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Food Wholesaler Crash Costs Jobs

Main Image 11 December 2017 | Adam Berry

Palmer & Harvey collapsed into administration recently, costing around 2,500 jobs.

The food and tobacco wholesale company has a history of 92 years and previously saw annual sales of more than £4 billion.

Administration process started

A rescue takeover had been in discussion, with Carlyle Group, an American private equity firm, ready to step in. However, after those talks collapsed, the company was forced to call in administrators from PWC.

This is a huge blow for the food industry, with Palmer & Harvey supplying major retailers such as Tesco and forming a large part of the sector. The loss of 2,500 food jobs is naturally devastating, and means a lot more jobseekers in the market this week.

Carlyle Group was apparently expecting to be able to come to an agreement right up until the moment that the administration was announced, leaving negotiators feeling “surprise and disappointment”, according to a source on the inside.

PWC were already in the wings waiting to step in, as they had been advising Palmer & Harvey on their financial options until it was decided that all was lost.

Just how big a loss is it? Palmer & Harvey were the biggest delivered wholesaler for the UK’s convenience market, with 90,000 customers across the country including big supermarkets and local corner shops. They supplied ambient, chilled, and frozen food lines alongside their tobacco products. Their delivery network included 14 regional distribution centres which were serviced by more than 1,000 vehicles. Their product lines totalled more than 12,000. In short, the loss is clearly a huge one.

The administrators said: “The group has been by hit by challenging trading conditions in recent months and efforts to restructure the business have been unsuccessful. This has resulted in cashflow pressures and it has not been possible to secure additional funding.”

Loss of jobs

Not all of the employees at Palmer & Harvey have been let go so far. The initial cut was to make 2,500 of their staff redundant immediately, as a cost saving measure going forwards. They originally had 3,400 staff members across their head office and branch network, so some 900 of those are still hanging on. However, it looks like they will also almost certainly be searching for food recruitment opportunities very soon.

Those who remain will be asked to “assist the joint administrators in managing the activities of the business to an orderly closure”, while 450 of the staff are currently being retained in certain sectors of the wholesale business that PWC are currently seeking buyers for.

Joint administrator Matthew Callaghan described the crash as “a devastating blow for everyone who has been involved in the business”.

Palmer & Harvey were responsible for 25% of the tobacco market in the UK. Imperial Brands and Japan Tobacco International had a heavy exposure to the company, and they had been trying to patch the gaps recently with tens of millions of pounds given in short-term finance. This money was intended to help the group continue trading until the Carlyle Group takeover was finalised, but it never came.

Imperial have since suggested that the collapse will mean a hit of £160 million against the present financial year’s operating profits, though they stressed that it would be a one-off. They are the makers behind a number of brands, such as Gauloises and Davidoff cigarettes.

There are contingency plans in place which may help to avoid disruption of supplies to retailers, at least on the tobacco side of things.

The collapse is sure to hang heavy in the air as the British market heads into the Christmas season.

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