Coronavirus

Supply chains: This is what wholesalers fare in the Corona era

Everyday life in the Nuremberg wholesale market before the corona pandemic.

Nuremberg Wholesale Market, GFI German Fresh Market Association

The pandemic has brought the catering industry into the focus of attention. The lack of November and December aid fueled the fear of existential poverty. From the beginning of February, the question is not only whether restaurants or cafes are allowed to reopen. It will probably be about the future of an industry that last turned over 80 billion euros in Germany in 2019.

But also all those companies that are bound to them by supply chains: the network of their suppliers.

“Everyone has looked at the catering trade so far, but the middlemen and wholesalers in the supply chain remain invisible,” says Ludwig Veltmann, Managing Director of the SME Association. With his association he represents around 230,000 medium-sized companies that are organized through associations. Including some wholesalers and intermediaries for the catering industry. Veltmann explains that many would not even go public with their decline in sales for fear of no longer getting a loan from the banks.

“We are just as affected as the restaurateurs”

One of the people who speaks anyway is the Munich fruit wholesaler Christian Kieslinger. The company “Frucht Feldbrach” was founded by his wife Jenny Feldbrach in 1997, and he joined the company three years later. Today both are managing directors there. “In the first row, the restaurateurs suffer, in the second and third we as suppliers,” says Kieslinger. You would always come in the next step in the supply chain.

Kieslinger does not want to quantify his exact sales decline either, but he speaks of losses in the seven-digit range. “We are just as affected as the restaurateurs,” said Kieslinger. They are currently generating 20 percent of normal sales, for example through a large car manufacturer that still orders food for its employees in production. There are also old people’s and nursing homes and clinics. In the long run, however, this is not a sufficient alternative to gastronomy. In addition: So far, Kieslinger has only received one state advance payment last year.

Wholesalers like Feldbrach, who are indirectly affected by the closure of the catering trade, were able to apply for bridging aid from July last year. Depending on the decline in sales, this resulted in a proportional contribution to the fixed costs. With a drop in sales of more than 70 percent, he should get 80 percent of the fixed costs in the funding month. Basis for calculation: the costs of the previous month. But the maximum funding amount was initially a maximum of 50,000 euros per month. For the supplier, very little compared to the seven-digit turnover.

Later, the maximum funding amounts for bridging aid II and III were raised to 200,000 euros and 500,000 euros per month, respectively. But he has not yet received anything from this, said Kieslinger.

Dealers in wholesale markets are sometimes switching to retail

The situation is different for retailers who have been able to convert parts of their business, reports Frank Willhausen from the GFI German Fresh Market Association. His association represents 95 percent of the wholesale market operators with the 16 wholesale markets in Germany, Switzerland and Northern Italy. Including Munich, Berlin, Frankfurt and Stuttgart. Declines in sales at wholesalers, so-called market companies, also affect wholesale markets as a platform on which the dealers act. Losses are reflected here in outstanding rents for the space.

“Market companies that supply the hotel-restaurant-catering channel suffer from the shutdown, but were able to shift parts of the business to food retailing,” says Willhausen. In particular on traditional retail, i.e. weekly markets and owner-managed specialist shops. “Sales there have increased disproportionately,” he says. That was able to partially compensate for the losses in other areas, such as gastronomy.

At the Stuttgart wholesale market, also a member of the GFI-Deutsche Frischemärkte association, this was even shown recently with the goods that were offered for sale: “Overall, we even had a slight plus in bringing in goods in 2020,” says Thomas Lehmann, the managing director of the Stuttgart markets. This is also due to the fact that the retailers already had a certain mix of their customer base beforehand, i.e. in addition to catering they also served food retailers, supermarkets and weekly markets.

Pure catering suppliers find it more difficult to adapt

Wholesaler Feldbrach is represented at the Munich wholesale market. But changing his business is more difficult here: “For us, it is not possible to simply sell goods to private households,” says managing director Kieslinger. This option would not exist on the Munich wholesale market.

For catering suppliers without a mix of other customers, however, there is another difficulty: “Switching to discounters quickly doesn’t work,” says Kieslinger. They do have private Edeka stores that would buy some of their goods. But the big discounters have contracts with permanent companies and have absolutely no interest in their deliveries. “We asked a few, but without success,” said Kieslinger. First of all, a listing interview is needed to get on the list of suppliers. It’s not that easy at all.

In the long run, however, the Munich-based fruit wholesaler sees a much bigger problem: the supply chains with his company are not over. “Our potato farmers, from whom we buy peeled potatoes, can no longer sell without our purchases,” he says. The potatoes have long been grown, but they don’t know how to continue using them. The same applies to their gardeners: they had already planted the salads in February, and thousands of salads now no longer have a buyer. “Our farmers can pack up,” says Kieslinger.

Just one example of many that show how vulnerable supply chains are when one breaks. Kieslinger’s greatest hope is that the restaurateurs will soon be able to open again.

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