Matthew Cushen is a London-based investor, strategist and consultant in food retail, via his dual businesses Worth Capital and Uprising Consulting.
He’s consulted globally, including helping to establish food giant Reliance Retail across India. In the UK Matthew has provided innovation consultancy to major retailers Tesco and Sainsbury’s and has an ongoing relationship with Waitrose.
Matthew is also a startup investor via his capital venture firm Worth Capital.
In early May – six weeks into the UK’s rigid Covid-19 lockdown, Matthew told Quota how things were looking from his, both small and large business, perspective. You can view the full interview on Quota TV.
What’s a lockdown day like in business investment?
“What’s been remarkable is how differently every one of our 26 investment businesses has been impacted. Every conversation has gone off in yet another different direction. Some of them are in very good shape because they’ve been able to exploit some great opportunities that have come up. But some others are in a very difficult position.”
What does business planning look like in these conditions?
“We’re certainly not looking at three years, we’re looking at 12 months from a cash perspective. With everyone one of our businesses we try to ensure that there’s a path to a cash runway for 12 months because we don’t see the funding environment being very positive at all until at least the first quarter of next year.
“So we’re being super realistic about that and cash conservation is key. From a demand planning perspective and marketing activity, it’s about the next four to 12 weeks.
“Then we’ve got half an eye to different scenarios about how we will come out of lockdown. But I try not to kid my businesses we can predict what is going to happen. So we think about what may happen. We’re just making sure that we’re super flexible.”
How are your businesses making use of UK government support schemes like furlough and business loans?
“They’re in different positions… some of them have built up reasonable size teams so they are using furlough. One furloughed a sales team for three weeks but they’ve taken them back on, which is encouraging. They thought they were going to struggle to have any conversations with retailers and other distribution outlets. But then after a three-week hiatus those conversations started to open back up again.
“The coronavirus business loan scheme has been a bit of a disaster really. We’ve said to our businesses frankly unless we were considering a loan arrangement before then that hasn’t really opened up many more options.
“But bounceback loans… they seem to be coming through quite easily and we’re basically encouraging our businesses to take loans regardless because it’s up to £50,000 depending on turnover, it’s zero interest for 12 months and then a low two and half per cent interest rate after that. If they don’t need it right now it can contribute to their cashflow rate that I was talking about earlier on. So it’s a sensible contingency. Even if you don’t need it right now, put it in a savings account and it’s there if you need it for later on.”
How do you feel about the role our big food retailers have played in lockdown?
“I think it’s actually healthy for everybody to realise the role the big supermarket retailers have in our food security is pretty key and it’s also pretty impressive. I think it’s great that people are waking up to the fact they shouldn’t really take that for granted.
“These are incredibly impressive businesses. And our supermarkets are the best in the world. We are recognised the world over as being great retailers. It’s good that we recognise that.
“The government has had a wake up call. You could see that they weren’t communicating with the industry very well at the start and then they realised that it was industry that was going to help us a/ cope and b/ come out of this.
“The supermarkets have had to have a mind set shift. They’ve spent the last 20 years chasing efficiency and optimising supply chains or what I would term the optimisation fetish and this has been thrown into stark relief. It’s great when things are normal but it has caused some problems when things have gone off the rails.
“Flour is a great example of that. The overall demand for baked goods has not increased, there’s only so many calories you can consume – of bread and cakes. But where we are consuming those calories has changed and how we’re consuming them as changed. We’re baking them in the home rather than eating in a café.
“So the overall amount of flour we need in the supply chain hasn’t changed but where we need it and how it’s packaged has. The retail packaging element of the supply chain has become the bottle neck. Flour has gone from something you could predict very accurately because it doesn’t really change with the seasons except at Christmas. But then there’s this huge bullwhip effect of the extraneous impact on volumes and forecasts and it takes a hell of a long time to work that through the system when your supply chain is set up to be completely optimised around regularity. The shock is huge.”
Does that mean we’ll see a different approach taken by supermarkets to supply planning?
“I’m not sure it will mean that much. There will be a consciousness of contingency and the need for contingency. It was great to hear Dave Lewis [CEO] from Tesco talking about the contingency scenario planning they do. Their last big exercise was January. That practice has put the business on a good footing.
“I think some retailers will realise their need to do a better and more regular job of contingency planning but I don’t think it will fundamentally change the optimisation fetish because as consumers we demand that they run lean, we demand low prices. We won’t stand for any supermarket giving us food price inflation. It’s just uncompetitive. So we’ll continue to optimise but there will be more of a role around contingency and scenario planning.”
What has been your experience of businesses having to adapt to the new consumer environment?
“The other big thing that’s happening at the moment for businesses small and large is the shift of where we are consuming. I think that we can anticipate that the places where we’ll be consuming will continue to look very different for at least the rest of this year and possibly looking into next…
“It’s the retailers where the demand has been stronger and casual dining and food service has been out for the period of lockdown. [After lockdown] casual dining volumes will be low because of distancing but delivery operations mean we can think about being relevant for that offer.
“What that means to businesses of mine like the adult soft drink brand Nix & Kix, is that delivery has been around single serve cans. Delivery now is about sharing – so how can we get sharing bottles to be part of that? I use that an example of thinking about different channels and how demand shifts. We were already selling on Amazon and direct to consumers from a website. Of course they become more important channels as well.
“The knock on impact is what it means for your margin mix, what it means for your supply chain, what it means for your manufacturing. Sharing bottles are [manufactured] out of Wales rather than single serve cans out of Austria, so the implications start to snowball.”
Is there any one observation about the current business environment that you think will impact the longer term?
“I think we’ll all be different at the end of this. What’s really interesting about this period, and I’ve been saying this to a lot of the businesses I work with, is, it’s long enough to develop new habits. If the lockdown had been 10 or 14 days, that’s not a period where people lose old habits. But it’s now a length of time when you can gain new habits.”