Brexit related issues at Sainsbury's?
25 January 2021
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Brexit has kicked off with the usual debacle that one would expect with an agreement that changes the very fabric of people's experience with supply chains and indeed, with 7 days notice, over Christmas, to get things sorted.
Add in COVID and the challenges with testing and drivers/hauliers and you have a recipe for near disaster. Stocking up is all good but you can only do so much of it.
Added to the fact that a number of people in supply chain and indeed, retail won't have ever experienced anything pre the EU and open borders, seamless deliveries and all that goes with it and well, you have a resilient sector that mitigated most of the fall out.
But there comes a time where you're unable to hold back the tide and gaps open up, whether that is the case here, specifically, or whether that is down to other factors as well - such as the COVID testing elements and the delays at the border.
However, the presence of shelf signage in areas like Pet Food (where Sainsbury's Dog Food is produced in the Republic of Ireland) and then the Mars suite of products (Whiskas, Sheba et al) are produced across Europe one presumes(?) One lot code on the box shows PL (Poland?) which could explain some of the challenges.
Of course, lockdown 3.0 may increase the huge increase in Wine sales, but again, shelf barkers were displayed highlighting the gaps. These are often introduced to prevent customers asking colleagues about the gaps 300 times a day.
Clearly in terms of the gaps in Wines, it could be linked to the Brexit based situation and the adjustment to new rules. But there are other elements in the mix too, it's clear that the 'just in time' benefits of seamless movement of stock and absence of paperwork (by and large) for EU shipments means that numerous things that we have taken for granted, may well be now under threat.
Likely leading to price increases, but in the market we are in, with the recession and COVID battering numerous sectors.... That is a hard pill to swallow at any time, but now? Unthinkable.
Which means the margin may have to take the strain, but as we know, margins are hardly fat in food retail.....
Whichever way you look at things, the business model is set up for seamless movements of stock and minimal working capital deployment. Once the mere fabric of how the stock is moved from the EU to the UK changes, then costs have to be incurred and where will that impact be felt first?
It may settle down over time, but there is little doubt that this significant change, with plans and horizons changing means that the slack needs to be picked up somewhere......
Wines were hard hit, this could be lockdown 3.0 (ho ho) but the reality is that the supply lines here are likely to be hard hit, indeed, there were issues in Spain over port strikes too, plus the COVID backlog everywhere.
However it's clear that any disruption in the ports has a knock on effect and with supplies needed rapidly to fill gaps, that timeline could possibly be longer from now on.
From the Grocery Insight newsletter archive, first sent to subscribers on 25 January 2021. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.