Update w/c 08.02: Hospitality sector losses top £570 million, Ocado sales increase by 35% and UK supermarkets come under scrutiny from investors.
Research by accountancy group UHY Hacker Young shows that losses in top-earning restaurants topped £570 million last year, an increase of 117% from before the lockdown. This has lead to a number of Company Voluntary Arrangements (CVAs) to restructure company finances in an attempt to stay in business, including The Restaurant Group (owner of Wagamama and Frankie & Bennie’s), Leon, PizzaExpress and Yo!.
As we have reported before here, site closures and job losses have been widespread. Yet again the contrast between the food hospitality and food retail sector was underlined when Ocado reported a 35% increase in sales for the last 12 months. The company is however still loss-making due to heavy investments in increasing its capacity to meet ongoing demand for online delivery. The growth of online during the pandemic seems to have prompted a response from other retailers, including Tesco, Asda and Morrisons, who have signed a letter to the Treasury calling for a review of business rates for bricks and mortar retailers. The letter also calls for a 1% online sales tax in order to rebalance the costs of doing business on the high street versus online.
Beyond the hard business realities of the pandemic, Tesco have recently reported that sales of fruit and vegetables increased during the pandemic. Many products have seen a 50% increase in sales year on year, notably Maris Piper potato sales (60%), limes (60%), leeks (40%), red onions (30%) and apples (10%). Interestingly this comes in the same week as a group of institutional investors, led by the NGO ShareAction, have filed a resolution calling on Tesco to disclose targets for an increase in the proportion of its sales that come from healthy products. This initiative also references the Food Foundation’s own work Plating Up Progress which found most supermarkets to be stronger on their environmental commitments than their health and nutrition commitments.
At a time when food businesses are under increasing scrutiny about their role in people’s health and wellbeing, this week also saw supermarkets’ wage rates exposed. Several have awarded staff bonuses during the pandemic, although Morrisons stands with a planned wage rate of £10 per hour in April 2021, 50p higher than the voluntary Living Wage Foundation rate. Looking to more environmental issues, in the year that the UK will host the climate change talks (COP26) in Glasgow, Sainsbury’s have announced a goal to reduce their scope 3 greenhouse gas emissions (including food-related emissions from their supply chain) by 30% by 2030. We expect even more attention to be paid to food businesses regarding nutrition, social and environmental issues with both COP26 and the UN Food Systems Summit scheduled for later in 2021.