Supermarkets struggle amid CO2 shortage

A shortage of carbon dioxide is causing problems in the food retail sector, according to BBC News.

The gas is used to carbonate drinks and is also deployed to stun animals prior to slaughter. A shortage of CO2 is impacting the supply of beer, soft drinks and meat to supermarkets.

The Food and Drink Federation chairman Ian Wright has said supplies are not expected to return to normal for one week, and in the meantime “choice will be eroded.”

Wright said: “We will see fewer chicken dishes, fewer pork and bacon dishes. We’ll see probably less carbonated drinks and certainly bakery and other things that benefit from what’s called modified atmosphere packaging, which is plastic packaging with a tray underneath and a dish of food in them.”

Baking brand Warburton’s has blamed the gas shortage for halting production at two of its four plants, while a number of other companies have admitted their production has been disrupted.

The British Retail Consortium said: “We are aware of specific pressures in some areas such as carbonated soft drinks, beer, British chicken and British pork but the majority of food products are unaffected and retailers do not anticipate food shortages. However, it is likely that the mix of products available may be affected.”

A spokesperson for the Department for Environment, Food and Rural Affairs said: “They said: “We have been assured CO2 producers are working as fast as they can to get plants up and running again, with CO2 production set to start very shortly.”

Costa sees sales fall 2% on 2017

Costa coffee has reported a 2% fall in sales compared to 2017 for the first quarter of 2018, according to BBC News.

The coffee chain said total UK sales were up 5.2% following the opening of new stores, but like-for-like sales were down.

Parent group Whitbread pledged in April to demerge Costa from the group. Early morning trading in London saw the company shares rise 1% to £39.36.

Whitbread head Alison Brittain said: “Our stores remain highly profitable and deliver an excellent return on capital.”

A statement from the company said: “The UK like-for-like sales decline resulted principally from footfall weakness in traditional shopping locations, whereas travel locations continued to show good growth.”

Recent months have seen a number of well-known UK chains struggle to cope with challenging economic circumstances and online competition. Brands including Marks & Spencer, House of Fraser, Mothercare, New Look, Byron, Jamie’s Italian and Prezzo have announced plans to close stores.

Companies Maplin, Poundworld and Toys R Us have entered administration.

Poundworld founder considering return to ailing retailer

Struggling retailer Poundworld may not vanish from the High Street after all, following news that its founder is considering purchasing some of the stores, according to BBC News.

The discount retailer was founded by Christopher Edwards in 1974 and sold it for £150m to TPG Capital in 2015. Edwards believes the chain could be saved with a fresh management team.

Poundworld called in Deloitte to act as administrators after a failed bid to sell the company to R Capital. The chain has been struggling like other retailers with a weaker pound and the growth of online shopping.

Edwards said the brand”s management had “not adjusted” to rising price pressure and had therefore “lost their profit margin.” The management’s decision to introduce multiple price points also attracted criticism from Edwards.

Speaking to Radio 5 Live, Edwards said: “B&M Bargains hasn’t gone, Home Bargains hasn’t gone, Wilko hasn’t gone. So for every store that goes down others are still thriving. It’s about management style, that is what makes the business work.”

Edwards said he was “sad and emotional” about the chain’s collapse and would decide whether to get involved within the next two weeks.

Suppliers worried about Asda/Sainsbury’s merger

Suppliers to supermarkets Sainsbury’s and Asda have expressed concern that the merger of the two chains could lead to increased pressure on price, according to BBC News.

Mike Coupe, chief executive of Sainsbury’s has said that the merger would enable the resulting company to cut prices on everyday products by around 10%. Suppliers say they are worried they will carry the cost of those price reductions.

Austin Sugarman, head of coffee supplier Fine Foods International, said: “There will be plenty of losers from this. If suppliers are going to have to come up with the savings, then we’ll see consolidation in the supply base.”

Sugarman added: “That means closing factories, that means losing people and it means effectively less choice for consumers.”

Industry bodies have said the merger would make trade challenging for smaller suppliers who are already struggling to cope with increases in the minimum wage and the auto-enrollment of pensions, as well as the devaluing of the pound following the Brexit referendum.

Gordon Polson of the Federation of Bakers said: “We already operate in a very competitive retail environment. We just don’t see possibly how our products could be reduced any further.”

Sainsbury’s said: “At this stage, we are still in the early phases of our plans but we believe this is a great opportunity for suppliers as they will be able to make their supply chains more streamlined, to develop differentiated product ranges and to grow their businesses as we grow ours.

“We are also actively investing in small suppliers – we are recruiting a team which is dedicated to working with smaller and distinctive suppliers to help them bring new products to market and to handhold them through this process.”

Garden centres see lowest sales since 2013

The recent spell of wet weather has hampered growth in the UK gardening sector, with sales at the lowest level in five years, according to BBC News.

The Garden Centre Association says that sales so far this year are around 15-20% down on 2017 figures, with an early Easter adding to the woes.

The Association’s chief executive Iain Wylie said people opted not to buy plants when the weather was wet, as gardens would be waterlogged.

Wylie said: “We need a sustained period of good weather. The worst thing would be one good day, one bad day. It’s been too cold and too wet and we need better weather to pick things up.”

Figures from the Horticultural Trades Association indicate that the UK garden market is worth £5bn each year. Around two thirds of British adults visit a garden centre at least once each year. Plants sales have not been this low since 2013.

Wylie hopes that the weather will get warmer later in the year, making up for the missed sales: “There will be some lost sales, but hopefully [the garden centres] will catch up with later selling plants.”

He continued: “Nurseries produce crops that bud and flower at the time they should, but if the weather outside isn’t conducive, it’s very difficult to manage the production cycle.”

Prezzo to close one third of its restaurants

Italian restaurant chain Prezzo is to close around one third of its outlets as part of a restructuring plan to avoid the company going into administration, according to BBC News.

The restaurant chain, which is owned by private equity firm TPG Capital, has estimated that the closure of 90 eateries will result in around 500 job losses out of a total workforce of 4,500 people. All 33 Chimichanga TexMex restaurants run by Prezzo are to close.

The changes are part of a company voluntary arrangement which seeks to prevent the company from going into administration. Under the deal, rents will also be reduced by between 25% and 50% at 57 of the chain’s sites.

Jon Hendry-Pickup, chief executive of the chain, said: “While we continue to be profitable, the pressures on our industry have been well documented. Despite this being a tough decision, the support given today by our creditors shows that they believe we have the right approach to transforming Prezzo in the eyes of teams, customers and stakeholders.”

In 2014 TPG purchased Prezzo for just over £300m. The chain is one of a series to come under financial pressure in recent months. Jamie’s Italian and burger chain Byron have undergone restructuring, while Toys R Us and electronics store Maplin recently entered administration.

Businesses cite increased costs including a rise in the National Living Wage and higher business rates for retail woes. Competition from online retailers is also a major concern for high street retailers and restaurants.

Sainsbury’s to increase basic pay rate, remove Sunday working premiums

Sainsbury’s has announced a shake-up of working conditions for its employees, according to the Guardian. Staff are to receive a higher rate of basic pay but paid breaks and Sunday premium pay and an annual bonus are to be discontinued.

Some 130,000 workers in Sainsbury’s stores will be paid £9.20 per hour. The retailer claims this is equivalent to a rise of around 8% in annual pay, after accounting for the loss of a half-hour paid break in every eight-hour shift and a 15-minute paid break in seven-hour shifts.

However, non-managerial staff who currently benefit from annual performance-related bonuses could stand to lose out, along with longer-serving staff who are paid time and a half for Sunday shifts. The supermarket said those who would be affected negatively would be given top-up payments for the next 18 months.

Sainsbury’s said that it was investing £100m in higher pay for staff and that the vast majority would receive more under the new rules. Fow the last three years, staff have been given 4% pay increases.

London-based workers will be paid a basic rate of £9.80 per hour, which is less than Aldi pays in the capital and below the £10.20 independently calculated London living wage.

Simon Roberts, retail and operations director at Sainsbury’s, said: “The retail sector has never been more competitive and we know that our customers really value our colleagues and the excellent service they provide in our shops.”

However, union Unite said the move was a ‘classic “robbing Peter to pay Paul” situation’ and said it would recommend rejection to its members. The union criticised plans to give staff no further pay increase until 2020.

New Look to enter a CVA

UK fashion retailer New Look has announced a plan to close 60 stores in a bid to avoid going into administration, according to BBC News.

The fashion chain’s rescue Company Voluntary Agreement (CVA), which is subject to approval from creditors, would see around 980 workers lose their jobs out of the total workforce of 15,300. Rents would be reduced at 400 stores.

New Look chairman Alistair McGeorge said the changes were ‘tough but necessary’ and that employees would be moved to roles in other parts of the business.

According to McGeorge, the ‘over-rented UK store estate’ was a key problem for the retailer and negotiations with landlords had resulted in agreements that could reduce the clothing store’s fixed cost base, boosting profits.

Daniel Butters of Deloitte, who is handling the CVA, said: “The retail environment in the UK remains extremely challenging, driven by weaker consumer confidence, the implications of Brexit and competition from online channels.

“New Look is an iconic brand on the high street and the Company Voluntary Agreement will provide a stable platform upon which management’s turnaround plan can be delivered.”

Toys R Us enters administration

The toy retailer Toys R Us has gone into administration. According to BBC News, the ‘orderly wind-down’ puts 3,000 jobs at risk in the UK.

The troubled toy chain had been facing a tax bill of £15m, but poor sales figures meant it was unlikely to be able to pay. All 105 Toys R Us stores will be open until further notice.

Joint administrator Simon Thomas said: “Whilst this process is likely to affect many Toys R Us staff, whether some or all of the stores will close remains to be decided.”

Thomas confirmed that the administrators would seek to find a buyer for all or part of the business. Some parts of the chain are more profitable than others, as Thomas said: “The newer, smaller, more interactive stores in the portfolio have been outperforming the older warehouse-style stores that were opened in the 1980s and 1990s.”

The online click-and-collect facility for Toys R Us has closed, but a large sale of remaining stock is expected to be launched in stores.

The chain’s US owner filed for bankruptcy in September 2017 and the UK arm of the business only narrowly avoided entering administration in December 2017 following an agreement with the Pension Protection Fund to pay £9.8m into its retirement scheme over three years. The scheme now has a shortfall of £38m.

Julie Palmer of professional services firm Begbies Traynor said: “Rising costs from the National Living Wage, apprenticeship levy and inflation, combined with ongoing pressure on consumer spending and the continued rise of the internet are hitting retailers with a big high street presence hard.”

Morrisons to cut 1,500 management jobs

UK supermarket chain Morrisons is to cut 1,500 management jobs and create 1,700 lower-paid roles, according to Reuters.

The move is a big to cut costs along the lines of similar restructuring by larger rivals. The ‘big four’ retailers, Tesco, Sainsbury’s, Asda and Morrisons are all launching cost-cutting drives to compete with market newcomers Aldi and Lidl, who are steadily gaining market share.

Tesco has said it will cut 800 jobs and Sainsbury’s is to remove all management job roles below store manager.

Morrisons has said the net loss of 200 roles would not necessarily mean managers will lose their employment, as the chain currently has around 800 management vacancies for which affected managers could apply.

Gary Mills, retail director of Morrisons said: “Very regrettably, there will be a period of uncertainty for some managers affected by these proposals.”