Independent food and drink retailers and suppliers face a raft of challenges in the coming year, including rising costs and increased competition from supermarkets.
Here, some of the leading retailers, wholesalers and producers in the sector reveal what they see as the biggest hurdles to be overcome in 2025.
But it’s not all bad news, and our experts also look at the opportunities independent businesses have to succeeed and grow.
Paul Hargreaves
CEO, Cotswold Fayre and Flourish Foodhall & Kitchen
Challenges: The increase in business rates and employer’s National Insurance will disproportionately impact the speciality food sector, as any increase in costs will impact these smaller businesses more than larger ones due to their lower profit margins.
An ongoing challenge for retailers in the sector is being different enough in their product offering. Supermarkets are taking more specialist products than they used to, which is great for the sector, but means that products onboarded by the farm shop or deli three years ago may well now also be in the local supermarket. Ensuring speciality retailers are different is a challenge, but eminently possible as many new brands are coming through constantly.
Opportunity: Great customer service: it is noticeable in all sectors that personal service has become worse across the board, and this is where independent retailers can win loyalty and spending from their customers. Our retail outlets and many of our retail customers still have knowledgeable team members serving customers at the meat and deli counters, and walking around the store educating their customers about the products. This is the opposite of supermarkets, where the counters have been eliminated in most and team members are difficult to find in store. Customer excellence is where independent retailers can win.
Iain Hemming
Founder, Salt Deli Kitchen, Salisbury
Challenges: Increased team wages and National Insurance, not only from your own employees throughout the wage structure, but the knock-on from suppliers who will be looking to recoup increased costs. Don’t stick your head in the sand. Work alongside your accountant to plan how these changes will affect your business, and use January to implement the changes necessary and be ahead of the curve.
Opportunities: Look in the mirror to see what makes you special and different, and focus on this. Study each product on the shelves – what is its story, why is it unique and how you can best use it? Create clear, concise, professional POS to this affect. Plan supplier-led and/or store-led product tastings, and change your promo product range every two weeks to keep things fresh. This also promotes product knowledge within your team.
Build your presence in your local community as this can increase customer loyalty. We have met with local primary head teachers and will be visiting classes to prepare simple, nutritious and economical dishes. Pupils will roll up their sleeves in making these dishes and will take recipe leaflets home to their families.
Catherine Connor
Marketing & business development, Lovingly Artisan Bakery, Cumbia (2024 Farm Shop & Deli Retailer Awards Retailer of the Year)
Challenges: One of the key challenges faced next year will be the increased costs for businesses across the sector. The ever-rising costs of supplies such as chocolate and olive oil, combined with the recent changes in National Insurance contribution for employers, and minimum wage increasing again could put many out of business.
Opportunities: Since Covid there has been a sourdough takeover, which has grown exponentially as people learn about the fantastic health benefits of this mighty loaf. A key opportunity we’ve jumped on is the creation of our own mill, on track to be up and running in early 2025. Our friends at Eden Yard farm have grown and harvested more than 11 tonnes of heritage rye for us, soon to be milled by us!
Simon Hurley
Co-founder & managing director, Cock & Bull Co
Challenges: A potential recession will curb traditional spending, and less cash in consumers’ pockets is never a good thing. A price war in the supermarkets will no doubt follow, shining the light ever brighter on the price differentiation between them and the independent sector. This means value for money will be key, not just the cheapest on offer. So, great communication, exemplary customer service and human-to-human relationships will be important.
Climate change, and the impact of the food sector on the climate and health, will also be key issues throughout the year.
Opportunities: With a probable recession on the cards, the independent sector is well placed to offer that bit of indulgent quality that people will be craving as they tighten their belts and start to miss out on restaurant visits, holidays and parties. Health, both human and that of the planet, will continue to dominate the news in 2025 and will create opportunities for the independent sector to offer food-related solutions. Carbon footprint will be a very common phrase for the next decade and reducing this in food and drink plays to our strengths, as does speed of following the news and micro trends. Reduced sugar, plant-based and local will all be key drivers over the next 12 months and beyond.
Mark Kacary
Managing director, The Norfolk Deli (2024 Farm Shop & Deli Retailer Awards Delicatessen of the Year and Anglia regional prize winner)
Challenges: There are several, including being able to afford business National Insurance rate rises by managing staff and managing prices, as we’re going to have to find the extra money somewhere. Also, trying to find new customers who still have money and are prepared to spend it. Increased competition from supermarkets will also be a challenge as they are constantly looking for new customers, and are constantly encroaching on the areas of specialisation and innovation found in independents.
Opportunities: Ultimately, the biggest opportunity small independents have is their size and ability to pivot and find something new; to identify any possible weakness in supermarket offerings and to exploit it. Our biggest opportunity is to focus on local (as we always have) to work with small producers and to highlight the differences between the produce made by small producers and that which is mass-produced.
Emma Mosey
Owner, Yolk Farm, York, and chair of the Farm Retail Association
Challenge: It’s hard to choose just one, but I’d have to say the increase in National Insurance contributions, which will challenge businesses after several years of cost pressures.
Opportunity: Hopefully, those on minimum wage will have some more money in their pockets to spend in our outlets. Farm shops and farmers markets are the perfect place to treat yourself to something special.
Matt Whelan
Managing director, Fieldfare
Challenges: Rising costs and pinched shopper budgets will always be a big challenge. Smaller retailers cannot compete with supermarket pricing, which is why it is essential to offer something different and personal to your local community. Offer products that supermarkets may not be ready to stock. Loose and individually portioned foods offer something unique, while helping shoppers to manage their budgets better as they only pay for the quantity that they need.
Opportunities: A big trend right now is the move towards shopping for individual tastes and needs. We worked on research with YouGov earlier this year that found almost half (49%) of people enjoy adapted or different meals while sitting at the same table. Particularly so in smaller, one or two-person households, which now make up the majority of the UK’s homes. The specialist food and drink business is perfectly set up to tap into this opportunity.
By stocking loose food products, which the larger supermarkets still find a logistical challenge, specialist stores offer smaller households and individuals more choice. This enables them to experiment with new flavours without having to commit to large prepacked quantities, ultimately leading to a bigger basket size and return custom as shoppers enjoy the journey of discovery.
Joe Wall
Managing director, The Cress Company
Challenges: The rise in National Insurance is adding extra costs to everyone’s business, and finding good, reliable staff continues to be a challenge. On top of that, if inflation kicks back in, it will drive up prices for consumers – never an easy thing to manage in this market.
Opportunities: People always need to eat, and when times are tough, they still like to treat themselves. We’ve seen that customers often trade down from restaurants to fine foods for that feel-good factor. Being a smaller company, we’re quick on our feet and can adapt faster than the big players, which allows us to respond to market changes and keep delivering what our customers want.
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