Insight for food businesses food drink · market is underpinned by the quality of the product....

Winter 2018

fooddrink&

Insight for food businesses

Old Mill Food & Drink contentsWelcome 1

Brexit and the market conditions 3

Hot topics 5

Meet the team 7

Hot topic: Recruitment 9

Showcasing Dorset Food & Drink 12

The psychology of a menu 13

A recipe for disaster? 15

Top tips for attending shows 17

GUEST SPOT | BIC Innovation – Counting down to the new world of opportunities 19

HMRC Tax Penalties – Can a change in behaviour prevent them? 21

Recipe: Bakewell tart 25

Are proposed cider tax changes the beginning of the end for traditional producers? 27

Celebrating success – Taste of the West awards 2018 29

Leaving your legacy 32

1 www.oldmillgroup.co.uk

Your Old Mill contact

Jolyon StonehouseT: 01935 709312E: [email protected]

WelcomeIn this edition we touch on two of the big themes that impact Food and Drink businesses across the West Country in 2018; namely the ongoing uncertainty around Brexit and the challenges around recruitment.

Both topics are largely intertwined and it appears there

is no quick fix or easy solution. As I said in my address

to over 400 passionate industry professionals at the

Taste of the West Awards luncheon at Exeter University

recently, the South West’s Food and Drink industry will

help us get through Brexit.

With the region’s Food and Drink exports up for a

fourth year in a row, according to the latest HMRC

figures, what effect will Brexit have on the region’s

economy? Well, at the time of writing, the remarkable

events that have played out over recent months has

made it unclear whether Mrs May will be able to get

her deal over the line.

So, in the meantime, our counsel is that owner-

managed businesses need to keep on doing the

fundamentals well, remaining pragmatic by being

ready to take advantage of the opportunities that

emerge from this somewhat confusing state of affairs,

but planning for contingencies that might occur.

Knowing the World Trade Organisation tariff rates

on your own products feels like a good place to start

contingency planning.

Here in the West Country both farming and tourism/

hospitality are heavily dependent on EU workers but

businesses are becoming increasingly concerned as,

with record low unemployment, they are finding it

increasingly difficult to find the workers they need.

The number of Eastern Europeans coming to the

UK has registered its largest annual fall since

records began in 1997 to bring EU migration

to the UK to a six-year low.

Whilst the political uncertainty around Brexit is a factor

in deterring some migrants in coming to the UK, the

reality is that the lack of depth in the labour pool across

Western Europe is also a major contributor to the

problem.

So what’s to be done about it? Well we begin to tackle

some of the challenges facing local businesses trying to

compete in the jobs market with the first of a series of

articles aimed to provide actionable advice to SMEs on

how to attract top talent.

As I said, two big themes in and of themselves, but we

also touch on areas like HMRC’s changing focus and

behaviours around VAT, proposals for taxes on cider

production that will potentially impact on traditional

cider producers, as well as the importance of thinking

ahead in terms of succession planning when the time

comes to exit your business.

So, once again, there’s a lot in this edition of Food &

Drink to consider and, hopefully, help you plot your

way through some of the current challenges facing our

sector and ensure we approach 2019 on the front foot.

Brexit and the market conditions

I’m pretty regularly asked – what do you think about ‘the Brexit effect’ in food and drink and what should I do about Brexit?

For the past two years I have been giving much the same answer; “It’s all up in the air – concentrate on the things that you can control, stay on top of your financial performance, set goals and monitor your progress against them”. All good advice. All things that all businesses should be doing, now and all of the time.

The trouble is that all of this can feel a bit passive and, to most of the business owners that I know, doing the above just won’t excite them. So here is the challenge...

We still don’t know what is going to happen, even if there appears to be the occasional positive noise in relation to a trade deal. This uncertainty creates challenging trading conditions. It affects consumer demand, supply chain costs, currency rates, interest rates, etc. All of this you know.

This year, more than any in the past three, it feels like the biggest challenge for businesses has been sales growth. Of course, there are always exceptions and I do have clients that have managed to grow their turnover but, on the whole, it has been making the sale that has proven difficult.

In uncertain times we have surprisingly predictable behaviour. Commodity traders invest in gold as a ‘safe haven’, we stop moving house, we tighten our belts and we continue to eat and drink.

It’s this last point that perhaps informs us of what we should be doing. We must all continue to eat and drink – that is a fact of life. So we, the South West food and drink industry, have a role or perhaps a duty, to make sure that it is South West food and drink that is being consumed.

But I don’t think that ‘Brexit uncertainty’ gives us the full picture regarding suppressed consumer demand. For those ‘in the know’ there is an understanding about what West Country food and drink offers but I think we are currently underestimating the scale of the task in educating the end consumer. A 2015 LEAF survey revealed that a fifth of children didn’t know that bacon came from pigs. We can infer that a number of parents either don’t know or don’t educate their children about the food they are eating and drinking.

So three years on, how much have we moved the dial? Probably not very far. I believe that there are those whose principles dictate that they will buy locally sourced, locally processed produce wherever possible. There are those that will not. And then there are those in the middle – ‘the marginals’ – that can be persuaded in either direction. In tough and uncertain times they’ll seek out cheaper, mass-produced products readily available from supermarkets. In better times, they’ll give more thought to the food and drink they are consuming. So what, as an industry, should we do?

Well this is the bit that I think will excite most business owners and I think Brexit is the catalyst. Doing nothing is not an option, so here is my call to action. Now, more than ever you need to be banging a big, loud, unmistakeable drum about your product, the quality of the product, its provenance, its taste, its unique flavour. The challenge is to convert some of the marginals into those that always seek to buy locally sourced, locally produced products and to convert some of the current ‘non-buyers’ into buyers.

The strength of the West Country food and drink market is underpinned by the quality of the product. Let’s make sure that everybody knows about it!



Phil Mills @OMPhilMillsM: 07545 642087 E: [email protected]

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“ The strength of the West Country food and drink market is underpinned by the quality of the product. Let’s make sure that everybody knows about it!”


Hot topicsWEATHERWhat has happened?Although it seems a long time ago now, first we had the ‘Beast from the East’ followed by one of the hottest and driest summers on record with rainfall in June and July only managing 48% and 71% of average rainfall respectively.

As a result of these extremes, there are significant concerns over future food supplies with the cold winter delaying planting which was followed by an unusually dry summer which is leading to lower yields. Livestock are also suffering with many farmers already topping up feed using their winter supplies.

Research suggests meat, vegetable and dairy prices are set to rise “at least” 5% in the coming months because of the UK’s extreme weather this year. The Centre for Economics and Business Research (CEBR) said 2018’s big freeze and heatwave would end up costing consumers about £7 extra per month.

What does this mean for you?Food costs will rise. Due to the lower yields, supply will be down which could push up the price of certain food items. More food will need to be imported from outside of the UK to help satisfy demand, which itself may be problematic as many parts of Europe, and indeed the rest of the world, are suffering from similar concerns. If these cost increases are not passed on to the consumer, margins will suffer. However, if they do pass on the cost increases, sales volumes will suffer.

What can you do about it?Plan ahead and look at your cost base. There are ways to mitigate the rise in these prices such as taking advantage of higher volume purchase discounts, looking at forward contracts or by buying earlier if possible. It may be a good time to review other costs in the business to see whether savings could be made there.

LOW ALCOHOL BEVERAGES What has happened?Low alcohol beverages have become increasingly popular with sales increasing year on year. Normal strength beer, cider and wines are naturally high in calories with the low alcohol market supported by the more health conscious attitudes towards food and drink.

What does this mean for you?There are opportunities out there for drinks manufacturers to become involved in this movement towards a healthier drinking culture. The market is expected to continue to grow with many of the largest drinks manufacturers now involved with low alcohol versions of their popular drinks.

What can you do about it?There is an opportunity here to enter in to a growing market and to take advantage of this continuing trend. Alcohol producers have the opportunity to carry out research and development activities which will see benefits both in terms of end product and with additional tax relief available for this type of expenditure.

THE BUDGETWhat are the key updates? Immediate:• Businesses will receive a 33% reduction on business

rates if they are in a property with a rental value of less than £51k.

• There has been a freeze on the VAT threshold (next 2 years) and the duty on beer, cider and spirits: no such freeze in place for wine.

January:• Increase in Annual Investment Allowance up to £1m.

April:• Increase in National Living Wage to £8.21 and

Personal Allowance to £12,500.

What does this mean for you?Falling business rates will lead to higher profits and cash. However, the new National Living Wage could increase business costs by 5%. Make sure you have factored this into cash flow forecasts and budgets.

Timing is everything. If you are planning to invest in plant and machinery it may be worth waiting until after the New Year. Ask your accountant why this is more tax efficient or contact us today.

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Chris BennettT: 01935 709392E: [email protected]

VATThere has been quite the focus on Making Tax Digital (MTD) in recent months and quite rightly so. However, there are other VAT issues affecting businesses out there that also require some attention. There have been a number of instances recently where clients have enquired about the possibility of having VAT accounting periods that were different to the standard monthly and quarterly accounting periods.

It is possible to have an accounting period that is non-standard, i.e. not ending at the end of a month or quarter. Some businesses opt to have a VAT accounting period which is 4 weeks long and therefore submit 13 VAT returns each year. It is quite common for food businesses, especially restaurants, to want to run their accounting periods so that they end on the same day of the week each time, quite often being a Sunday. This has many practical benefits to the business with comparability of financial information and stock taking being two of the main draws.

In order to move away from the standard VAT periods, you will need to write a letter to HMRC explaining the new VAT periods that you want to use. They will confirm your use of these periods and adjust the VAT period accordingly, subject to their agreement.

It is also possible to have non-standard VAT periods when MTD comes into place, so don’t let that put you off.

TAX EQUALITY DAY 2018 Tax equality day 2018 was on 13th September 2018 with the aim of raising awareness of the perceived inequality that exists in the current tax system.

On 13th September 2018 every Wetherspoons pub in the UK, along with a lot of other pubs, bars and restaurants, gave customers a 7.5% reduction on all food and drink. The aim of this day was to highlight the impact of a VAT reduction in the hospitality industry.

At present, all food in pubs attracts VAT at the standard rate of 20% whereas supermarkets benefit from zero rate VAT on the majority of the food they sell.

It has been argued by industry experts that a reduction in the VAT rate applied to food sold in pubs will generate growth in the market, increase employment and safeguard the futures of our much loved public houses.

Meet the team

We’re not all boring accountants here in the food and drink team! From experienced chefs to amateur bakers, we have an array of talent and bright minds driving our business forward and using their industry knowledge to help drive food and drink businesses to reach their goals too.

One eager new member of the team is James Harrison-Taylor. A budding new addition to our food and drink obsessed clan...

James, what is your role at Old Mill?

I am a graduate trainee advisor in the food and drink team. At the moment I’m still learning the ropes and preparing simple sets of accounts, but I’m looking forward to developing my knowledge through study and practice, and learning new elements of the role.

Why did you want to work for Old Mill?

I’d been trying to get into accountancy for a while, with Old Mill being my first choice purely through first impressions and a gut instinct while doing my research. Coming to the assessment day reinforced this, and I got the feeling it was an exciting and ambitious company to work for, with a far more relaxed and sociable atmosphere than other firms I’d interacted with. Thankfully, I’ve not experienced anything so far to suggest I was wrong!

What do you like about working in the Food and Drink team?

For me, the best part is the team itself! There’s a great blend of experience coupled with a young, vibrant group full of energy with plenty of people to learn from, and the shared sense of humour definitely makes work enjoyable.

What are you passionate about?

I’m a huge fan of anything nerdy, be it TV shows, books, movies, board games, or anything else that catches my attention! I’m also a big rugby fan (3 years living in Cardiff was enough to get me hooked) and enjoy going to see Chiefs play when I can. I can also often be found engrossed in books/documentaries/research on history; the Roman and Mongolian empires are my speciality, but it doesn’t take much for me to develop an interest in new periods.

If you weren’t working in accountancy, what would you be doing?

I’d most likely have fallen back into the world of education. I’ve previously had a career as a maths teacher, and retain a strong interest in the sector, so I’d probably have found a role in the private sector that allowed me to influence and advance educational policy and the way maths is taught and assessed in schools. Either that or return to studying and complete a Masters in Operational Research.

What’s the most valuable thing you’ve learnt so far?

Who the best people to ask for help are when I am stuck on something!

If you were to create your own food or drink business what would it be and why?

I think Rupert Grint had the right idea in going with the childish dream of buying an ice-cream van, regardless of how easy it would be to end up eating through all the stock!

What’s your favourite place to eat?

After putting off going for far too long, I finally ventured out to Turtle Bay earlier this year, and it very quickly became a firm favourite! The combination of cracking burgers and a pretty substantial cocktail menu to work through means I’ve got plenty of reason to keep going back.

What’s your favourite meal?

You can’t go wrong with a roast in my opinion. Although my preference for soggy Yorkshires isn’t always particularly popular!

What’s your favourite tipple?

I’m not tremendously fussy, but typically cider is my go-to, so I’m hoping the move to Somerset will present plenty of excuses to sample new varieties!


Trips to see Chiefs play

8Walking the family dogs

New places to (over)eat...

Rugby in Cardiff

Days at the beach

Harry Potter Nerd out!

Food & Drink team

building; Tough Mudder style...


HOT TOPIC:

RecruitmentHere in the West Country both farming, food and drink and tourism/hospitality are heavily dependent on EU workers but businesses are becoming increasingly concerned as, with record low unemployment, they are finding it increasingly difficult to find the workers they need.

The number of Eastern Europeans coming to the UK has registered its largest annual fall since records began in 1997 to bring EU migration to the UK to a six-year low.

Our clients consistently tell us that one of the top challenges they face is hiring and keeping good staff, so we have decided to try to confront this head on, in the first in a series of articles aimed at helping business owners tackle this critical issue.

Old Mill’s Talent Acquisition Manager Laura O’Driscoll provides some actionable tips and advice on what can be done to stand out from the crowd and attract the top talent the region has to offer.


Laura O’DriscollT: 01935 709444E: [email protected]

Recruitment, recruitment, recruitment

It’s the biggest challenge facing most businesses right across the UK at the moment, so it’s likely a major concern for you too. You can’t help but hear that unemployment rates are at their lowest since the ‘70s, and dare I even type the word “Brexit” to throw this into the mix and the constant feeling of how the unknown could affect this further?

So, we should probably all be panicking?

Well, you could – and let’s face it lots of businesses are – or you can choose to accept that the labour market is tough and arm yourself appropriately to make sure that you are still able to secure good people.

As an in-house Recruitment Manager I look at recruitment as a marketing function. Yes, we sit within Human Resources – we bring people to the business after all – but we must think about our candidates like we think about our clients to truly understand how we should treat them, attract them and sell our business to them. We must nurture the candidate market place, we must appeal to them, and be prepared to use a number of different channels to speak to them.

OK, so that makes it sound simple doesn’t it – so, where do you start?

AcceptanceYou need to accept that things are going to take longer – the days of 30 day “time to hire” are slipping away from us, especially in areas where there are serious skill gaps or geographically limiting factors.

Acceptance alone won’t help you of course, you need to incorporate this into your planning.

“Well how can that help me if I don’t know that someone will resign?!” I hear you cry – I’m not suggesting you get out your crystal ball but you will need to be proactive wherever you can.

Think about where your risk areas are – who are the most sought after individuals in your organisation and what are their notice periods? You need to start to build a Talent Pipeline. Start talking to people with the relevant skills, talk to them across Social Media (Facebook, Twitter and LinkedIn), you need to put yourself on their radar before they are looking for a job. Start giving before you start asking. What does this mean? Post relevant and interesting content across the socials – the only time they hear from you shouldn’t be when you’re asking them to work with you.

Perhaps build yourself a social media content calendar if it helps, ask people from your business to contribute and write articles. Begin to open up the curtains and let people take a peak within your business so that they get a feel of what it would be like to work there before they are looking for a job. Good candidates will be snapped up so you need to make them want to work for you.

Understand your USP

Unique Selling Point is probably something you have considered when marketing your business but what does this mean for your Employer Brand? If you stood in a line alongside your three major competitors for talent – why would the best candidate pick you over someone else? If you can’t answer that question yourself, how could your candidate even begin to answer this for themselves?

Continues on next page...

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Maybe you already know your USP – that’s great! Do your candidates? Are you shouting it loudly from the rooftops? If so, are they hearing it?

How can you tell? Ask them! Ask your recent recruits, ask your agency contacts, and ask your network. In the same way you would use focus groups if you were launching a new product or service, you can use focus groups to understand people’s perception of you.

It could be that you offer amazing salaries, or a great flexible benefits package or maybe you are offering a good work life balance. If you can understand what your ideal candidate is motivated by, you can use this as a focus when you promote your Employer Brand.

What should you have in your arsenal?

Agencies

It goes without saying that there will likely always be a place for Recruitment Agencies and, despite them getting bad press sometimes, there are some really good companies out there that can provide a fantastic service. As with all suppliers though you need to pick wisely. Meet with a select few, how do you feel when talking to them? The chances are that if you feel like you’re talking to a used-car salesperson then your candidates will too. You need to work with the agencies who can treat your candidates as well as you can – and if possible even better!

Using agencies comes at a cost – if you go down this route there is little point trying to drive them down to small fees – if you pay 10%, you will get a 10% service. If you are committing to the budget for agency fee you should be paying between 15% and 20% to ensure that the agency are putting their best people onto the role and are giving you first refusal on good candidates. If your competitor is paying 20% but you are paying the same agency 10% – who are they sending that candidate to first?

At Old Mill we have adopted a Preferred Supplier List for our agencies – this is working well. We now work with less agencies and work well together. As a result they talk about our business more confidently, they know that they will be treated fairly and that we will look after their candidates. So if you are going to use agencies, use them wisely and this could be a great source of candidates for you.

LinkedIn

If you don’t have a huge budget then LinkedIn can be a really good way to get in touch with candidates – you can purchase a Recruiter Lite subscription (in fact you can take a free one month trial first!) and pay less than £100 a month. This will give you access to search for people by their Job Role and Location and contact them directly even if they are outside of your network. All you need to do is send them a friendly message to ask them if they are interested in a new role (keep it short and sweet) and begin to open up some communication and hopefully convert them into an applicant for your role.

Job boards

You may not feel confident approaching people directly on LinkedIn, or you may not have a huge amount of time to do so. Another good option for you is to purchase credits for Job Boards and post some adverts yourself rather than using an agency to do so. Some Job Boards will charge you (Total Jobs, Reed, Monster, Jobsite etc.) and others will be free (Indeed, Job Centre Plus). You should also be aware that some are Aggregator sites (LinkedIn, Glassdoor, Google Jobs) and they will automatically pull any jobs advertised on the internet into their search engine. But having Job Board credits is useless if your adverts are boring...

Good advert copy

The way you write is becoming more and more important. You should separate the term Job Description and Job Advert in your mind. A Job Description is a detailed list of all the essential and desirable requirements of the job itself. The advert should be shorter, you should speak directly to the candidate and talk about what is important to them and not you. If you get the chance, look up a chap called Mitch Sullivan on LinkedIn – he isn’t particularly “vanilla” in the way he writes his blogs but he does have some great ideas around advert copy, and better still, he even runs courses to teach you how to write Job Adverts if you’re so inclined.

Make applying for the role as easy as possible – avoiding lengthy application forms or extra paperwork unless it is absolutely necessary.

So there you have it, it’s a complex area and it can’t be fixed with just one approach but understanding that it’s a candidate’s market is key. We will continue our discussion on this critical area for owner-managed businesses in the next edition of Food & Drink in the Spring.

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Showcasing Dorset Food & Drink

Old Mill’s Food & Drink team prides itself on being at the forefront of the South West’s thriving food & drink sector, so we are delighted to be able to announce our recent partnership with Dorset Food & Drink.

Dorset Food & Drink is the membership organisation for food and drink businesses based in Dorset who produce, serve and sell great local products, as well as those who celebrate their connection to the beautiful county of Dorset. In terms of its structure, it’s a community interest company limited by guarantee with an asset lock which means it truly is a not-for-profit organisation.

Katharine Wright, Coordinator at Dorset Food & Drink says; “We aim to work with our members’ businesses to support them and help them get their food and drink businesses seen, known and recognised by consumers here in Dorset and beyond.

With an effective marketing and communication programme, both inside and beyond the county, we help our members reach new customers and help residents and visitors of the county find the very best of local food and drink here in Dorset. Our members are a supportive family, and we bring them together to network, collaborate and learn from each other, demonstrating new products and new ways of working to improve business and environmental performance.

We are the signpost for our members towards business support, marketing, promotion and above all we are the all-important link for advice, inspiration and product development. Not only that but you’ll also see us out and about at events, fairs and festivals sharing the wealth of food and drink and celebrating what Dorset has on offer!”

Now in their 6th year of promoting all of Dorset’s great food and drink, Dorset Food & Drink started life as an initiative of the Dorset Area of Outstanding Natural Beauty (“AONB”) Partnership. After a consultation with the local food and drink

sector (large and small businesses) about what was needed in the area to support food and drink business, Dorset Food & Drink was born.

With its outstanding protected landscapes, 8,000 years of farming and fishing, market towns, coastal communities and rural villages, it is easy to see why Dorset boasts a varied selection of locally produced food and drink, including meat, fish, dairy and wine. The county’s rich and diverse food culture is linked with the stunning landscape and coastline, providing the perfect backdrop to enjoy local food and drink. The area now has some of the best cafes, restaurants, pubs and farm shops which also play a key part in the economic activity of rural Dorset.

With 41,400 (as of 2016) employees of the food and drink sector in the LEP Area of Dorset, this makes it the most popular sector to work in.

Of the recent collaboration with Old Mill, Katharine says: “Our partnership with Old Mill’s highly regarded Food and Drink team enables us to offer the full package of support to our members, which we hope will really benefit their businesses. Old Mill are our latest Corporate Partner and we are excited to be working with them and connecting them with our membership base.”

For more information about Dorset Food & Drink, visit their website www.dorsetfoodanddrink.org, or feel free to call 01305 228239.


ThePSYCHOLOGYof a menu...

MAINSMEAT

It is important to hide the ‘£’ signs as this makes

the price stand out. £11.00

Also try not to line the prices up under

each other... 8.00 (v)

... as it’s easier to scan though and pick a low-priced

meal 10.00

Try using friendly pricing with a 0.95 at the end 7.95

This is a pricing technique used across all business

so shouldn’t be overlooked 9.00

Try not to use 0.99 as it says cheap and potentially

not quality 8.99 (v)

FISHMenus can be extremely daunting if too much

information is disclosed to the customer and can

lead them to look for the price 11.65

This doesn’t just apply to the descriptions of your

items but also to the volume of pictures 8.25

Photos of every item on the menu give the

impression of a ‘low end’ establishment 12.99

However, one tasteful photo or sketch per page could

increase sales for that product by 30% 14.00

STARTERSWe can apply the themes of behavioural economics

and psychology to the art of menu design known

in the business as ‘menu engineering’ 4.95

First impressions are extremely important as it is said

that it takes a customer just under 109 seconds to

make an opinion on your menu 5.99

Eyes are drawn to boxes but don’t overdo it! 6.45

Colours can also have an effect on your decision

making and the colours ‘red’ and ‘blue’ can influence

your customer to have a greater appetite 5.00

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ThePSYCHOLOGYof a menu...

SHARING IS CARING Think about your target audience when choosing

your layout and dishes 8.95

Couples are often less price sensitive as they are

out to impress 9.50

So maybe we can use this romance to entice

customers into spending more 10.95

DESSERTSPeople love nostalgia and can be drawn to familiar

dishes such as ‘rhubarb & custard crumble’ or

‘peanut butter & jelly pie’ 7.95

Also the use of descriptive words such as ‘succulent’

or ‘caramelised’ can tempt consumers and increase

sales by up to 27% 6.55

This is said to be more effective than geographical

terms such as classic ‘Italian’ pasta or ‘cajun’ chicken

burger 8.00

And unfamiliar dishes can lead to sales as they

spark interest and intrigue 5.45

CONTACT USAppeal to your customers to give you ideas and help

grow your menu as well as your business

Also, don’t forget us!

SWEET-SPOT The upper right hand corner of a double page menu is said to be the sweet spot as customer’s eyes are drawn to this area first – hence why some restaurants will display the most expensive dish here!

EXTREME PRICING is another technique used on menus 25.95

This involves using an extremely high price next to a lower priced (but still fairly expensive) dish 20.45

This makes all the items around it seem cheap in comparison 19.95

Consider using this with products you make high margins on 17.45


Lucy Bennett @OMLucyBennettT: 01935 709320E: [email protected]


A recipe for disaster?

Being in a highly regulated sector I appreciate that sometimes it feels like processes slow you down and does anyone else really care?

Many of the reviews and cross checks that I do for a set of accounts or tax computation are completely unappreciated by my clients. It strikes me that Health and Safety linked with the Food and Drink sector is a similar under-valued process, but absolutely essential all the same.

The problem is that when things go wrong, they can go really wrong and therefore the controls need to be in place and implemented, rather than just an afterthought. Reputational damage and the fines involved have the potential to break a business, so a controlled environment needs to be enforced. If things go wrong, often there is an instant blame culture in a business, but this doesn’t always succeed in eliminating cost or damage, so why would anyone rely on a reactive positive outcome and method of mitigating risk?

A serious Health and Safety incident and a failure to comply with procedures could create significant financial risk to any business. According to Health and Safety expert Russell Sweet of DDFL Solutions Limited (Health and Safety Consultants) “average pay-outs for issues such as breathing difficulties caused by inhalation of dust could be between £4-16k, slipping on wet floors £1-£150,000k and moderate burns £3-15k or significantly higher dependant on the resulting injuries.”

A claim could make all the difference to working capital and even push a business into administration. Sweet says; “Health and safety should be proactive rather than reactive but unfortunately it is often an afterthought, however, if controls are implemented it could save the business money.” Many health and safety requirements are centred around use of equipment and the Provision in Use of Work Equipment Regulations. If a workforce is established they can become blasé in using old equipment which is naively carried into the use of replacement machinery. Attention to detail is paramount with maintenance and cleaning procedures as you need to understand what foreign matter could enter the food chain and when and where to test for this.

I have heard of several incidents where new machinery has created unforeseen issues, and therefore an ongoing partnership with the manufacturer could be a smart move. A large local brewery had a scare in July linked to the cleaning of its new facilities and so these types of situations can happen to any size of business. Budgeting for the cost of new equipment and facilities should take into account the costs of transition, ironing out integration issues, training, process documentation and instruction manuals. Hence, along with essential engineering input and finance considerations, a risk assessment impact should help to keep a business operational during times of change. Reliance on other business’ processes is not an option with Hazard Analysis at Critical Control Point regulations. Failing to check food temperatures at delivery, during cooking, chilling and storage stages, could leave you wide open to risk of food poisoning incidents. Safer Food Better Business packs via the Food Standards Agency provide useful blank checklist documents and diaries for the smaller business to use on a regular basis. Proof that these procedures have been followed could give a stronger defence against possible claims and will be required as evidence in the case of any investigation. Documentation of Health and Safety Risk Assessments are required if you employ more than 5 people so these safeguards are not just for the bigger business. Even if you employ fewer staff, you also still need to have considered the potential issues so ignorance is no defence in a court of law and should not be an option.

Russell recommends; “businesses should put in place a safety management system which encompasses mitigating risk associated with the main causes of occupational ill health, injury, policies, procedures, RAMS, training matrixes, investigation procedures if things go wrong, ongoing monitoring and help liaising with enforcement authorities if improvement notices or prohibition notices are given.”

Another key concern of many businesses is control of contractors and how to ensure the safety of foreign nationals working in the UK. From a compliance perspective, is it enough to have workers sign a document saying that they have read and understood a multitude of health and safety documents? There is undoubtedly going to be more onus on the employer to check that individuals understand the processes, which may well not only cover the working environment and the provision of accommodation and leisure facilities provided out of courtesy.

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It seems that, to avoid being tied in knots with compliance, it is easier to put proper procedures in place and build a good safety culture from the start with, ensuring that there is a good control environment which breeds conformity. The need to comply with controls should be driven by senior management and, unless there is accountability for adherence to these procedures, there could be a disaster just waiting in the wings.

So arguably, with Health & Safety fines doubling, prosecutions increasing and prison sentences being applied to business owners/persons controlling a

business that fails to ensure compliance, Health & Safety should be given the same status as Finance/Turnover/Profit/Production/Quality/Technical/HR/Employment within a business.

If you would like advice on your Health and Safety procedures, please contact Russell Sweet at DDFL Solutions Limited on 07506 366195 or email [email protected]


Lorraine BollandT: 01935 709368E: [email protected]

“ A serious Health and Safety incident and a failure to comply with procedures could create significant financial risk to any business...”

TOP TIPS:

Attending food shows


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PLAN: Ensure you are prepared before the day arrives. A happy and relaxed trader is more approachable than a stressed one. Being fully prepared allows you to enjoy your day and your customers to enjoy it with you.

SET GOALS: It’s important to set yourself goals and some expected measurable outcomes before attending an event. These outcomes should be tracked at each event attended to get an idea of what events work for you. Having a clear outcome will help you plan your strategy for the day and give you an idea of what you will be saying to potential buyers, whether spreading the word about a new product or to maximise sales.

ADVERTISE: Let people know where you are. As the world continues its obsession with social media, use it to your advantage. Let people know what shows you will be attending well in advance and where they can find you. Tagging your posts directly to the events social media page (with pictures of your stall and details of special offers/special guests you have on the day), will help you gain maximum exposure.

PUBLICISE: Ensure you are open to talk to the press who are attending the show, along with event organisers, as any free publicity from the day will only increase business.

STAND OUT: One way to judge whether your stall grabs the right attention is by applying the ‘25ft test’. Once you’ve set up your stall, walk back 25ft and then approach your stand. If your display doesn’t stand out from afar, this could be the difference between people stopping and buying or just walking past. You could also provide free samples to grab attention and clearly display any awards you may have.

GET YOUR PRICING RIGHT: Offer a one-time only show discount offer to encourage sales. However, always remember, you have set your pricing strategy for a reason so stick to it. It is easy to panic when at a show when things aren’t quite going to plan and your product isn’t flying off the stall. Just remember, there is always another day!

NETWORK: Get to the show early! Meet other traders before the rush, tell them about your business and they may recommend your product. Seeing other trade stands will also give you ideas on how to improve your own.

REVIEW: Take time after the day to analyse and assess whether you have hit your targets and expectations for the day. If you haven’t, assess whether there were other factors affecting your day (such as the weather), rather than assuming it is because of your product or your pricing strategy. Create a document that keeps track of all the events you have attended so that you have a good understanding of which events have been successful and which you should potentially avoid.

MAKE CONTACT: Pick up the phone to anyone that you met at shows that were of particular interest. Connecting with them on LinkedIn, Twitter and

Facebook etc. will help you stay in touch. Email can be less effective because it can be deleted or ignored. Whether the person you are contacting is a potential customer, or a fellow trader you would like to start up a business relationship with, contacting them will have opened the door.

The main thing to remember is to relax, enjoy your day and not get too disheartened if things don’t go to plan. An unsuccessful day in terms of sale, may turn out to be a successful day based on the contacts made.

So, you’ve taken the plunge and decided to take part in the busy and unpredictable world of events and shows, but the question is, are you really making the most of your day?

Whether you are a new business looking to start selling at trade shows or you are an established business that attend shows regularly, this article explores some top tips which may help you in making the most of attending events.

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Counting down to the new world of opportunities: Brexit isn’t the problem; the market environment is

You may have gathered by now that Brexit is coming. Even if delayed for political reason, we will have technically left the EU before next summer.

So what?

The good news will be the potential sourcing of more food and drink products from within the UK. We know we are not self-sufficient in many agricultural products, not least milk and dairy, but also fruit, vegetables and salads. Inflation is picking up and food-inflation in particular will mean that consumers will have to pay more for food and drink. This means that if the weather isn’t the cause, then a sliding currency and perceived difficulties getting imports might also lift prices.

The less-good news was the weather and its impact on production. Sectors such as dairy have recently and continue to see high prices, especially for fats. The bad news is that it makes the processors look vulnerable to the supply chain pressures. Root crops and cereals have also suffered and whilst prices rise, having lower or no yields is no compensation.

It isn’t any easier dealing directly with consumers. The ‘Blue Planet effect’ means that consumers want to see action on packaging and anyone offering hope in that area will be popular. As usual with these things it is complicated and not so easy to quickly implement changes. The switch back to glass for some products, claimed as a fix, only highlights the law of unintended consequence with CO₂ through weight and washing and the problems with safety and recycling.

Consumers don’t readily accept long answers though. Then there is the trend against animal-protein and towards plant-protein. Small but now increasingly significant and with a premium in some cases that pricing can be three-times that of the conventional product; not least because the cost to produce and process can be far higher.

Animal welfare and the impact on the environment is an issue we will all have to address. The industry may need to invest in communicating why it should be regarded as having the highest standards for welfare

and the environment. Then the news that large drinks companies are reformulating products such as cider to use less apples grown locally, and more fruit flavours, reflects the consumer’s preferences, but means orchards are at risk of being removed.

What might we all be doing differently as a result? Some suggested questions for a food and drink producer might look like the following:

• Am I producing a product that has a growing market or a choice of markets?• Do I have a choice of customer if the existing one

disappears?• If I am short of water or my monthly rainfall arrives

in bulk on one day, can I still grow the same crops?• What disease and pest problems will result in the

change of weather or the change of legislative regime for the herbicides and pesticides that I have traditionally relied upon?

• Can I process more on-site and add value to my outputs?

• Can I partner-up with suppliers or customers to reduce costs, add value (by doing more of what they do) and protect my position as a result?

So, we are all probably going to take climate change more seriously and see contracts for growing reflect the risks associated with weather. Partnering up with suppliers and processors to try and mitigate the risk associated with currency, weather (climate) and changing consumer trends for plant-based foods and environmentally friendly plastic is also an easy prediction.

Focus on what else the business can do? Exploring the alternatives be they crops, products, markets. This is where professional help and advice may well make a difference. One example might be that after Research and Development Tax Credits (R&D) this research work could actually pay for itself.

It may sound odd but actually training and re-training yourselves and employees by getting out and about and seeing what other companies do may well inform

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John Taylerson | Senior Associate | BIC InnovationBIC Innovation is a specialist Innovation agency with expertise in food and drink, property development, processing, exporting and branding.

www.bic-innovation.com

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if not inspire the business to strike out in new and value-adding ways. Diversification is a good plan, it reflects managing risk and is not a defeatist move. Markets change, and businesses need to change to reflect that.

There is a lot of help available for adding value to the outputs of your business. You may have the provenance of where or what you produce, a competency to produce something to a very high and consistent standard and or a potential site that could process or host a processor. Not ready to invest directly in processing? No problem, contract-packers might be a help; companies who process for other people rather than produce their own brand. This means that accessing a market may not need capital investment in the first instance.

Believe it or not, the above list is what marketing is all about. Anticipating and meeting customer’s needs. Or it’s what you might call ‘doing what your competitors might do, only doing it first’!

Professional advice, be it for finance, marketing or property management, is key. Knowing what best practice is and how it applies to your business will be a competitive advantage in these changing times.

“ Diversification is a good plan, it reflects managing risk and is not a defeatist move...”


HMRC TAX PENALTIES:

Can a change in behaviour prevent them?We all have that place where we put things that we’ll deal with later / next week / never! It’s sometimes easier to put something off that looks unappealing, time-consuming or as though it might throw up something uncomfortable.

Many people behave in this way, particularly when it’s a tax or other official form or letter of some kind, especially one that relates to financial matters. Is it fear, lack of understanding, disorganisation or quite simply because we don’t think it’s important enough?

Old Mill’s VAT specialist, Marianne Hawksworth, provides some insight...

In the case of dealings with HM Revenue and Customs

(HMRC), it is an assessment of precisely those

underlying behaviours that are playing an increasingly

prominent role in VAT enquiries and investigations, and

in the resulting issue and treatment of related financial

penalties. Put simply, in the event of even a routine VAT

enquiry, the identification of such behaviours which

have resulted in VAT or other tax errors or failings can

trigger a potential financial penalty. Should HMRC

deem that such findings stem from negligent behaviour

- as opposed to genuine human error - such penalties

are likely to be harsher and their impact on a business

to have a more lasting effect.

As a VAT specialist at Old Mill, advising on and

defending against HMRC VAT assessment and related

penalty actions is a key part of my work, and we achieve

considerable success when we are involved in a review

of HMRC’s proposed actions on such matters, including

suspending or cancelling penalties, or reducing the

category of penalty, where possible (generally known

as mitigation). Ideally, though, taxpayers themselves

need to become more aware and focussed on the type

of behaviour which may cause HMRC to raise a financial

penalty charge – this is not a tax deductible expense

and moreover creates an aura of non-compliance for

the business/person concerned which will influence

future HMRC behaviour towards them, e.g. increased

focus; less likelihood of concessional treatment, etc.

Bridging the tax gap

It is important to first recognise HMRC’s changing focus

and behaviours. Their Annual Report and Accounts

2017 to 2018 presents powerful reading material

and shines a light on the scale of the effort to ‘tackle

deliberate tax avoidance and evasion’, including VAT. In

2017 to 2018, total tax revenues reached £605.8 billion,

an increase of £30.9 billion over the previous year.

VAT revenues in 17/18 were £128.6 billion, or just over

21%, almost twice that generated from Corporation

Tax. Little surprise, then, that there is heightened

concentration on this important source of income and

on closing what HMRC refer to as ‘the tax gap’. This is

the difference between what HMRC believe should be

paid in tax and what is paid.


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HMRC have been adapting and resourcing up to meet their new financial targets and have a clear strategy for meeting revenue goals; targeting evasion and attacking avoidance through aggressive penalty regimes and primary points of focus. Increased scrutiny, enhanced technology and the deployment of 25,000 tax compliance officers are the main pillars of a strategy that has every one of us in its sights.

Numerous penalty regimes are in existence, covering in particular:• failure to file and/or pay tax due on tax returns; • failure to notify (a liability to register for tax/VAT);• penalties for inaccuracies (where tax claims or returns

have been submitted to HMRC containing errors resulting in underpayments or over-claims of tax).

Apart from VAT, the above cover a wide range of taxes and also duties, for example customs duty and excise duties. The introduction of such penalties has been over a number of years. Some were more recently introduced (i.e. 2010/11) and other penalties have existed for decades, albeit some in different forms. Nonetheless, HMRC are focusing on penalties, as well as tax assessments and interest charges, to increase revenue. It is notable that, at the start of a VAT enquiry, for example, an HMRC penalty factsheet and a Human Rights factsheet are routinely issued to taxpayers, before HMRC have even started looking at the business and accounting records.

HMRC now seek to categorise the different ‘types’ of behaviours that have resulted in non-compliance and/or under-payment/over-claiming of VAT. Depending on the categorisation, which can often be subjective, there can be vastly different consequences for the taxpayer. This is regardless of whether the person or entity concerned is even aware that problems have arisen.

What are these behaviours and how are they judged by HMRC?A key factor in avoiding penalties is to take ‘reasonable care’ when dealing, for example, with creating and maintaining accounting and tax records, issuing tax

invoices, claiming VAT, filing and paying returns, determining whether a VAT registration is needed, seeking a VAT relief for a relevant residential or relevant charitable purpose building, etc.

No penalty may be imposed by HMRC where it can be demonstrated that ‘reasonable care’ has been taken. Of course, HMRC have their own definitions of ‘reasonable care’. In their internal VAT Compliance Handbook (CH81120), HMRC state:

“Every person must take reasonable care, but ‘reasonable care’ cannot be identified without consideration of the particular person’s abilities and circumstances. HMRC recognises the wide range of abilities and circumstances of those persons completing returns or claims.”

And

“For example, we do not expect the same level of knowledge or expertise from a self-employed un-represented individual as we do from a large multinational company. We would expect a higher degree of care to be taken over large and complex matters than simple straightforward ones.”

The range of penalties applicable is between 0%, for example where it is determined that despite ‘reasonable care’ having been taken, an error occurred, to 100% of the net VAT lost where an error has been deemed to be both ‘deliberate’ (e.g. the taxpayer knew that VAT should have been declared) and ‘concealed’ (e.g. the taxpayer took steps to hide the error from HMRC).

HMRC’s expectation is that the business owner(s) will ensure that ‘reasonable care’ is taken by them and by their employees engaged in compiling and submitting VAT returns. If reasonable care is not taken, this pushes the behaviour category and thus the penalty amount into the ‘careless’ category. Where carelessness is determined, penalties will range from 0% to 30% of the net tax due, whereas behaviour leading to non-compliance that is deemed ‘deliberate’ carries a penalty range of 20% to 70%.

Reasonable care includes putting procedures into place to ensure accurate and timely returns are filed, and seeking input from a specialist for an unknown, e.g. the VAT treatment of a particular transaction. The expectation is that sufficient effort has been made to ensure the timely and accurate filing of returns. If a matter is still uncertain, despite taking such steps, HMRC suggest that the matter is highlighted to them, at the same time as the return is filed or in advance of a transaction occurring, for example.

Finally, behaviour deemed to be both deliberate and concealed can result in a penalty between 30% and 100%, with emphasis on the upper end. The discussion around the boundaries can be open to subjective judgement and it is often in this respect that Old Mill is called upon to work with our clients to formulate a case for a favourable judgement.

I’ve been issued with a penalty – what can I do?

A penalty within a certain category can be reduced if it is disclosed to HMRC in an ‘unprompted manner’ to HMRC, i.e. at a time when HMRC are not enquiring/actively looking into that taxpayer’s affairs. Whether an error is ‘prompted’ by HMRC can be open to debate, for example, if the matter was in the process of being disclosed to HMRC when HMRC contacted the taxpayer to arrange a routine VAT inspection. An unprompted disclosure can result in a significant reduction of a penalty amount, and in addition, factors such as helping HMRC look into the background to the error, providing additional information as requested by HMRC and seeking professional assistance in dealing with the matter are all potential factors in achieving a reduction in the penalty amounts.

Although certain VAT errors may fall below the limit for separate disclosure to HMRC, i.e. can be adjusted on a current VAT return, there is still scope for HMRC to raise a penalty for non-disclosure despite this. We would always recommend such matters are considered in terms of implication before deciding not to disclose to HMRC and find ourselves advising a number of businesses and other taxpayers on such topics.

In terms of mitigation of a penalty amount, there is also the concept of ‘Reasonable Excuse’. This arises when a taxpayer has not met a legal requirement, for example to notify their liability to register for tax, file a return or pay tax, but believes there is a reason why this should not be penalised. There is a large volume of case law surrounding the area of ‘reasonable excuse’ and what might be treated as reasonable in one case, may not where there is another set of circumstances.

In our experience, the root cause of VAT problems is rarely negligence, and is more often than not simple carelessness, or the absence of clear systems and processes. It can also be fear of the unknown or ignorance of the law regarding taxation. All businesses can suffer from mistakes caused by genuine human error, the results of staff turnover and the loss of expertise and sometimes of focus. Sickness and other unplanned absences of key members of a team can all be factors that can lead to genuine and innocent errors. However, allowing these situations to continue over time or indeed taking no action to regain tax compliance can quickly escalate to the ‘careless’, ‘deliberate’ or even ‘concealed’ penalty categories, meaning higher penalty charges and greater HMRC review of the taxpayer, sometimes crossing over into other tax areas.

Whatever the underlying behaviour that has led to a VAT error, a failure to notify or a failure to file and pay tax, we are experienced in supporting our clients to get their VAT ‘house in order’ and have had considerable success in supporting clients in mitigating or cancelling potential penalties. Ideally though, the question of a penalty will not arise - we also review matters such as VAT compliance procedures to provide a business with bespoke guidance on key steps to take to prevent the incidence of a penalty. In short, awareness and prevention is usually better than cure.

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Marianne HawksworthT: 01935 709436E: [email protected]


Recipe for Bakewell TartEQUIPMENT

Weighing Scales

Sieve

Large Bowl

Rolling Pin

Wooden Spoon

10” Fluted Tart Tin

Wooden Board

Baking Parchment

Baking Beads

FOR THE PASTRY

200g Plain Flour

1 tbsp Icing Sugar (Plus extra to decorate)

110g Butter

1 Whole Egg (Beaten)

2 tsp Cold Water

FOR THE FRANGIPANE FILLING

150g Butter (Softened at room

temperature)

180g Caster Sugar

3 Large Eggs

180g Ground Almonds

1 tsp Almond Extract

200g Seedless Raspberry Jam

25g Flaked Almonds

100g Fresh Raspberries

(0ptional)

1. Start by sieving the flour and icing sugar into a large clean bowl. Then, with cold hands to keep from melting, rub in the butter to the flour mix. Add the beaten egg along with 2 tsp of cold water. Mix all the ingredients together to form a firm dough.

TIP If the dough is too sticky, add a tsp of flour at a time until the dough is moist but no longer sticky. If the dough is too dry and doesn’t stick together when in a ball, add a couple drops of water until the dough combines well without becoming sticky.

2. Roll the dough out onto a lightly floured board until 1cm thick. Gently place the pastry over the tart tin and press in each groove to line the tin. Then with a rolling pin, roll over the top of the tin to remove the overhanging leftover dough and keep for later. (Alternatively, you can trim the overhanging pastry with a knife.) Chill the tart in the fridge for 15 minutes for the dough to firm up.

3. Heat the oven to gas mark 4 or fan 160°C. Take the pastry out of the fridge and gently place baking parchment paper over the top and then fill the baking paper with the baking beads. Gently press down to fill the tart case without affecting the shape of the pastry underneath. Now place the pastry in the middle of the oven for 15 minutes to blind bake.

4. Remove the tart tin from the oven and gently remove the baking parchment paper and baking beads. Place the tart back in the oven for a further 15 minutes. Once done, remove and leave to cool.

5. To make the filling, beat together the softened butter and sugar until pale in colour and smooth. Then beat in the eggs one at a time. Once fully incorporated, stir in the ground almonds and almond extract.

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TIP You may find that you have enough dough and filling left over to make a smaller tart. If so, the dough and filling can be stored in the fridge for up to a week. When cooking, if you have roughly half the ingredients left, you should roughly halve the cooking time for baking. Blind baking is still required. Follow the recipe the same, adding a generous layer of jam and bake the frangipane filling until golden brown and firm.

6. Once the pastry case is cooled, spread the jam generously over the base. Then gently pour the almond frangipane filling evenly over the top of the jam. Optionally, you can push some raspberries down into the mixture so they can’t be seen on the top for added texture and flavour. Now sprinkle over the flaked almonds to decorate.

7. Place the tart back in the oven to cook for a further 60-70 minutes until the filling is firm and golden brown. Remove from the oven and dust with icing sugar. Serve with some cream and a lovely cup of tea.


Are proposed cider tax changes the beginning of the end for traditional producers? Cider tax has been a contentious issue over the last decade with the government introducing initiatives to try and reduce the health effects of white cider consumption.

The success of these schemes has been mixed with

many critics arguing that the government hasn’t done

enough to deter people consuming large quantities of

white cider, whilst still protecting the traditional cider

makers. In this article we explore some of the history of

the cider industry and comment on the new cider tax

rules that will be implemented in February 2019.

Back story

The 2010 and 2014 reforms forced white cider

producers to either increase the content of apples/

pears to their recipe or pay higher taxes, thus pushing

the price of the end product up. Given that one bottle

of white cider contains roughly 22.5 units of alcohol

(1.5 times the recommended weekly amount) and the

product has a somewhat negative image across society,

any price increase leading to less consumption should

be viewed favourably. According to the Alcoholic

Health Alliance 25% of drink related illnesses come

from white cider consumption.

However, critics of the 2019 reforms argue that

traditional cider producers will be caught up in a policy

which is not intended to affect them. Some producers

are still making cider near the 7% ABV level and will

either have to adjust their formula or pay higher taxes on

production. This could have a significant impact on some

producers in an already highly competitive industry.

Although this is clearly a controversial issue, the recent

change in consumer demand has meant that the

majority customers now want lower strength or fruit-

based ciders which are usually produced at around

4% ABV, so this is unlikely to have a major impact on

the industry as a whole. However, there are a number

of producers that are concerned that watered-down

cider takes away from the hard-earned flavour which

is teased out of apples during concentration and could

lead to the extinction of traditional cider making.

EU and Brexit

Clearly this legislation will bring about significant

change for the industry. However, there are potential

EU reforms around the corner which could lead to a

bigger shake up.

Under the current proposal (which is yet to be

unanimously backed by the Council of Ministers), small

cider producers (less than 15,000 hectolitres) will only

pay 50% alcohol duty. This could lead to a significant

reduction in costs and encourage smaller producers

to push beyond the current 70 hectolitre tax efficient

production levels. Furthermore, cider specification

will be homogenised across the EU leading to a more

consistent product and a fairer tax legislation.

During a recent interview for The Morning Advertiser,

NACM Chief Executive Fenella Tyler points out that Brexit

could still have a huge part to play in the future of the

cider industry and states that she “expects wonderful

things” for the industry over the next 10 years.

Over the last five years the EU has been putting

pressure on the UK government to remove the

70-hectolitre exemption which is unique to the UK cider

industry and Brexit will reduce the likelihood of this

happening. The UK currently accounts for 39% of the

world’s cider production but is still a very small part of

the alcohol industry as a whole. Therefore, many critics

argue that cider is way down the list of EU priorities and

little attention has been paid to taxing it fairly.

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Conclusion

The craft cider category has firmly established itself as a beverage for modern millennials. As cider begins to rival beer in the UK, it is clear that the industry is evolving rapidly with brands such as Thatchers, Brothers and Heineken all taking market share from traditional beer alternatives. However, consumers are not just turning to household names. An increasing number of pubs are now stocking smaller traditional brands straight from the farm as consumers are demanding greater variety from their providers.

Market growth usually rewards those that are willing to adapt to changes in the industry and these amendments to legislation could be just one part of that. Regardless of whether the new EU policies are implemented in the UK (following Brexit), it could be a good idea to align practices with other European countries to encourage exports. For instance, Aston Manor has recently been taken over by the French company Agrial Group which could give us some indication of where the market is going.

In conclusion, the new UK legislation is unlikely to affect the vast majority of traditional cider producers as generally production levels are below 6.9% ABV. However, some will inevitably be impacted, and their future success could hinge on their ability to adapt to changing consumer demands. The general trend in the sector seems to be towards lower strength, fruitier ciders.

So what should you be doing to adapt to the changes in the industry?

• Market the story and benefits of your product: educating the public about the locality and benefits of your product can reduce some of the emphasis on price.

• Research and Development (R&D) tax relief: if you are looking to re-design your product then make the most of tax reliefs. Making a claim can reduce your tax bill by an extra 25p per £1 spent.

• Packaging: have you considered reducing the quantity of cider in your bottles? We are seeing a shift to 330ml bottles which reduces the perceived price to customers.

Additionally, if you are looking to raise funding to expand the business, have you considered crowd funding? Brew Dog have just finished their Equity for Punks scheme which raised over £26m from 90,000 participants to expand their operations into Ohio.

If you would like to discuss any of the above or chat to us about how to save money via an R&D claim, then please get in touch.


Wayne Bastian @OMWayneBastianT: 01935 709436E: [email protected]


Celebrating success – Taste of the West awards 2018 Having attended the Taste of the West Awards this year, it was clear that 2018 was another fantastic year for the Food & Drink sector. The meal, which was made using award winning products, was delicious and the variety of nominations was inspiring.

“ The strength of food and drink production in the South West is un-paralleled compared with other regions...”

Barny Butterfield Sandford Orchards

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As the region continues to establish itself as a food and drink destination for tourists from all over the world, it makes us all proud to be headline sponsor for such a fantastic initiative. We spoke to winners in several different categories and our conversations highlighted some of the key challenges and opportunities these businesses have faced; ultimately enabling them to achieve their goals and succeed in the business world.

Background

Successful businesses have to start somewhere and each of the award winners began their journey as small companies and then expanded over the years. New Farm Restaurant (The No1 Place to Go) and Little & Cull (Champion Ready Meals, Soups and Light Eats) both started life inheriting their family farm and decided to diversify away from traditional farming operations. Having been in the wine trade for some time, Crispin Bond and his wife Jane, who is City and Guilds qualified, were the perfect combination to turn their family farm into a fantastic restaurant sourcing the finest ingredients the region has to offer. Then there’s Tom Cull of Little & Cull who decided to turn his family farm into a kitchen, growing vegetables on his 40-acre site and turning them into pies.

Some of the other winners turned to the food and drink industry for a career change, leaving their old jobs behind. Conker Spirit (Best Branding), Hartland Mill (Best South West B&B) and Lick the Spoon (Champion Chocolate) were all created by individuals passionate about food and drink, and keen to try something different. Previous skill sets were diverse, with owners having experience in teaching, cooking, surveying and engineering.

Barny Butterfield from Sandford Orchards (Supreme Champion) was a farm labourer and used to use excess apples and the farmer’s equipment as a means of “part payment of wage”, as was traditional in those days. As demand for his cider grew, Barny invested in more apples and cider pressing equipment.

Challenges

Challenges are different for each business but there is a consistent need to adapt to them and consumer demands. Matthew Short from Lick the Spoon emphasises the need to “create products with a longer shelf life” so that wholesale customers have longer to sell them. Barny adds to this the importance of effectively managing cashflow, stating that “cashflow can be a real killer”. Cathy & James Walker focused on the need to consistently change their decor, making “every guest feel individual” and “updating the menu in a creative way”. Rupert Holloway from Conker Spirit focuses on the difficulties in thinking two years ahead, whilst Crispin & Jane raise concerns about the slight reduction in trade caused by an impending Brexit.

Despite the variety in challenges these businesses have faced, what is clear is that they have each taken a flexible approach and have/will adapt where needed. Matthew has noted two key points in his career where he made significant change. The first was to reduce his product lines, focusing on the ones which were profitable, whilst the second was to close his restaurant to focus on the core part of his business. These are tough decisions but have proven very beneficial in the long run.


Taste of the West winners 2018

Tom Harb-Little and Tom Cull: Little & Cull

Matthew Short: Lick the Spoon

James and Cathy Walker: Hartland Mill B&B

Barny Butterfield: Sandford Orchards

Crispin Bond: New Farm Restaurant

Rupert Holloway: Conker Spirit



Wayne Bastian @OMWayneBastianT: 01935 709436E: [email protected]

Recognition

When speaking to the winners it became apparent that these awards hold a real prestige and are positively recognised by both consumers and suppliers across the region. Barny states that; “regionally, Taste of the West is hugely important and very highly thought of. The strength of food and drink production in the South West is un-paralleled with other regions”. Crispin adds that they had a “massive response from Facebook” and Rupert mentions that the awards have helped obtain supermarket space and are a real recognition of what they are doing.

Regardless of the impact on sales, obtaining an award from Taste of the West is something to be celebrated. The judging process is strict and only the best products will get recognised.

Advice

We asked the winners if they had any advice for others which are looking to follow in their footsteps and the response we had was fantastic. Barny advises; “you need to have an utterly ruthless focus on the liquid and to stick to what you are good at”. He focuses his efforts on producing a fantastic cider from apples grown in the Sandford area whilst leaving skills such as accounting, marketing and legal to the professionals. He continues; “suppliers should focus on telling a story and educating rather than reducing their price”, a point which was re-enforced by Cathy who advises to “make your offering as good as you can to help with margin”.

Rupert shares his thoughts saying; “producers should obsess over every detail… the business should look for gaps in the market, what are other people not doing.” Matthew raised an important point about running a shop; “It’s really hard for anyone running a shop these days and getting the right location is key. Often new businesses start in out of town, cheaper units which have a lower footfall of customers which

can be hard to overcome”. He also highlights the need to understand your customers and the seasonal trend which is inherent in your product stating that you need to “make enough during peak season to sustain cashflow throughout the year”.

From the two service establishments we spoke with, the advice was consistent and clear, know what your unique selling point is and stick to what you are good at. Both places sourced food from local quality suppliers, often using the Taste of the West awards to find the best products. Cathy from Hartland Mill also stated that when a vegan enters their restaurant they; “throw away their menu and see what they can do for the customer, rather than seeing what they can have from the current menu”. Tom adds; “prepared food markets are growing enormously with food to go and casual dining sectors seeing rapid growth”.

This year has been an incredible year for the Food & Drink industry with new innovative products finding the limelight at shows and on supermarket shelves. Customers are starting to demand more quality which is partly down to the efforts of the producers to educate the public. John Sheaves from Taste of the West emphasises the government advice of “get closer to your market and regain trust” to further develop the industry. Phil Mills of Old Mill mentions the importance of “focusing on your core market” in times of uncertainty rather than investing into new areas to drive sales.

We wish everyone a great 2019 and hope that, if you haven’t already, you find the inspiration to create a successful business and further establish the food & drink sector in the Southwest as the number one place to go.

Taste of the West winners: (above left) Matthew and Diana Short, Lick the Spoon. James and Cathy Walker, Hartland Mill B&B

Leaving your legacy Many Food & Drink businesses start small with a great idea, often as lifestyle businesses, and then start to find their feet and get traction... but typically business owners are sucked into working ‘in the business’ with no time to think about the type of legacy they would want to leave on exit.

For many owners, legacy can be just as important as the cash out. A case in point that made the press was Pukka Herbs; a well-known West Country-based organic herbal tea and supplement company that was founded in 2001 by Sebastian Pole and Tim Westwell.

It was acquired by Unilever in September 2017 for an undisclosed (but likely very large sum) after the founders started out with £2,500 each of their own money and initially worked from a bedroom.

Their decision to sell to a global multinational surprised many at the time but, as Pole and Westwell said, it was all about safeguarding Pukka’s legacy and accelerating their mission of bringing the power of herbs into more people’s lives.1

So as a business owner what type of legacy do you want to leave behind?

Selling or passing on a family business is a once-in-lifetime decision but many business owners are failing to put exit strategies in place ahead of their retirement because they’re caught up in the challenges of the present.

They either assume that somehow succession will work itself out naturally – or consign it to the bottom of the ‘to do list’ because it’s an overwhelming and complex task they don’t have time to tackle right now.

Old Mill’s Corporate Finance specialist, Mark Neath (right) says; “You really need three to five years to get it right and do it properly. It isn’t just about maximising the value, you also need to make the business sustainable without you. If it’s a trade sale to a big corporate, cashing out may be fine, but in many SME deals, the business will need to support the funding to some extent so to make sure you get paid out, you need to be confident that the funding works and the business is well-prepared to survive. And to do that properly

you need time, you need to make sure the staff and customer transition effectively through the succession process; and those things all take time, they are just never going to happen quickly.”

Whilst Pukka Herbs decided to go down the trade sale route, an increasing number of smaller firms are looking at alternative exit strategies – and often these are more about ensuring the business and its employees are protected than securing every possible penny of value for the person selling out.

Things like employee share plans and management buyouts, where you can get some key staff involved solves two problems. One: the funding problem, because spreading a purchase through an employee share plan can reduce the lumpiness of funding; but two: it also reduces the risk by securing the future participation of key employees.

The knock-on effect of passing the baton is that business owners need to think carefully about how best to nurture and develop the next generation of business leaders to ensure a seamless transition. As exit becomes a reality, it’s critical that the business isn’t reliant on the business owner(s) and that measures have been put in place to upskill the new team.

Old Mill has developed a deep-seated specialism in advising owner-managed businesses on these critical choices. So don’t put this on the backburner any longer – we’re happy to have a confidential, exploratory discussion around the best strategies to meet both your personal and business needs.

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1 www.unilever.com/news/news-and-features/Feature-article/2018/pukka-people-say-we-sold-out-actually-we-sold-in.html


Mark NeathT: 01392 351308

E: [email protected]

Contact Old Mill

You can contact the Old Mill Food & Drink team directly by emailing [email protected]

Exeter Leeward House, Fitzroy Road, Exeter Business Park, Exeter, Devon EX1 3LJTel: 01392 214635 Fax: 01392 214690

MelkshamWessex House, Challeymead Business Park, Bradford Road, Melksham, Wiltshire SN12 8BUTel: 01225 701210 Fax: 01225 709817

WellsBishopbrook House, Cathedral Avenue,Wells, Somerset BA5 1FDTel: 01749 343366 Fax: 01749 344986

YeovilMaltravers House, Petters WayYeovil, Somerset BA20 1SHTel: 01935 426181 Fax: 01935 431852

Email: [email protected] www.oldmillgroup.co.uk

The content of this newsletter is for general information only. It should not be relied on and action which could affect your business should not be taken without appropriate professional advice. Please contact your usual Old Mill contact or local Old Mill office.

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