MD of Applied AcumenView Author Profile
The sad story of Southern Salads is a warning to all businesses ahead of Brexit.
Southern Salads did not appear to be a business in trouble 12 months ago. In fact, order books were strong right up until the moment the administrators were called in to this £30 million turnover company, which supplied a range of fresh salad and deli items to a good balance of retail and food service customers.
In simple terms, the company ran out of cash. Operating in a highly seasonal business, the firm’s business model was reliant upon buying in from Europe, and putting a mark-up on processing and distributing the produce to their national customer base.
It sounds easier than it is in reality.
Leafy salads have a shorter shelf life than you’d think. Most of this life can be consumed in the journey to the supermarket, so a slick supply chain, rapid processing and smart logistics is a basic requirement, not a luxury.
Add to this the highly vulnerable nature of the product, which must be handled carefully not just to avoid bruising, but to also observe the strictest hygiene requirements – a bad salad can literally kill you – and you have a most challenging supply scenario.
So, doing this successfully for 30 years means you can bet the people running Southern were no mugs, and it would be wrong to write them off as such. Like every manufacturer in the UK, they would have been facing any number of what we would describe as ordinary operational challenges.
Top of the list of these challenges for many right now is direct labour availability.
We aren’t even close to Brexit, yet getting hold of people on minimum wage who can string two words together (any language will do) is already proving difficult in many parts of the country.
It's a key reason that Staffline, one of the UK’s largest agency direct labour providers bringing people in from Eastern Europe, is aiming to double its £1 billion turnover over the next few years.
Maybe they know something we don’t about cross border controls post 2019, but in any event it is clear that only people who do not have a mortgage in this country can live on minimum wage.
Of course, supply of labour is merely a symptom of demand for goods and services. Managing that demand with ever tighter margins is the game we all play.
Many sectors are beginning to experience the same kinds of pressures long seen in short shelf-life food: the variability in demand through a week of 7 delivery days, the swings in forecast accuracy, the day one for day two lead time, the accommodation of a variety of different customer ordering systems, procedures and documentation, the seasonality of demand, and the drive for innovation.
All of these things present a huge day to day managerial challenge. Managing these things better means a business will make more money. Although these pressures are most acute in the Salad sector, surprisingly none of these things tripped Southern Salads.
As with most food businesses, their supply contracts were not in sync with their sales contract, so when input prices went through the roof, and alternative sources were unavailable, Southern was forced to try to renegotiate – something they clearly tried to do.
Until the money ran out. So, there was nothing this company could do, except blame Brexit and exchange rates, and they consequently shut the doors with the loss of 260 jobs.
Except, that isn’t the whole story, is it?
A simple question: was this company the best salad supplier in the country, or not really any better than the others?
If it had been the best supplier in the country, providing the best service, with the best quality, at the best price, would those customers have been so apathetic about letting it fail? Well, we certainly know the outcome of not bothering to find out.
Richard Shipperbottom is MD of Applied Acumen.
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