Supermarket salad supplier Southern Salads has collapsed, with the loss of 260 jobs, after being squeezed by the weak pound and higher import prices for its produce sourced from Europe.
The family-run business, founded by Ray Boakes more than 30 years ago, appointed administrators from recovery specialist FRP Adisory yesterday (16 August 2017) and ceased trading immediately, with almost all of the approximately 260 staff made redundant.
Kent-based Southern Salads produced more than 50 tonnes of fresh salads, diced vegetables and deli items a day for its supermarkets, restaurant and travel chain customers across the UK.
The business invested heavily in 2014 to expand its production capability, which put pressure on working capital, but the expected growth in revenues failed to materialise, joint administrators Ian Vickers and Chris Stevens said in a statement.
Sales at Southern Salads have remained flat at about £30m in the past six years, with the business making a loss in three of those financial periods, according to filings at Companies House.
“The company faced an unprecedented pressure on cashflow in the immediate aftermath of last summer’s EU referendum vote,” Vickers said.
“The sudden decline in sterling was not foreseen by the company, leaving the business grappling with an immediate fall of between 10% and 20% in its purchasing power for overseas-grown salads required for the winter and early spring UK market, which in turn put a severe strain on cashflow.
“With insufficient protection from its currency hedging arrangements, pressure increased on cashflow as the business traded through to this spring.”
Southern Salads was unsuccessful in negotiating any significant changes to its pricing terms with its suppliers in mainland Europe, while also being unable to pass on its cost increases to supermarkets and its other customers, he added.
The company relied on European suppliers for fresh vegetables and fruit from the Netherlands and Poland in the north to France, Italy and Spain in the south.
Southern Salads entered discussions with advisers at FRP Advisory earlier this summer as it sought to restructure the business, including seeking new investment and engaging in detailed sales talks with interested parties.
“Once both investment and sales negotiations came to an end, the pressure on cashflow proved unsustainable, leaving the company with no viable alternative other than to seek the protection of administration and begin the process of realising assets,” Vickers said.
The joint administrators are now seeking a buyer for the company’s assets.