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Brexit, supply chain and inflation – the unholy trinity

Taking a brow-mopping break from their day jobs, we chatted to two industry leaders about the current issues facing not just our market, but industry and retailing as a whole.

First subject up was Brexit, for which Natural Trade Brokers MD Tom Moses had three words: “Get it done!”

Pressed further, he added: “We’re still encumbered by needless old EU bureaucracy that is simply holding back the UK Health Trade where the EU seemed to specifically target our industry. I mean probiotic as a health claim? Really? It’s nonsense.”

Meanwhile, TOL/THS Group Buying Director Julian Wright said a considerable volume of trade with Ireland, both North and South, has become very restricted as the regulations around exporting have been enforced more fully.

“Organic lines are the worst affected but there are also challenges with conventional goods,” he said. “It is also costly to ship products of animal origin which require veterinary certification, and phytosanitary products which need separate declarations. We had smaller but not insignificant sales into the rest of the EU which has also reduced to a small fraction of historic levels.”

All of which has been exacerbated by supply chain issues.

“Lead times on some products have increased, and shipping costs have had a significant impact on costs of imported goods but the actual supply chain has been pretty robust,” said Wright. “The events in Ukraine are likely to hit availability of some products later in the year and into next. We will also have to see whether the summer weather pattern causes issues with crops in Europe.”

At home, Moses reports “lots of problems” both with getting the right product to the right place and sourcing the product in the first place.

“Again, the EU are deliberately making life difficult and we need to break out of the circle of bureaucracy,” he said. “Meanwhile, the cost-of-living crisis is being used to increase raw material prices and almost all of the costs involved in running a business. There is also a suspicion that some unscrupulous suppliers are taking advantage of the general mayhem. Petrol seems to go up quickly but fall slowly. Strange that!”

One of the biggest costs for wholesalers is transport, much of which is the cost of fuel.

Wright said: “While diesel price remains high the costs of delivering goods has increased dramatically, and it is likely that if the cost of fuel falls, the cost of transport will not follow. This is also a cause of cost inflation in goods being delivered to us.”

Pricing has always been straightforward in the health food industry with wholesalers following suppliers’ trade and retail price recommendations. With low levels of inflation this has tended to see annual negotiations about how increases would be tolerated or what impact they may have on demand. Wright points out that those discussions are now far more frequent and often just notification of increases.

“Sales are lower than last year, however it is almost impossible to determine what element is linked to price increases rather than lower footfall which is still a problem for most of the country, and the other pressures on household income from energy bills and the general squeeze in living standards.”

They’re worried, you’re worried and your customers are worried. Cross everything for better news when our next issue lands!

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