Advice for food and drink business owners on saleability as energy bills rise
While the food and drink industry sees a dramatic increase in energy costs as the price of wholesale gas and electricity rises exponentially, businesses must foot higher energy bills, with some quoting a 500% increase as the energy crisis hits both domestic and commercial energy users.
As this puts pressure on company cash flow, food and drink businesses must maximise the support available to them to survive the energy crisis and the overarching cost of living crisis. Our business transfer agents run through what help is available for businesses in the food and beverages industry as energy bills rise.
Help for drink and food businesses with their energy bills
If you plan to sell your food and drinks business, position it at a commercial advantage prior to marketing your business for sale as this can ultimately affect how much buyers will be willing to pay. If you fall off track with your energy bills, this could mean having negative cash flow which could damage the financial health of your business.
To drive down the cost of doing business, particularly energy bills, the government introduced the Energy Bill Relief Scheme.
Energy Bill Relief Scheme
Under the Energy Bill Relief Scheme, non-domestic customers can benefit from a discount on their energy bills to partially offset the increase in energy bills, known as the Energy Price Guarantee. The discount is automatically applied and will initially run between 1 October 2022 and 31 March 2023.
The scheme will be available to businesses that are:
- on existing fixed price contracts that were agreed on or after 1 April 2022
- signing new fixed price contracts
- on deemed / out of contract or variable tariffs
- on flexible purchase or similar contracts
The government will provide a discount on gas and electricity unit prices by setting a ‘government supported price’ as a baseline which is lower than what wholesale prices are expected to be this winter. This stands at £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas.
Commenting on the measure, CEO of The Food and Drink Federation (the membership body for food and drink manufacturers), Karen Betts, said:
“We welcome the scope of the Government’s Energy Relief Scheme and the speed with which it’s being rolled out.
“It addresses the largest and most volatile cost pressure facing our industry right now.
“Although some aspects of the scheme are still to be clarified, it offers relief to food and drink manufacturers across the UK.”
- Previous sales and acquisitions experience
- Sector specialisms and average success rate
- Sales value expectations and growth potential
Raising money for energy bills
Wholesale gas and energy prices are rising due to a threat to energy supplies as a result of the war in Ukraine, inflationary pressures and economic recovery from the coronavirus (Covid-19) pandemic.
While the government stepped in by introducing the Energy Price Guarantee under the Energy Bill Relief Scheme, temporary support may not be enough for food and drink businesses.
Hiking prices, reducing product menus and cost cutting may help businesses offset the increase in energy bills.
Reducing menu - As businesses experienced labour and ingredient shortages during the pandemic, reducing menu options presented a practical workaround.
Revisiting this tactic and cutting out stock that is energy intensive to manufacture or prepare can help drive down energy bills. For example, different types of fish are often on order by fish and chip shops, such as haddock, halibut, and tilapia. Reducing the variety cuts down the number of refrigerated storage facilities in use by suppliers and the total of fryer ranges in operation by fish friers which subsequently cuts energy costs.
Increasing prices – The price of energy and ingredients such as oil, fish, and potatoes have significantly increased due to their scarcity, which makes raising prices inevitable so businesses can overcome the increase in overheads.
Company restructuring – Seeking business restructuring advice from a licensed insolvency practitioner to streamline company operations and maximise efficiencies can help raise money for your energy bills.
As the energy crisis continues to test the resilience of businesses in the food and drink industry, they must remain hopeful and seek professional support to maintain business profitability and saleability.