somerset local food

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Somerset Local Food A Community Benefit Society

Business Plan January 2018 (Revised April 2018)

SOMERSET LOCAL FOOD LIMITED !1

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Contents

Background Page 3

The Current Business Page 4

Time for Transformation Page 4

Why Somerset Local Food is different Page 5

A Digital Business? Page 5

What Customers See and Experience Page 6

Our Market Page 9

Understanding Our Customers Page 10

More than Marketing Page 11

Competitors Page 13

Somerset’s Local Food Distribution Network Page 14

The Financial Situation Page 15

Financial Forecasts Page 16

Key Personnel Appendix 1

Risk Register Appendix 2


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Somerset Local Food Business Plan

Background With a mission to deliver top quality local food to customer’s homes in the most direct way possible, Somerset Local Food Direct was potentially the first online specialist local food retailer in the UK. Over the last 15 years, it has gained a huge amount of experience, including a wealth of information accumulated in a comprehensive database, which will provide the springboard for future growth.

Somerset Local Food Direct Limited (SLFD) was incorporated on 21st January 2003 as a company limited by shares, jointly owned by Somerset Local Food Limited, an Industrial and Provident Society, and Somerset Farmers Markets Limited, a company limited by guarantee.

In 2012, Somerset Local Food Limited acquired the shareholding of Somerset Farmers Markets Limited, and SLFD became a wholly owned trading subsidiary of Somerset Local Food Limited.

The business started working with stallholders of Somerset Farmers Markets as a way of supporting local small food and drink producers by making local produce available to residents across Somerset on a weekly order cycle. Later this extended across Bristol and the West of England.

This model gave local producers access to a larger market, allowed producers to sell surplus produce direct to the public in a manner that complimented their farmers market sales, and therefore reduced food wastage, maximised income on produce and provided the scope for organic growth of the supplier community without the need for investment in additional marketing activity.

With access to regular Farmers Market stallholders, the diversity of food and drink produce was such that SLFD was never a vegetable box-scheme, but rather a true online e-commerce platform providing a real alternative to supermarket shopping; at a time when supermarkets were perce ived as the on ly main compet i to r organisations.

Whilst ‘local’ remained a priority, it was recognised there was a need to provide a consistent supply of this variety of fresh produce throughout the year in order to maintain a viable market that regular customers could access. Therefore, the decision was made that when local fresh produce was not available, to use local small wholesalers providing ethically sourced food and drink from elsewhere in the UK and abroad.


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The Current Business

With a good understanding of their customers, SLFD has followed consumer trends and also offer ethical and organic produce, locally sourced where possible. The business has a relationship with 60 active local suppliers based within a 30 mile radius of the Glastonbury warehouse, including two small Bristol based fruit and vegetable wholesalers who offer organic produce and will always source as close to Somerset as possible. It is made clear on the website who the supplier is and, as far as possible, the provenance of the produce.

Ethical kitchen cupboard products are sourced from the Essential Workers Co-operative, a Bristol based organic and Fairtrade product social enterprise, who manufacture and distribute sustainable wholefoods, ecological household products and cruelty free body care items.

SLFD works with local suppliers to list produce currently available on its website https://www.localfooddirect.co.uk. This produce is supplemented by other produce and products described above. The business operates on a weekly order cycle, and customers make and pay for their orders by 9am every Tuesday. Orders are downloaded on the same day by the suppliers direct from the website, or placed by phone with micro suppliers, who deliver their produce to the warehouse in Glastonbury. The warehouse team pick and pack customer orders on a Wednesday for delivery on Thursday or Friday. Packed orders are stored overnight in a refrigerated room when necessary, and insulated boxes are used to protect and ensure the freshness of produce during the delivery process.

Time for Transformation

Whilst initially managed by a Board of multiple directors, Roger White, a founding director of SLFD is now the sole remaining director, and has been since May 2006. Roger has decided to take retirement due to age and family commitments and will do so during the latter part of 2018.

This decision has prompted a period of change and renewal for the business. The directors of Somerset Local Food are clear that the business makes an important contribution to Somerset’s rural economy but should make the focus and extent of its social impact clear, and improve its financial performance and access to social funding to strengthen the Balance Sheet.

This business plan and associated share offer document detail the current business and our plans for renewal.


"Thank you for today's delivery of lovely food. You never, ever let me down. The Mere Farm smoked trout parcel was divine. I've never had purslane before. It's lovely. I'm looking forward to having some with the mixed organic tomatoes this evening. Lovely fresh and healthy things to eat. Yum.” Chrissy, Sep 2017

https://www.localfooddirect.co.uk


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Why Somerset Local Food is Different

Somerset Local Food has a strong value proposition:

“Fresh, local food for local residents delivered direct to your door”,

Our mission simply sums up our community and business purpose, but it is key to the differentiation of the service. To move closer to this mission in the short term we are adopting the following approach:

1. A community based approach to sales growth. Over the summer we piloted a series of successful ‘Meet the Producer’ events ranging from Tinkers Bubble on Ham Hill to Langford Farm in the Chew Valley. We were joined by existing customers, each of whom were asked to bring a friend to learn about the provenance of their food and the businesses that their purchases support. It is this sort of community approach, building local connections, and fully understanding the extent of our reach and values of our customer base that will drive sales growth.

2. Reinforce our purpose to support local micro and small food and drink producers. We will expand our family of local suppliers to increase choice, but focus on our core business mission - sourcing local food and drink produce and working with more micro-producers to support their growth ambitions. We will also introduce new added-value product ranges utilising produce from local food and drink producers that will allow us to promote the Somerset and Exmoor brands nationally and internationally whist growing new markets for our suppliers.

By supporting more community based projects and support for a broader range of rural business, Somerset Local Food are looking to assess the long term impact of this approach on transforming unproductive land into viable community-led food businesses; creating training opportunities and employment, and supporting other agencies to meet health and well-being priorities in Somerset through therapeutic growing projects and provision of fresh, healthy food to vulnerable groups.

As part of the transformation process, Somerset Local Food will work with supplier, customers and other stakeholders to develop a Theory of Change which explains the difference our business does and could make. This process will be supported by a Social Impact Framework and, to prove it, we will publish an initial report to create a baseline during 2019, and then regular annual reports on the social, environmental and economic value derived from our operational activity.

A Digital Business? The SLFD website was developed in 2002 and the front end design has changed little since. There is a comprehensive ordering and order fulfilment process, and SQL database attached to the back-end of the website, none of which is intuitive but meets the current operational needs of the business.

If the business were launched today, it would instantly be recognised as a technology company operating in the digital sector. One competitor has, to a large extent, mirrored the SLFD business model, and describes their business as "revolutionary" and will "disrupt food provision in the South West.”


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The Directors of SLFD may not have fully recognised their business as a technology dependent company, and therefore did not invest sufficiently in their online platform to keep abreast of technological advances, nor incorporated modern, person-centred design principles to either the front or back-end of the platform and, as a result, rather than ‘being the business’ the website itself has become a barrier to acquiring and retaining customers. This is now impacting on sales which are reducing year on year despite high levels of new registrations to the website.

New registrations are running at around 20 per month, and it is anticipated there will be more than 200 new registrations for the full year of which 50% will come from internet searches and 30% from word of mouth. However, these registrations are reducing year-on-year and are not translating into long-term, regular customers.

The website https://www.localfooddirect.co.uk is SLFD’s only revenue stream and it is vital that action is taken to improve the design and front-end functionality in order to retain customers once registered and increase sales income to previous levels, with a long-term plan for continuous technological improvements that will ensure the business remains competitive.

A significant competitive advantage over new market entrants is the back-end SQL database, which has been collecting data for the last 15 years; every customer transaction including registration and order frequency, every product ordered by every customer for each weekly order cycle, quantities ordered from which producer, price paid, product mix and total basket value.

This database has been downloaded, cleansed and is now prepared for deeper analysis to determine customer segments, profiles and lifecycle changes to preferences and ordering patterns, product demand cycles, and pricing strategies. This analysis will inform a branding exercise and drive future marketing effort.

What Customers See and Experience Branding The current logo used by SLFD is an adaptation of the Somerset Farmers Market logo from the early 2000’s, with a solid red heart changed to a Union Jack. The design is simple but design expectations have changed and the logo does not reflect the purpose, values or ethos of Somerset Local Food. When compared to other, more contemporary logos, it is lacking in appeal and does not project what the business is about.



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Logos are graphical displays of a company's unique identity, and through colours, fonts and images they provide essential information about a company that allows customers to identify with the company's core brand. Somerset Local Food will undertake a re-branding exercise to create a unique and fresh visual identify for the renewed local produce delivery service. It will reflect the purpose, values and ethos of the community business that resonates with our customer segments.

The new new branding will also differentiate Somerset Local Food from other online food and drink retailers, and be used consistently across the website, social media, promotional materials, vehicle livery and work clothing for warehouse staff and delivery drivers.

Website

Long standing customers are complimentary of the website design and functionality. However, the home screen is cluttered and chaotic, and feedback indicates that new users find the site difficult to navigate. It is critical the core loyal customer base that SLFD has built over the last 15 years is retained, so any changes to the website’s front-end need to be informed by, and sympathetic to, those customers.

As a first, immediate stage, before a new website is created, we will review the website analytics, and review the traffic reports to better understand the popular and less visited areas of the website, correlate with customer product purchasing data from the SQL database to identify which pages need to be improved. We will also convene ‘user groups’ of existing customers to secure qualitative evidence of the need for change in design and ensure improvements are well received.

The current website is not smart phone or tablet enabled, and does not interact with social media apps as it should, which is reducing the impact of social media activity as a promotional tool. However, we have taken advice and the cost of making even small changes to the existing front-end would be prohibitively expensive and risk corrupting back-end functionality.

Somerset Local Food’s priority is to invest in the design and development of a new e-commerce website that will allow us to differentiate and expand our product ranges, improve functionality across devices, and consider engaging with new innovations such as automatically suggested produce as an alternative if produce ‘sold through’ or as a technique to up-sell and increase basket sizes. This process will be informed by insight gained from the existing website improvement and data analysis of the SQL database.

We have made application and received a definite offer for LEADER rural grant funding to invest in the development a new web based platform.


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Delivery Services

The delivery drivers are mostly self-employed, using their own vehicles to deliver on a route determined by the Warehouse Manager, though drivers allocated a route mainly deliver that route each week. We have recently recruited two part-time employed drivers who use the SLFD owned transit van to collect orders and make deliveries on specific routes, giving additional delivery capacity as the order volumes grow. The current director also used his own mini-van to collect supplies and

deliver produce to certain customers, and to back-fill delivery capacity should a driver not be available.

Orders are packed in insulated boxes that will prevent food from spoiling for up to 5 hours, even in the hottest weather when ice-packs are included to ensure food remains fresh. If the customer is not home the delivery is left in a nominated location. Drivers are expected to help customers unpack food should they be home, and/or collect empty boxes from the previous delivery.

The self-employed drivers are paid a commission as a percentage of total delivery value carried,

originally set to encourage them to provide excellent customer service and to grow the customer base in their area by encouraging customers to recommend SLFD to friends and leafletting their route. Feedback from customers is that they have developed a rapport with their regular driver and value the service.

The transformation is an opportunity for Somerset Local Food to consider the role of the driver, to introduce new contracts and ensure revised Service Level Agreements are signed that are clear about standards of customer care and performance. Drivers will be provided with logo emblazoned polo shirts and waterproof hi-viz jackets for inclement weather.

However, vehicle availability does not allow the flexibility needed to meet growth expectations. With an additional transit van, the employed drivers will be able to work concurrently, and therefore a second liveried transit van will be purchased to increase delivery capacity alongside the existing SLFD transit van, which will ensure there is sufficient in-house capacity available to meet short-term growth and profit aspirations, whilst retaining and growing the number of self-employed drivers to service and grow the customer base in their allotted geographies.


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Our Market Market Size

SLFD delivers to a geography covering Somerset and the West of England from a warehouse located centrally in Glastonbury. Whilst not directly constricted by, or extending across whole local authority boundaries, based on the 2011 census the indicative total population is:

Bristol 428,100BaNES 176,015North Somerset 202,600Somerset 529,972Total Population 1,336,678

Within that geography, the number of households breaks down as follows:

Bristol 182,747BaNES 73,515North Somerset 88,200Somerset 226,989Total Households 571,451

SLFD targets households for direct delivery of local food, but there is a small percentage of delivery to small, mostly boutique B&Bs, small businesses with an in-house staff canteen, and to self-catering accommodation providers for on-site grocery stores or direct to visitors of self-catering accommodation.

The distribution of current and recently dormant customers predominantly reflects the delivery area, as one would expect, but there are also customers beyond the area who may order for relatives within Avon and Somerset, or who have ordered Welcome Boxes or groceries for their stay whilst on holiday in self-catering accommodation.

Mintel research of online grocery retailing in the UK forecasts sales to reach £11.1 billion in 2017, up from an estimated £9.9 billion in 2016, and to reach 15bn by 2020. With the market forecast to grow by 12% this year, the value of online grocery shopping is growing at a faster rate than sales in physical stores. In 2016, sales in the online grocery market rose by an estimated 15%, while total food retail sales grew by just 1.5%.

The growth in the market comes as an increasing number of shoppers are choosing not to shop in a supermarket store. Almost one in three (29%) online shoppers say that in the past 12 months they have done more of their grocery shopping on the web. As many as 14% currently do all of their grocery shopping online, up from 7% in 2014. Meanwhile, the proportion claiming to do most of their grocery shopping online has risen to 13%, up from 10% in 2014. Overall, 48% of UK consumers do at


http://store.mintel.com/uk-online-grocery-retailing-market-report

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least some of their grocery shopping online, up from 43% who said the same in 2014. 1

These figures would indicate that within the SLFD delivery area, roughly 80,000 households do all of their grocery shopping online, while 274,300 households do at least some of their grocery shopping online. The total market size of potential customers already doing at least some grocery shopping online is around 275,000 households within our delivery area, shared with supermarkets and other online food providers.

Somerset Local Food needs to secure between 0.5% - 0.8% of existing market share to achieve an average of around 500 orders per week with a target weekly basket size of £43, to create a turnover of £1.15m per annum. Given the forecast growth in total online grocery sales of 12% this year alone, it is felt that securing less than 1% of the total market share for online grocery sales within our delivery area is an achievable ambition.

Understanding Our Customers

Somerset Local Food has undertaken an initial high-level analysis of the entirety of the customer base, which includes those registering between January 2003 and June 2017. This analysis is a ‘snapshot’ of the current profiles of the households and therefore does not necessarily reflect the characteristics of users when they first registered. However, it has provided an insight into customer profiles from registration through to maturity, and has allowed us to begin the process of customer segmentation.

Further analysis will inform the re-branding exercise and the development of a marketing, community engagement and communications strategy, which will allow us to target specific communities to increase market share and grow sales. There is strong anecdotal evidence of latent demand for an ethically conscious, community focussed local food delivery service within our target geography, and this analysis will allow us to communicate more effectively with potential customers. Somerset Local Food will no longer be Somerset’s best kept secret!

This analysis has also indicated there are opportunities to grow sales by improving retention rates whilst also increasing frequency of ordering and basket size. Around 25% of people who register on the website do not proceed to place their first order, and only 30% make 3 or more orders, so a new website and communication strategy could quickly secure an additional 1,160 orders per annum on the current average order rate for new registrations of 5.8 orders per year.

This improvement in customer retention, and increase in orders and frequency, will be made easier by the investment in branding, utilising modern design principles for the new website with appropriate technological enhancements, and ensuring service delivery is designed to meet the needs of specific segmented customers groups.

http://www.mintel.com/press-centre/retail-press-centre/online-grocery-clicks-in-the-uk 1


http://www.mintel.com/press-centre/retail-press-centre/online-grocery-clicks-in-the-uk

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More Than Marketing

Somerset Local Food intends to build a social movement that connects, celebrates and involves everyone in producing and eating local food. This encompasses all involved in the local food chain as beneficiaries, whether producers, consumers or other interested parties, for example those concerned with rural economies or growth in tourism. This movement will be based on our guiding principles:

Producers

We will reconnect local people to local food, and in doing so we will generate a fair and steady income for the producer and a relationship based on trust with the consumers. In return, the producer will provide access to healthy, local food at affordable prices, including through Somerset Local Food and directly to the consumer through local box-schemes, farmers markets and farm shops.

Communities

Consumers will benefit from a share in the harvest of healthy, local produce and in doing so will build a connection with the producer, the land and each other. This includes a commitment to support local producers through both good and poor harvests, and to champion local food and ecological farming methods to others in their community. Through Somerset Local Food we will provide a model and an opportunity for members to invest and have a say in how our community owned food business is run and how it can operate to improve access for all in the community to high quality local produce.

Rural Economy

Consumers will be given opportunities to understand the extraordinary commitment a farmer or producer demonstrates to produce or make our food and drink, and an opportunity to be connected to the working life of a farm and what’s produced there, through farm visits and ‘meet the producer’ events. In return the producer will prioritise occupation, employment and training to those furthest from the labour market within their own local community.

The Environment

A chance for the land and biodiversity to flourish by prioritising local food produced using ecologically beneficial farming methods and shared interest in these methods of production.

These principles will inform a more detailed marketing and community engagement plan, as well as using traditional business marketing channels. The plan will be further informed by analysis of the customer database, but as a minimum we will deploy the following promotional methodologies:

Partnership Networks - continuing to invest in building strategic alliances, including with local government organisations and health authorities, and support them in developing and achieving their health & well-being goals and food strategy targets. We are also building relationships with groups such as Wells Food Network, and other local food organisations. We are also building


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working relationships with social enterprises such as BoS Food Festivals and local charities such as Somerset Community Council to help promote our offer. We will continue to pursue a goal of collaboration to promote the local food agenda and health benefits, as well as the convenience of fresh local food to those without easy access to shopping facilities and to those less mobile individuals in both urban and rural areas.

Events - we will continue to attend and host events to promote the local food agenda, and have successfully piloted a series of ‘farm visits’ for our customers and others in their community which will continue. We recently held a visit for a group of home schooled children from Bath at a beef and dairy farm, and built in an educational element to the programme. With only 2% of the population feeling connected to their food, we will look to attract funding to run additional local food educational events for children and their parents.

Social Media - We have a passionate following on Twitter and Facebook, and will look to extend our reach through development of an Instagram account. We fully utilise other platforms such as MailChimp to send weekly newsletters to those who have opted-in to such communication, and will continue to build our expertise in direct communications.

Referral - Our customers are passionate about our service, and around 30% of new customers originate from a referral by an existing customer. But we will get better at asking customers for referrals and provide them with promotional leaflets they can leave with friends and neighbours. We will also work harder to promote our producers and their local box-schemes, farmers markets and farm shops. In return will ask our producers to promote our service to their customers to extend their own offering.

SEO - We will ensure that our new website is Search Engine Optimised. Our future website will have a dynamic content and growing product range, and will be optimised to rank highly in Google searches.

Traditional Advertising - Highly targeted advertising informed by future database analysis via local print and media outlets, and door-to-door leafleting campaigns within specific residential areas.


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Competitors Our competition is the Industrial Food Chain, represented by large food brands and supermarkets. The academic debate about the definition of ‘local food’ continues, making it difficult to accurately identify the share of the food and drink market that ‘local food’ has, it is estimated that supermarkets have between 95% and 99% market share depending upon location, scale of geography and density of population studied.

An increasingly globalised industry has led to the wider sourcing, importing and exporting of more exotic foodstuffs, with a relatively small number of large companies offering a year-round supply of uniform produce. However, after a 2

spate of negative media stories about the Industrial Food Chain, including poor animal husbandry, questionable reliability of ingredients, poor food handling and hygiene, environmental concerns and awareness of the negative impact of intensive farming, consumer expectations are changing with an increased demand for ecological and ethical conscious local food production and distribution:

“I feel guilty about eating food that has been flown half way round the world and I feel guilty for buying lots of food from Tesco, because it’s quick, easy and close rather than sourcing it from local producers or whatever it might be, I feel better about it now I’m getting my fruit and vegetable box (Sarah, mother of 3)”

Consumers are concerned about what they eat, and yet people forget that supermarkets have only existed for the last 60 years. They have also forgotten what ‘healthy food’ means as large brands and supermarkets flex their marketing power to promote convenience for the consumer. It is clear supermarkets understand

the threat and are resorting to strap lines such as ‘Freshly Clicked’ and ‘One Hour Delivery’ to give the impression of shorter supply chains.

Almost all households rate ‘healthy foods' as being the most important consideration, with 80 per cent of people rating it as the most important factor affecting their buying decisions. Therefore, the most 3

effective strategy to compete with the Industrial Food Chain is through a growing awareness of the benefits and positive social impact on local communities of sourcing and consuming ‘local food’, which can only be achieved through greater co-operation and collaboration between all those involved in local food production and distribution.

“Better knowledge exchange and stronger co-operation and collaboration in the local food market could grow demand and stimulate new supply” 4

Department for Environment Food and Rural Affairs (2005a). The Validity of Food Miles as an Indicator of Sustainable Development. 2

Didcot: AEA Technology Environment.

https://www.gov.uk/government/news/people-want-to-buy-healthy-local-food-survey-shows3

http://www.nourishscotland.org/wp-content/uploads/2015/06/Local-Food-Economy-Report.pdf4


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Somerset’s Local Food Distribution Network In order to grow the market for local food, Somerset Local Food will take a lead role in bringing organisations together to share knowledge and to collaborate whenever possible, and will refocus efforts to reach out to local food growers, farmers and producers.

Farmdrop BristolFarmdrop began as a concept in 2012 as an online ethical grocery provider in London, almost identical to the SLFD operation which commenced trading 10 years prior. Led by founder Ben Pugh, it raised £750k with a first share issue in 2014, £3m in 2016, and has just completed a £7m funding round which has allowed Farmdrop to expand into Bristol with plans to roll out nationally to major cities across the UK. The Bristol hub makes daily home deliveries within a 10 mile radius. A number of the SLFD suppliers also supply Farmdrop.

Fresh RangeFresh Range began in 2015 when Rich Osborne visited and then operated from SLFD warehouse. Moving to a warehouse in Keynsham, having raised £1.5m from two shares issues, Fresh Range now makes home deliveries across Bristol, Bath and North Somerset.

Real Economy The Real Economy started as a co-operative society in Bristol sourcing, packing and distributing local food from distribution points across Bristol but has recently changed to a Community Benefit Society, now also providing outreach services by teams of volunteers offering healthy food and companionship to isolated people from Community Food Centres. SLFD is a supplier to the Real Economy and we see collaborating with third sector ‘Food for Good’ organisations as an important component in our social value framework.

Somerset Farmers MarketsFarmers markets are critical as a first stage sales opportunity for local micro growers and producers and for promoting the availability of local food to consumers. However, the limitation of ‘reach’ and access to consumers for producers is the very reason SLFD was started in 2002. We continue to have a good relationship with Somerset Farmers Markets and draw many of our suppliers from their membership.

Local Vegetable Box SchemesWith Riverford Organics in the vanguard, the popularity of local vegetable box schemes is growing and a number of our suppliers offer this service on a very local community basis. We will support them in their efforts whilst providing a market for their surplus produce and, through greater collaboration, can offer to grow market share for local box schemes by increasing convenience for the consumer through provision of locally sourced meat, fish and non-perishable items ordered through the provider.


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The Financial Situation

SLFD have had a challenging few years, with their sales figures and profitability reducing year on year. They quite rightly identified that supermarkets were the main competition, but chose to compete head-on by expanding the number of items available, so increasing choice and adding complexity to purchasing decisions.

The complexity of such a broad offering meant they were drawn to greater utilisation of wholesale suppliers rather than multiple local micro-providers - in an effort to return the business to profitability they compromised their purpose.

SLFD also felt they needed to compete with the supermarkets on price, and the combination of these strategies was to reduce order values, total sales income and margins on sales achieved.

This strategy has now been reversed, with a reduction of the number of items available and ‘dead items’ removed, and a refreshed emphasis on fresh, local and high quality produce.

The impact of these changes have been positive, with the sharp drop in sales and profitability during 2017 reversed, and the business once again moving toward profitability.

This process will continue during 2018, with a further transition back to high quality produce from local, and especially micro- producers. We expect that with the launch of new branding and website in July 2018 to have an immediate positive impact on the financial situation, though the response from existing and new customers to minor changes to the existing website and customer communications is such that we are cautiously revising financial targets for FY2017/18.

In order to better manage the finances, the manual accounting system has been moved on to Xero, an online accounting package which provides the directors of Somerset Local Food daily updates on the financial situation and the opportunity to produce monthly reports including P&L, Balance Sheet and Cashflow. This work is completed and we expect to have sight of prepared SLFD draft accounts before end April 2018.

Somerset Local Food has already taken control of the finances of SLFD and will adopt the Xero accounting software as the organisations merge during 2018. A cautious approach has been taken to scenario planning given the uncertainty around economic forecasts, which has informed the P&L forecasts. In particular, a ‘hard-Brexit’ without membership of the Single Market will impact food availability and prices even at a very local level, and labour shortages are already a reality affecting our producers and our own ability to source warehouse and delivery staff.


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Financial Forecasts

PROFIT AND LOSS ACCOUNT FORECAST

Somerset Local Food Direct Somerset Local Food

FY2014/15 Actual

FY2015/16 Actual

FY2016/17 Forecast

GroupFY2017/18 Forecast

SLFFY2018/19 Forecast

SLFFY2019/20 Forecast

£ £ £ £ £ £

TURNOVER ON SALES 324,256 309,806 285,000 318,374 425,500 520,000

Cost of Sales 226,463 213,152 235,000 218,743 255,300 312,000

GROSS PROFIT 97,793 96,654 50,000 99,631 170,200 208,000

Distribution Team Costs 51,585 50,298 41,500 43,884 49,780 54,238

Administrative Costs 44,920 43,975 40,218 75,467 102,119 115,527

Depreciation 3,381 2,955 2,600 5,368 10,800 10,800

Interest payable and similar charges 840 695 590 1,500 7,500 7,281

NET PROFIT (2,933) (1,269) (34,908) (28,838) 1 20,154

EBITDA 1,288 1,686 (31,718) (19,720) 18,301 38,235


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BALANCE SHEET FORECAST Group Somerset Local Food

FY2017/18 Forecast

£

FY2018/19 Forecast

£

FY2019/20 Forecast

£

Fixed Assets 118,500 118,500 118,500

Accumulated Depreciation (5,368) (16,168) (26,968)

Total Fixed Assets

Current Assets

113,133 102,333 91,533

Bank 92,300 98,318 111,742

Trade Debtors 4,833 7,000 7,222

Total Current Assets

Creditors Due Within One Year

97,133 105,318 118,946

Trade Creditors 23,362 26,567 26,567

Other Creditors 17,199 11,378 5,589

Bonds 18,300 18,300 18,300

Social Loan 0 11,669 20,004

Net Current Assets

Creditors Due After One Year

38,272 37,404 48,354

Social Loan 100,000 88,331 68,327

Total Net Assets

Capital and Reserves

51,405 51,406 71,560

SLF Called-up Share Capital 12,350 12,350 12,350

SLFD Income and Expenditure Account (16,019) (16,018) 4,136

SLF Income and Expenditure (8,071) (8,071) (8,071)

Restricted Funds 30,145 30,145 30,145

New Share Issue 33,000 33,000 33,000

Total Capital and Reserves 51,405 51,406 71,560


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Notes to Forecasts:

Accounting Policies

Accounting convention

The published financial statements for SLFD were prepared under the historical convention in accordance with the Financial Reporting Standard for Smaller Entities (effective January 2015)

Turnover

Turnover represents net invoiced sale of goods excluding value added tax

Tangible Fixed Assets

Depreciation has been provided at the following rates in order to write off assets over their estimated useful lives

Website and Branding 33% on costPlant and machinery 10% on costMotor vehicles 25% on reducing balance

Additions

Additions planned during 2018 as follows:

Website and branding £ 35,000

Motor Vehicles £ 13,500


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Appendix 1

Somerset Local Food - Key Personnel

Paul Sander-Jackson, Chairperson, Somerset Local Food Paul is a qualified social enterprise adviser, and a non-executive director and Chair of Wessex

Community Assets, an organisation promoting and developing community ownership models in sectors such as housing, workspace and land.

He helped develop the Wessex Community Land Trust Project – which has delivered to date 135 affordable houses in 13 communities across Somerset, Devon and Cornwall. From 1999 to 2006, as Director of Somerset Food Links, Paul led development work for the local food sector in Somerset and was a founder director of Somerset Local Food Direct in 2002. He was also co-founder and first Chair of Food Links UK

in 2004, and from 2008 to 2013 he chaired the grants panel for the Big Lottery Local Food Fund which awarded over £50 million to community led local food initiatives.

His previous work has included development of an urban farm and a co-operative garden centre in Bristol as well as providing support for a wide range of community led enterprises in both urban and rural settings. Paul has lived on the Somerset Levels for the past 25 years and currently resides in Baltonsborough.

Philip Sharratt, Director and Chief Executive, Somerset Local Food

A practical, hands-on business consultant, Philip has provided strategic advice and support to large employers in the private and public sectors, micro and small businesses, social enterprises and charitable organisations for nearly 30 years, alongside leading and delivering economic and community development projects in Somerset and across the wider South West for the last 12 years.

Well known to the local business community for leading projects such as the Cabinet Office funded Code Club technology project across the South West addressing the chronic skills shortages in the digital sector, and the Genesis

Project to promote and increase the use of environmental technologies in the construction sector, he was also commissioned to develop the ‘Green and Grow’ economic strategy for Taunton Deane.

Philip is an active member of the Institute of Directors (IoD) and a member of the South West Regional Board.


http://wessexca.co.uk/wessex-clt-project/

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Kim Robinson, Finance Director, Somerset Local Food Kim has lived in Somerset for the past 17 years running project management consultancy, having previously worked in London as an Associate Partner with an international business consulting firm, focusing on the financial services sector and change management practices.

Her interests outside work revolve around food and community support. She is a trustee of both the Wells Food Network and Somerset Community Food, a director and Treasurer for Wessex Community Assets and a director of, and producer for, Wells Country Market, a co-operative that provides an outlet for small-scale home cooks and domestic fruit and vegetable surpluses.

Kim is also a director and Treasurer for Mendip Community Credit Union and, over the past 16 years has worked with fellow directors to develop an innovative (and believed to be unique) business model to support its 1,200 members, run entirely by volunteers with a virtual office and dynamic interest rates that reward members who save alongside repaying their loans.

Kim was a founder Trustee of PROMISEworks, a charity that supports the mentoring of some of the most vulnerable young people in Somerset and remains an active mentor and young persons’ advocate, representing them at important meetings where their voices need to be heard.

Sarah Sander-Jackson, People & Communities Director, Somerset Local Food

Sarah has a practical legacy of establishing successful social enterprises including a school farm, urban farm, co-operative garden centre and educational and community projects. She was a founding director of Somerset Community Food in 2000, and for ten years provided effective training and community support for Somerset in areas related to local food and health, including food co-ops, community allotments and sharing cooking skills. Since 2009, Sarah has been a director of the Red Brick Building in Glastonbury with special responsibility for HR matters. The Red Brick Building is now a thriving community centre to promote arts, education

and enterprise following successful renovation of a derelict warehouse as an innovative community owned asset. Since 2014 Sarah has worked with the Reimagining the Levels group to find creative ways of responding to the extreme floods of 2013/14. In particular she is interested in supporting the community to take control of their own environment by being well informed and responsible for the choices everyone can make to best secure a viable future for the Somerset Levels.


http://www.somersetcommunityfood.org.uk/

https://redbrickbuilding.co.uk/

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Appendix 2 Somerset Local Food - Risk Register Risk Probability Impact Mitigation Status

Poor Governance Low High Somerset Local Food has taken control of governance for SLFD.

Non-Compliance with current legislation.

Low High Reviews of HR practice, food hygiene and health and safety are now complete. SLFD has 5* food hygiene rating. All staff to refresh food hygiene certificate and undertake refresher training in manual handling. New website and associated database will be GDPR compliant.

Financial Management Low High Somerset Local Food have taken control of financial management. Manual systems have been moved online using Xero accounting software, which allows directors real-time access to financial accounts and reports.

Financial Performance does not improve

Medium High Reviews of product ranges, supplier cost and SLFD pricing strategy have been undertaken and margins improved. Customer database has been interrogated with customers segmented. Targeted communications are being made electronically and tools developed to aid other forms of communication that will increase order value and frequency of purchase. New branding and website will further assist in improving financial performance, with the new website being smart phone and tablet enabled, and with new functionality including suggesting linked produce and special offers. Business Plan has been completed and adopted by the directors.


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Lack of ‘identity’, local consumers not being aware of availability of local food and drink delivered direct to their door via online purchasing platform, and failure to secure growth in order volumes

Low Medium Grant funding has been secured to offset cost of branding exercise to promote organisational values and quality of local produce. Three local design and marketing companies have bid to undertake the development of a Somerset Local Food brand. A marketing and communications plan is being developed and will be implemented prior to launch of new website, including full mix of online and offline promotional activities. Support will be given to the more than 30% of website registrations not proceeding to order, recently lapsed customers will be targeted with specific marketing communications to encourage them to recommence ordering, and a full marketing campaign will be undertaken to raise awareness of the service across our delivery area.

Unable to service anticipated increase in sales volume

Low Medium The business plan seeks to return sales volumes to previous levels, so we are confident the improved systems and new delivery vehicle will easily cater for an increase in sales volumes. Additional producers are being identified to provide popular product lines.

Risk Probability Impact Mitigation Status


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Failure to improve customer retention rates

Low Medium Social media performance has been improved, with increased engagement and participation by recipients. Targeted postings are being used to promote values and local produce, including via Facebook, Twitter and weekly MailChimp postings. There are currently over 200 new customer registrations to the website each year, of which up to one third do not proceed to place an order. Targeted communications are increasing volume of registrations and telephone support is available for new registrations to help them place their first order. Targeted communications have also been prepared for recently lapsed customers, those that have stopped ordering over the last 2 years, and to support those struggling with the existing website. We are now responsive to customer concerns and a full diagnostic of the entire operational system has been completed with actions being implemented to improve quality of service and customer satisfaction

Business disrupted due to power outage, unavailability of key systems, unavailability of warehouse, weather etc.

Low High Key systems are all cloud-based and can be accessed remotely. Business-critical availability levels will be written into the contract with the suppliers of new website and management systems. Business continuity planning will identify alternative site for emergency warehousing if requiredVery low levels of stock kept in warehouse. Dynamic delivery rescheduling to mitigate delays caused by weather or other short-term business interruption



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New Website not meeting operational or customer requirements, and loss of existing long-term customers when new website launched

Low High Grant funding has been secured to offset cost of development new website and backend functionality. A full IT transformation and implementation plan will be drawn up by the CEO and directors, one of whom is an experienced IT project manager, to ensure there are communication and feedback loops with customers, staff and suppliers at every stage of the process from design to launch. Four high-quality and respected local website developer companies have tendered to undertake the work and a rigorous selection process will be undertaken before a preferred bidder is selected. Our lawyers will review contracts to ensure we retain control of the website and are not held to ransom in the future, and there is no loss of intellectual property.

Loss of Key Personnel Low High Key personnel with experience and knowledge critical to a successful transformation and future growth are:* Chair - Paul Sander-Jackson* Finance Director - Kim Robinson* CEO - Phil SharrattWe will explore insurance cover to ensure funding to buy-in expertise in the short term and meet the cost of securing a replacement. * MD SLFD - Roger WhiteRoger will retire during 2018 and CEO is shadowing to ensure smooth transition to new management. * Warehouse Manager - Nigel CoxStaff are being trained to take on elments of the role and the CEO has shadowed to ensure there is short-term cover for illness or departure. Recruitment and succession planning to transfer operational activities being carried out pro tem by directors to staff within the business



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Failure to secure sufficient funding from share issue for capital investment and/or increase in working capital

Low Medium Directors are planning a mixed funding package, securing the maximum amount from grant and community shares, with a loan to make up the full capital sum required. We are currently in active negotiations with two potential social investment organisations and will be finalising an agreement to allow us to make a fully financed commitment to the timetable we have set ourselves for the relaunch of the business.

Restrictions on imported food and increasing cost of food and drink products due to changes in international trade agreements (Brexit)

Medium Low With a predominantly micro/community grower and producer supplier base, which would struggle to integrate into larger supply chains, we are confident we could maintain a good supply of fresh local produce for local residents, and the creation of a social fund would ensure fresh fruit and vegetables remain available to those on lower incomes. We feel our environmental and social value framework will differentiate us from the industrial food chain and solicit greater loyalty from consumers and suppliers.



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