The number of new businesses registered soar over the second half of 2020 despite the challenges of the Covid-19 pandemic, according to the ONS. There is growing evidence that the food & drink industries in particular saw a boom in new start-ups - the number of distilleries alone rose 29% compared with 2019.
It has largely been understood that this increase has been the result of the redundancies and furlough throughout the pandemic as they sought to bring in some extra income. And it has led some to question how many of these entrepreneurs will maintain focus on their business once the country returns to normal, and whether or not post lockdown will produce the right environment for these businesses to flourish.
This was the topic of discussion at a recent roundtable of food & drink entrepreneurs to discuss the future of this new wave of start-ups hosted by the Great British Entrepreneur Awards and haysmacintyre.
The Covid bubble
Lockdown has created a massive demand for on delivery foodstuffs. Hanna Dilley of Benji’s Bites, explained how that helped her business. She said: “Parents were trying to manage their toddlers at home, and trying to work at the same time. So if they have a bit of extra time to cook, a food for toddlers that could be delivered was a massive lifesaver.”
But is that environment a bubble set to burst? Hannah doesn’t think so. She explained: “In the delivery to customer sector, there is so much choice and people have realised they can get really good food delivered to them. It’s given people confidence to start up and launch things.”
Hamish Light of Local e Sourced, agreed, explaining that a new industry is thriving in this space: “It will continue because there’s a lot of courier companies popping up quickly as well, to try and support this, with customer focused things like one hour delivery slots.”
Not everyone agreed, however. Dominique Woolf of Woolf’s Kitchen is not seeing the same pattern in her business, which rather than selling to direct-to-consumers, sells to delicatessens. She said: “Earlier in lockdown, making phone calls, I was getting a lot of sales. But now, a lot of my delis have reported that it’s got quieter, and even Amazon sales are down for a lot of people.”
She’s concerned about changing customer habits as we return to normality. “We can get high quality produce and hopefully there will still be a segment of the market that will continue to do that. The worry for my clients is whether people will go back to their normal shopping habits.”
Dainora Rajunce of Buzzy Blends, thinks these habits are already weighed against them, and fears the impact it will have on younger, smaller challenger brands that retail from independent stores up and down the country. “I noticed during the pandemic that people go shopping at one retailer, like Amazon or Sainsbury’s and they don’t wander into smaller high street shops, like they used to.”
Competing with big brands for shelf space in crowded markets is one of the biggest challenges a new food and drink brand can face. And with such a shift towards more artisan, high-quality products and brands, it has led to questions about whether or not supermarkets are doing enough.
Dainora added: “The biggest problem for small brands is how to access the traffic. Through the pandemic, people have been going to places where contact with other shoppers will be minimised.”
And that was the primary driver behind Hamish creating Local e Source. He explained: “It was a way to get all our local businesses onto one central marketplace and create a full shopping experience. Rather than going into one shop individually you come to one online marketplace with everything from that area.”
However, many consumers have noticed a greater variety of brands and products available in supermarkets in recent years, especially Sainsbury’s with its Future Brands program. At the start of the pandemic, some of our entrepreneurs were pleasantly surprised by the willingness of the big supermarkets to help them.
Jess Harris of Little Bandits, praised the efforts of the supermarkets over the course of the pandemic, but is concerned that things will soon go back to normal. She said: “Now everything’s settled down, they’re going back to looking at the commercial viability of your product.
“We’re in a challenging place having launched in lockdown which certainly has affected our sales and are still compared to the sale rate of dairy, we’re more niche than that right now so you hope retailers will see the value of start-ups that are helping to build categories and support us in that.”
Hanna added: “I hope the support will come from consumer habits, and through that, pressure from the public.”
Freya Blount of Gather & Graze, has a less-than optimistic outlook for the future. She explained: “Even if Asda is supporting 500 small businesses, there could be another 10,000 out there. Especially because since the lockdown, there’s so many more of us, so the competition is huge.”
Dominique had a bad experience with a major online retailer. “They were asking for £15,000 toward marketing expenses, and I was shocked! I’m a new brand, they should know it’s just not going to happen. They’re really not supporting young brands, or giving any information. They just ask ‘what’s your offer?’ That’s not good enough in a pandemic.”
Keeping options open
While the supermarket shelves are often viewed as the golden ticket for new food and drink businesses, the panel explored the importance of keeping options open and the value of diversifying outlets.
Krisi Smith of Bird & Blend Tea does a small amount of wholesale, but also sells to the hospitality industry and believes customers are driving changing habits in those spaces. She explained: “A large hotel chain and a large restaurant chain want to serve our teas in their establishment because they have realised that in a year’s time, they need to be offering something special across their whole menu to tempt people out from home.”
“They want us on their menu because having all these amazing suppliers on their menu is their best chance of their business still trading in a year’s time. And this is good news, because we know that they’re thinking about changing their business to bring what’s needed.”
Similarly, Jess Harris explained her decision to focus on different channels at the start of Little Bandits’ journey. She said: “We’ve now got a contract with a nursery catering company. We’re the provider for yogurts for 275 nurseries in the area, so we’ve got that avenue to mitigate our risk.”
At eight years since launch, Krisi is much further into her entrepreneurial journey than the rest of the group. And she reiterated the importance of not relaxing during periods of change. Krisi said: “We’ve had to take a fresh look at our business model every two months over the last 18 months, just keeping an eye on what’s going on.
“It’s also really tricky, because there’s less information out there than you would normally get, so it’s harder to predict what consumer behaviour is going to do. Sharing knowledge, data and resources is so important if we want to pivot, be smart and thrive going forward.”
Delight Mapasure of K’s Wors has struggled with the lack of feedback and data over the course of the pandemic. She said: “We’ve not had the opportunity to get people to test the product, taste it in store and give us feedback. We launched into Costco at the peak of lockdown, which was a blind launch and a big risk.”
Luckily, her trust in her product worked wonders. “We had a really nice buyer who believed in our product, and he said ‘let’s put a few packs on the shelves, let people try it and see if they come back’ and they have been.”
“It’s based on having a really good product, trusting in that product, and trusting the process. I certainly see lots of people trying cooking from scratch, and being more interested in trying different flavours and foods.” This changing consumer behaviour bodes well for the future.
Shaping the future
Reflecting on the roundtable, Emma Maile, hospitality sector director at haysmacintyre, said: “The panel all have different products that all bring such unique viewpoints to the table. It’s going to be so interesting to see what the consumer demand is over the next 12-18 months. It seems that will be key in shaping the direction of your businesses and the channels they operate in. We’re going to be kept on our toes.”