonged period of lockdown and social distancing.
If they can take steps now that means they are able to come back as a viable and strong business in the future then that might be the action they need to take. “It means they may have to let staff go for the long term health of the business.”
The big fear is that this lockdown continues well into the second half of the year, not eased by the comments from the government’s Michael Gove that the on-trade may not be back on stream until the end of year.
Beale does not shy away from what this ultimately means for the industry he is there to support.
“The hit on the on-trade is permanent,” he said.
Quite how bad that “hit” is going to be remains to be seen, but we are not going to return to the same situation we were in at the beginning of March.
The plus side is that any on-trade business, be it an operator or supplier, that does come through all this is going to be a bigger player in what is undoubtedly going to be a smaller overall sector.
“They may well have a healthier slice of the market, but that market is going to be smaller,” said Beale.
Help on excise duty
The one area where everyone in the drinks industry needs help is with excise duty payments and the WSTA is lobbying the Treasury hard for more official measures to be taken to support the overall industry.
The issue at the moment is the Treasury and HMRC do not appear to be on the same page when it comes to what the HMRC is able to offer in terms of duty payment suspensions.
It seems it is being left to companies to talk to the HMRC and negotiate individual support packages based on their needs and ability to pay. Rather than agree one set policy. It means some companies are getting their duty suspended and other aren’t.
“We need the Treasury to offer greater flexibility on duty payments,” said Beale. “Unlike for VAT, there is no blanket ruling to allow this, meaning individual companies need individual agreement with HMRC. We are pushing for greater flexibility for all.”
The added problem is the HMRC is swamped with calls meaning drinks suppliers can’t get though. Beale said some companies are literally sitting on hold for days trying to get through. Others are just not paying and could face the consequences later – although the Treasury has promised to be understanding.
“Excise duty is the one issue that unites all our members,” said Beale. “Cash flow is the biggest problem for business right now, especially – but not exclusively – ones in the off-trade and on-trade. It is currently the double whammy that is hitting on-trade suppliers. They are being asked to pay duty on products for which they can’t get paid back for.”
Beale said there is no doubt there is going to be some consolidation across the industry and we will all have to take a step back before we are able to move forward again. It is also likely to lead to some big structural changes in the industry with more players opting for an omni-channel approach, with online sales more essential than ever.
Beale said there is no doubt there is going to consolidation across the industry and we will all have to take a step back before we are able to move forward again.
He and his team will continue to “provide any support then can so a company can be as informed as they can about any decision they make”.
“We need as many businesses as we can to survive this and information at this time is invaluable. Which is why it is so good to see fierce competitors being so open about how we can all help each other.”