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INSIGHT: Food supply chain in a challenging market

Assured

Hotels and the wider hospitality sector continue to recover and make progress out of the pandemic, however some of the bigger challenges now faced aren’t perhaps the ones we expected. Certainly, on that daily list is supply chain, and due to the short shelf life of most products’ food procurement appears to be hit by a perfect storm of factors including:

  • Product price volatility & availability.
  • Frequency & reliability in delivery logistics.
  • Supplier apathy to new agreements.
  • Resulting in operational disruption, revenue loss and margin erosion.

For as long as we can remember we had been spoilt by year-round availability of pretty much all produce with unfettered access to multiple supplier options creating a competitive buyers’ market. Whist we expect most of the challenges to settle over time, price increases eroding margins and availability impacting revenues is the last thing our beleaguered sector needs, particularly when looking at already difficult winter cash flow projections.

At Assured Hotels we have long established supply partners who we know we can trust to ramp up quickly when we commence new projects, so we have focused this article on food supply with our partner Entegra Europe .

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Entegra are a savings solutions partner, working across the catering industry to improve the operating margins of their clients. Operating with a self-funding, savings-led model, they remove any up-front costs or risk. They specialise in procurement services, delivering operational margin improvement and providing system solutions to enable clients to protect their profit margin and deliver improved operational efficiency.

Solutions to ease winter challenges

The food “basket” is complex with many categories performing differently with sources across the world, so we have shared Entegra’s quarterly market report here. A review of this report allows us to look ahead, summarised as follows:

  • Summary of current challenges and how we can support efficient operations.
  • Food categories, specifics on fruit & veg, meat & poultry, dairy, seafood and wholesale.
  • Category forecast, product guidance on availability, price and key issues.
  • Seasonal produce for the autumn & Christmas across all categories.
  • Non-food, trends & Christmas insights.

Price & availability data – allow for better planning and increase your margins

This is probably the number one challenge for Chefs and managers currently, so we conclude with a short analysis of price movement from an Entegra client’s September into October basket performance against inflation. Then more importantly how our support with Entegra’s purchasing power, systems and know how could mitigate commercial risks.

Price movement September into October – the tables below give a summary per commodity line from a representative basket spend over £100k, with all categories showing expected increases but lower than the current inflation trend.

In cash terms the forecasted increase for October (target period) on the same basket would cost £1,361 more (or 1.28%) more than September (invoice period), so much better than inflation which fell slightly in September to 3.1% according to the latest ONS figures issued 20th Oct.  

With inflation still high price will remain volatile for the foreseeable, many factors creating inflationary pressure to an accepted forecast range between 4-6% over the winter. Food increases will be at the higher end of this expected inflation spike.

Working with the back-up of a procurement partnership will provide a lot of support and solutions to mitigate external headwinds and the day-to-day operational challenges, these will include:

  1. No obligation review – price “ghosting” analysis, demonstrating 8-12% average savings against direct supply across all lines ahead of committing to any change in supply.
  2. Account management – multiple level operational & commercial support including:
    1. Monthly ops review including price movements, best practice, and lost opportunity recommendations.
    1. Live reporting between ops teams and financial controller on-site or remote, through cloud-based software.
    1. Menu costings, written not only to maximise margins but also payroll cost and team capabilities.
  3. Future/ forecasted pricing – price files are guaranteed for a month, and any big “shocks” from specific product lines will be identified ahead.
  4. Regulatory & legal support – changes to regulations and support on operational impact, e.g. Natasha’s law,  which came into effect this month.

We would suggest a review is a must – a ghosting report with supply and operational recommends would be provided on a no obligation basis.

Supporting Stakeholders – meet with us on a no obligation basis.

In direct response to ongoing challenges faced by the hotel & hospitality sector Assured hotels will be offering meeting time to sector stakeholders.

Please click here to book a meeting,  email mgriffin@assuredhotels.co.uk  or call 0203 916 5658 to discuss hotel restructuring and turnaround across the main disciplines of finance & forecasting, procurement, sales and revenue management, and funding particularly as government support continues to fall away.

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Zoe Monk

The author Zoe Monk

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