Many businesses have been significantly affected by the impact of the Covid-19 pandemic and associated social restrictions, and the permutations for the hospitality sector have been well documented throughout. Decisions taken to shut down hotels, restaurants, theme parks and cinemas have affected those businesses directly, but it has also come as a blow to manufacturers operating in the supply chain which support such businesses.
One of these supply chain manufacturers is Speciality Breads, a Kent-based bread producer that provides products from frozen doughs to fully baked artisan breads to the food and catering industry. Speaking on The Leaders Council podcast, managing director Simon Cannell candidly looked back on the previous 14 months for the business and how Covid has hit revenues and forced the company to adapt.
Discussing the immediate financial effects of the pandemic on the business, Cannell said: “The impact of Covid has been huge. We predominantly supply the food service sector and as a manufacturer we had gone from an average pre-lockdown turnover per week of £150,000 to just £2,500 per week by the second week of lockdown. So of course, closures within the hospitality industry had a major impact on our sales, which essentially dropped off a cliff within two weeks.
“We normally employ around 98 staff and once the furlough scheme became available, we took the decision to furlough 91 of those, running the core business for three months on a skeleton crew of seven staff during the first lockdown.”
Despite running the business for that period of time with such a small team, Cannell was significantly encouraged by the level of effort that his staff put in.
Paying tribute to his workforce, Cannell said: “I don’t think anyone would choose to go through this again, but we are an extremely resilient business with great people working for us. Our staff have been incredible, and we have seen people stepping up and putting in unexpected levels of effort daily. Overall, I think we have handled the crisis well as a team, and we have tried to ensure that we have stayed calm all the way through when making big decisions and tried to use all the key information available to us at the time.”
In Cannell’s view, Speciality Breads’ strategy of managing through the pandemic - which involved looking ahead beyond lockdown periods to ensure the business was ready to capitalise upon the lifting of social restrictions - proved greatly beneficial.
“We have always tried to look past the pandemic and knew a recovery would come. As it has been, we have had two recoveries with restrictions being lifted last summer, reintroduced again, and now back in the process of being tentatively lifted once more. We have used our time well to plan for both reopenings.
“We have found that this approach has given us something positive to focus on rather than getting sucked into the doom and gloom of the daily Covid case numbers which were not so encouraging. It has been important for us all to get in a positive frame of mind and look at how we can get ahead of the competition once restrictions are removed.”
Fortunately for the business, Cannell believes that Speciality Breads was in an advantageous position going into the first lockdown back in March last year thanks to its financial standing, an aspect which has held the firm in good stead throughout the challenge of lockdown.
“We were in a fortunate place going into the pandemic in that we were in rude health as a business. That has allowed us to step back, analyse things calmly and make the right choices. For businesses in financial distress already or which were slightly stretched going into this, they are feeling the pinch a lot more.
“Indeed, as we have come out of lockdown on both occasions and into recovery spells, we have seen businesses taking different approaches. In our case, we have been able to bring staff back in March 2021 and begin ramping up production again in readiness for the latest recovery in line with social restrictions being lifted, to take advantage of a busy summer ahead. Meanwhile, others have been forced to keep staff off and use furlough for as long as possible.”
Having had the leeway to restart operations earlier, Speciality Breads’ financial performance for the year is already beginning to show a marked improvement.
Cannell highlighted: “As a business, 2020 has been written off as it has been for everyone but looking at year-on-year performances compared to 2019 we are outperforming the figures for that year which is a real positive for us. The challenge is to keep planning for the future now. Businesses like certainty and the ability to to make medium-to-long-term investments, and it is difficult for the government to provide that certainty to allow for firms to do that.”
In this respect, Cannell feels that the government can do more by way of communicating better with businesses in times of crisis to help create greater certainty, and by widening its financial support measures further.
“I feel more can perhaps be done to help business going forward. We can thank the government for the furlough scheme, which was rolled out quickly, but business rates relief has been more hit and miss and we as a manufacturer were not entitled to it despite the hospitality sector being the lifeblood of our business. The hospitality businesses we serve were entitled to business rates relief, and they couldn’t function without suppliers and manufacturers like us, so I feel we were not necessarily thought about there.
“Looking to the future, nobody wants to utilise furlough. We want our staff back in work of course but extending the furlough scheme for longer as a safety net I feel could be beneficial for both government and business. Claimant numbers will be substantially down now compared to the peak of the pandemic so it will only be used by those in need of it. Furthermore, nobody wants a second lockdown and restrictions to come back, but if it does need to happen it would be good for the government to better communicate it well ahead of time so businesses know what the plan is, and we can then plan and make ourselves sustainable and work around lockdowns. The government needs to be more creative at how it looks at future restrictions and keep industry better informed.”
Cannell also stressed that the need for industry to remain informed was relevant to the government’s current roadmap out of lockdown. With the government’s policy throughout being to confirm whether key dates are to go ahead just one week ahead of time, Cannell was clear that this approach posed another challenge that business had to find a way around.
“It is difficult for us and other businesses to take risks. Planning for the hospitality sector reopening was not just a matter of us being able to wait for a week’s notice that it would go ahead on time, and then have us simply resume operations then in readiness for it. We must prepare ourselves and prepare stock weeks and months ahead of time with government dates in sight, and just hope and pray they do not get moved the week before.”
With regards to the final step of the government’s roadmap out of lockdown, senior ministers for the first time have opted to delay the latest milestone - dubbed the June 21 ‘Freedom Day’ where all social restrictions were due to be removed - for a period of four weeks. While Cannell does not foresee this having a detrimental impact on his own business, he warned that some sector operators will not be sustainable unless all social restrictions can be removed soon.
“From a business perspective, when we hear about pushing the lifting of restrictions back, it is difficult to take when you have been preparing so hard in advance for that date to go ahead. That said, we as a business are in a good place. The restrictions still in place at the minute are hampering sales for venues which would benefit from larger numbers of people within them, but we are coping and outperforming 2019. A June 21 delay for a short number of weeks will not be too disastrous for us, but some businesses out there simply will not be sustainable without restrictions being lifted completely, so the sooner all restrictions go, the better it is for everyone.”
