A survey of UK-based food industry SMEs found they are increasingly pivoting to e-commerce as retailers de-prioritise their products to concentrate on core offerings during the Covid-19 crisis.

London-based consultancy Young Foodies questioned senior brand representatives from 45 small- and medium-sized food businesses and found SMEs are dealing with major challenges to their businesses and livelihoods and are concerned they might be faced with a “war-time grocery market” within weeks.

Young Foodies said challenger brands are “in crisis”.

Some 73% of respondents told the organisation they see the current challenges as a threat to the survival of their business, with 47% seeing this threat as a real possibility. 

Major threats to survival include heavily reduced cashflow, being de-prioritised in retail and loss of both current and future revenues, especially from out-of-home.

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The average projected loss on revenue in 2020, for those that felt capable to estimate it at this stage, is 33%.

Snacks and confectionery are the food categories most at risk for de-prioritisation.

Food companies answering the survey spoke of sales declining more than 75%, with orders cancelled whilst in transit.

Young Foodies said: “The biggest concern for brands is being de-prioritised by retailers who are favouring larger businesses and essential products.

“There is growing concern they will be temporarily de-listed from major grocers, who represent more than 50% of their total revenue.”

But despite the challenge of reduced cashflow, de-prioritisation and loss of revenue, some 47% of respondents saw an opportunity to embrace e-commerce channels more quickly. 

Young Foodies added: “This shows the agility of small brands in responding to external influences, and the ‘can-do’ attitude that drives progress within founder-led businesses.

“Many brands are already pivoting marketing spend from sampling, events and activations, which have been postponed over [the] coming months, into online advertising and ‘connecting’ more with their consumers through digital channels.

“YF brands are seeing online channels as much more of a level playing field than grocery, where staff shortages and pressures are putting a strain on in-store merchandising, and with more ‘panic’ from buyers in physical stores than online.” 

But it said: “Challenger brands, the segment which has been driving majority growth in the market for several years, is in crisis.”

It is urging retailers to follow supermarket group Morrisons’ lead in reducing payment times for SME suppliers and to continue ordering from smaller suppliers.