As the industry waits for further news from the government about how it is going to protect workers salaries and those businesses in the supply chain that are supplying the restaurants and bars on the front line, that have been issued with a loans-based support package, we hear from industry chiefs at the sharp end running two of the country’s biggest national drinks distributors about how they are looking to cope with Covid-19.
Troy Christensen, chief executive of Enotria&Coe
We have a Confidential Invoice Banking facility, so we borrow against receivables with credit insurance backing in most cases. We have to follow the “letter of the law” regarding process from banks and credit insurance. But, they aren’t even sure what to do yet in light of these remarkable circumstances. So, the normal process of going legal and collecting procedures have been suspended. We are working to support those good operators who will be around. We want to support the trade, but there are customers on payment plans and some who are known to do pre-packs where we are more sceptical of supporting.
The big problem for us and the trade is that we have sold lots of product with VAT and duty which is now due. Unfortunately most customers reduced payments when this started and stopped after the Prime Minister announced he was shutting down the on trade. Many customers have shipped back product, which we is duty paid causing liability for the business and additional cost by bringing it back. All the horse racing venues, football stadiums, etc are examples. So, tax exposure will kill most of the industry if there is no relief.
Taxes cost the business more than all of our product costs combined. So, if the Prime Minister tells the on trade to stop doing business, but still requires everyone to pay all taxes, it is a death sentence for many in the trade. In response many are going through headcount reductions which is just going to further stress the economy and create more social unrest.
France took away all the expenses (payroll, rent, taxes), so despite there being no revenue from the on trade, there is also no costs. This also allows companies to hold on to their employees. Whereas the UK is offering “loans” backed by Government to help pay taxes to the Government.
I most likely won’t get paid by my customers if they don’t survive, so I have not just put myself in a deeper hole of debt. Adding debt in these circumstances is counterproductive. Also, they haven’t prepped any of the banks yet about the large borrowing programme. Nobody knows how that works, it will take a minimum of a 1-2 months before anything can flow (by that time, way too late). Most people already have debt with provisions that exclude additional borrowing. Also, nobody knows if Foreign banks are included in this, which may exclude many desperate companies.
We need long-term tax relief, the quickest way to help us keep our employees on board and be able to plan for the future. There really isn’t anything else that can provide the stimulus and certainty as that.
Andrew Bewes, managing director, Hallgarten & Novum Wines
Andrew Bewes says Hallgarten and its customers are in the “same boat”
What advice are you providing customers and any specific measures you are taking to help them work with you?
As we are all acutely aware, the Covid-19 situation is developing on almost an hour-by-hour basis. It is therefore imperative now, more than ever, that as an industry we all stick together and support our partners in the trade as much as possible. To a large extent we and our customers are in the same boat as we try to find a way through this situation whilst protecting the livelihoods of our employees. At this stage, it’s all about cash and trying to balance out supporting customers whilst securing payment from them to enable us to pay our employees.
As a business, we are extremely fortunate to enter this tough period in a position of financial strength but for us to remain viable, we will have to ensure that our exposure to debtors is not increased and this will put additional pressure on our customers. We work in close partnership with our customers and our advice to them at the moment is to take advantage of the government secured loans to enable them to pay staff and suppliers over the next few months. We are taking this same action, in addition to lobbying HMRC for a break in VAT, PAYE and duty payments.
We remain open for business and we will be working closely with our customers in the trade to ensure that our service levels and partnership with them are not adversely affected. We are all in this together, and we will do our utmost to go above and beyond to help our partners come through this crisis.
What measures you would like to see from the government to help your customers?
The Chancellor’s latest fiscal measures will come as some relief to our hospitality industry, but there is no doubt that more will be needed. It is a huge understatement to say the industry is under pressure and we hope these measures are not too late to save the venues that are already closing their doors.
Providing banks are quick to respond, arrange loans and provide grants for these businesses, we could avert a disastrous increase in numbers business failures, However, more is needed, particularly for the staff on a personal level to enable them to pay rent and feed their families.
With every crisis there are stories of people and businesses going ‘above and beyond’ to help and over the last few days it has been incredible to see the defiance of the hospitality industry in the face of this adversity. No business looks ready to roll over and many have taken advantage of the government’s policy to allow pubs and restaurants to operate in the home delivery market; however where restaurants do not have an off-trade license, no delivery of alcohol is permitted which will obviously have a knock-on effect on the wine industry.
What is the situation from your end in terms of shipping/logistics and getting wine into the UK from around the world?
Thus far we have not experienced any direct issues related to shipping stock into the UK. However this is now changing and we are aware of issues of shipping from New World producing countries which have been unable to source containers, and for shipping lines having vessels quarantined and stuck various parts of the world. Within Europe, although nominally excluded from the increasing number of lock-downs and border closures, we are starting to experience some difficulties in shipping wines. We thankfully managed to increase our stock levels over the past few weeks so we have no cause for concern – what is a concern, however, is the prospect of a sustained period of no customer orders for these wines.
And how is it getting goods around the UK?
As for delivering wines around the UK, our partners at LCB continue to provide an excellent service and, to date, have not experienced any issues. This may change and as will the entire Covid-19 situation, we are monitoring on a daily basis.
- If you would like to share your views on how the on-trade and its supply chain can cope with Covid-19 email richardsiddle@btopenworld.com.
