Feeling The Bite

It must be an absolute nightmare losing your job before Christmas because the company you work for goes out of business. That’s what happened with Grain D’or and P&H. Grain D’or ,
which is a stones throw away from us in North West London, were wholesale producers of croissants, pastries, cakes and speciality breads and were struggling in a very competitive market and suffering with “loss-leading pricing”. A recent hike in butter prices, as discussed in previous blogs, and the loss of two large contracts had compounded problems at Grain D’Or, which lead to the decision to close the business. They were a part of Finsbury Food which supplies bakery goods such as cakes and pastries to retailers, wholesalers and distributors and has Disney licences to produce branded goods. They decided to pull the plug on the business after making a £3 million loss on sales of £28 million with the loss of 250 jobs.
Palmer & Harvey the food wholesaler fell into insolvency with the loss of 2,500 jobs. They supplied Costcutter and 90,000 supermarkets and corner stores across Britain. P&H was a competitor of Booker Group who received clearance to be taken over by Tesco. P&H was also a major tobacco supplier to Tesco with 40% of its business coming from them according to reports, and warned if it lost the custom of the merged group, this would “have a serious impact on [its] efficiency, pricing and operations.”. Regulators agreed with Tesco who argued that the deal had little effect on competition because it involved moving into a wholesale market in which the supermarket group has no existing presence. The writing was pretty much on the wall after that and it was only a matter of time.
As much as our thoughts are with those workers who have lost their jobs there are two common threads which run through both closures. Firstly, the costs that businesses operate under, the constant battle to maintain margins without increasing prices and the fluctuations of ingredient prices which was relevant in Grain D’ors case. Both also relied heavily on one or two key customers and when circumstances change which inevitably they have a habit of doing they were left high and dry. There are lessons there for all businesses no matter how large or small whether you’re a small bakery delivering cupcakes and cakes across London or a large FTSE100 company supplying components to Apple.