Wholesale alcohol supplier Conviviality, who supply many pubs and retailers including 900 of the Wetherspoon pub outlets, and also owns a number of retail brands, has officially appointed administrators to the business. It follows the recent announcement of an unexpected £30m tax bill, and issuing of a subsequent profit warning. The wholesale arm of Conviviality was immediately snapped up by C&C Group owners of retail brand Magners, with financial support from drinks giant AB InBev. This sale saved about 2,000 jobs including those working for Matthew Clark and Bibendum. The retail arm of the business remains unsold, including the Bargain Booze and Wine Rack consumer brands. PwC has been appointed to handle the administration and has confirmed that the business and outlets will continue to trade.
The news comes amid a plethora of stories circulating currently, which highlight a worrying economic trend. Many retailers are reporting their distress, construction sector growth is down for the 9th consecutive quarter, profits are down 64% among the UKs top 100 restaurants, all of which point to a time of uncertainty if not recession. Building on this theme, the Association of British Insurers (ABI) reported that credit insurance paid out during 2017 were up 7% compared with 2016 and that 2018 is on trend to exceed 2017 figures. In fact, claims in the first two months of 2018 are reportedly 100% higher than claims the same period in 2017, according to anecdotal conversations with insurers. That means that the risk of bad debts is increasing for all companies and all companies should review their credit risk strategies to fit. It’s less rational than ever to use past performance as the basis for assessment – the level of future risk is higher than the level of historical risk.
Certainly an interesting period and one which should have businesses thinking very carefully about the way they manage trade credit risk.