2021 Year in Review: Food, Drink and Hospitality Sector

As we look back over the food, drink and hospitality sector in 2021 what are the key words that have shaped the year? Covid, Brexit, human capital challenges, sustainability and organisational agility all immediately come to mind.

The Ongoing Effects of COVID-19

COVID continued to have an impact on the sector throughout 2021. With the 2020 Christmas lockdown measures extending into the Spring, the successful vaccine rollout in the months ahead allowed for many businesses to get back on their feet, but uncertainty still lay ahead. It was only last month that business owners received confirmation that the Scottish Government decided not to expand the controversial covid passport scheme.

This was welcomed by many across the sector. When asked, Stephen Montgomery, the group spokesperson for the Scottish Hospitality Group said that he welcomed the news and that “hospitality is still facing significant challenges and suffering from the long term effects of the pandemic, with rising supplier costs and an ongoing recruitment crisis putting real pressure on the industry”

Brexit

Even with COVID overshadowing everything during 2020, Brexit did not exactly creep up on exporters on 1 January 2021. However, with the EU-UK Trade and Cooperation Agreement only being finalised on Christmas Eve, UK businesses had very little time to prepare for the reality of Brexit. It is little wonder, therefore, that all of the headlines in the first few months of 2021 focused on delays at the ports, rotting food on lorries and empty shelves in stores. Even the UK’s beloved “Percy Pig” was threatened by EU “red tape”!  

We have been helping clients in the seafood sector who have specifically seen increased paperwork required for the movement of goods. In addition to the actual export declaration, seafood shipments have a raft of other documentation from catch certificates to various health certificates. Both in the run up to Brexit and in the first few weeks of 2021, we spoke with clients to ensure that they understood the changes and had put in place any overseas registrations necessary for the smooth operation of their supply chain.  We have supported clients with the operation of more efficient structures and in particular clients have implemented arrangements that significantly reduce the volume of paperwork.

Sustainability

Despite all of the above listed struggles, sustainability remained a hot topic and priority for the sector during 2021. The launch of a Scottish food and drink trade partnership sees five long term commitments to help the sector meet net zero targets and ensure its long term sustainability as confirmed by Mairi Gougeon, Cabinet Secretary for Rural Affairs and Islands, at a COP26 event: “Food and drink is one of the most important sectors in our economy, employing more people in manufacturing than any other, contributing hugely to our exports and supporting thousands of jobs across rural Scotland – we want it to have a sustainable future.”

Following on from COP26, the methods for increased sustainability are beginning to come into place. From April 2022, there will be a tax on plastic packaging, where if plastic material used is made with anything less than 30% recycled plastic, businesses will be charged £200 per tonne.

Organisational Agility

Mairi is correct, this is one of the most important sectors in our economy, and due to this disruptive and rapidly changing world, never before has organisational agility been so important in order for businesses to re-position quickly and effectively whilst under control. We’ve seen this being pushed high up in the strategic agendas of companies large and small, and through the lenses of investors and shareholders.

As the sustainability agenda encourages up to shop and consume local produce, the organisational agility agenda and increased digitisation allows for our food, drink and hospitality businesses to move away from only being able to use local professional services businesses to support them. Thanks to home working and businesses becoming increasing agile, businesses are seizing the opportunity to move to working with industry experts no matter where they are located. 

This approach relates directly to our Virtual Finance Function, where location has never been an issue because the solutions we provide for clients are virtual by name and by nature. While our Virtual Finance Function provides businesses with a high quality, bespoke finance service, options to choose from enabling it to be built around your business, and experts to call on to give you peace of mind that ‘everything finance’ is under control, freeing you to focus on operations. 

Since the start of the pandemic we’ve seen a demand in this service, onboarding new national and international virtual finance clients in the food and drink industry to whom location is no barrier: an international craft beer bar in Shanghai, an organic cold-pressed juice bar based in London, and an alcohol-free gin manufacturer in Glasgow to name but three.

Looking forward to 2022

At the time of writing this, the nation is sadly once again facing uncertainty due to COVID, as we wait to see if the vaccine will be effective against the latest variant. With the booster scheme already taking place we can only assume and hope that businesses will continue on an upward journey in 2022, and that issues caused by Brexit will continue to be ironed out.

With so much importance placed on the sector, we believe the most immediate issue to attempt to resolve is human capital challenges. Vital roles must be filled in order to keep supply chains moving and to help businesses grow and through conversations with clients we understand that more support is needed.

What the last 2 years have shown us is that businesses in this sector are resilient, and the people behind them are determined. With Scotland aiming to become the world leader in 21^st century tourism, it is easy to take for granted the delights on our doorstep. Businesses have gone above and beyond to bring not only a product or service, but a memorable experience to customers. It’s undoubtedly an exciting time for the Scottish tourism and food, drink and hospitality sectors, and I for one am looking forward to seeing what 2022 has in store.

If you would like more information or guidance on issues relating to the the food, drink and hospitality sector, please contact Derek Mair, Head of Food, Drink & Hospitality.

Find out more about AAB’s food, drink and hospitality team here.