16 July 2020

How a farm producer nurtured a new business model

With its traditional client base in disarray, a Kent-based grower swiftly sought out customers in fresh fields – and joined forces with other providers hit by pandemic lockdown.

Over 70 years, Watts Farms has built a loyal customer base for its produce. But in the countdown to the Covid-19 lockdown, its senior team could see that many of its key clients were likely to be hardest hit.

From its 600-acre farms in Kent, Essex and Bedfordshire, Watts served over 500 restaurants in the South-east, most of them fine dining. Other major markets were hotels, airlines, and contract catering for City workplaces.

Besides its own seasonal produce, from cherries to chillies, Watts sourced from other growers and complemented this with an extensive catalogue of grocery staples.

As businesses prepared to pull down their shutters on government orders, however, Watts Farms could see the writing on the wall. Amid the uncertainty, one thing was clear: people confined to their homes would need supplies.

Domestic delivery

The business rapidly set up an online store, with payments processed through the Shopify platform. Its launch rode the initial wave of panic buying in the pandemic.

“We went live a few days before lockdown,” says Ed Gray, a Director at Watts. “We got some press coverage and things went a bit crazy – helped by the fact that there was a lack of food on shop shelves.

“At first, we were doing 600 deliveries a day. We processed £1m of payments in the first three weeks.

“Forecasting cashflow has been difficult, but these upfront payments were enormously helpful to us. For wholesale we operate on 45-day credit terms, but those clients were taking longer to pay than usual, so our debt was building up. It also helped that HSBC was able to give us loan holidays.”

The bank also extended the company’s existing invoice financing facility. “They have been really proactive – they knew what problems we might be facing and immediately organised a group video call to explore options,” Ed says.

We quickly expanded from an online offering of 300 products to 1,000 – though this wasn’t a stretch since we normally sell 6,000 products from our warehouse.

Consumer feedback

A reshaping of warehouse processes made for a relatively simple shift to packing for domestic customers. Watts offered delivery over the same geographical area as for its wholesale business, spanning London and the Home Counties.

But there was, Ed admits, a learning curve as the business switched from wholesale to direct consumer deliveries.

Consumers were quick to request additional items in their boxes. Watts already provided staples such as coffee alongside its home-grown produce, but now it needed to source family packs rather than 5kg bags, as well as niche items.

“Our main products are the fresh items that we grow, and every delivery includes some of those. But customers were looking for ambient and grocery items too,” says Ed.

“We quickly expanded from an online offering of 300 products to 1,000 – though this wasn’t a stretch since we normally sell 6,000 products from our warehouse.”

Joint ventures

To make its offering stand out, Watts sought to forge partnerships. Its collaborations extended its range while supporting other suppliers hit by the shutdown.

“We know a lot of businesses who supplied the same hotels we did, so we linked up with some of them. For instance, we knew of a coffee shop which had a massive bakery, so we offered to launch their cakes and breads on the website.

“Similarly, we’ve now teamed up with a butcher and fishmonger to offer high-end fish and meat. We’re looking to produce some specialty juices too.

“Our aim is to offer things that are a bit different from the supermarket fare. The thinking is that while the restaurants are closed, how can we bring a flavour of that to people at home?”

Taking on the giants

Supermarkets dominate the home delivery market. The twin challenge for Watts Farms was to match the big stores’ online delivery offering, while also differentiating the firm’s service.

“At first we offered a named day delivery, but we have since started to offer a morning or afternoon slot, plus Sunday morning and night-time deliveries,” says Ed. “The supermarkets can offer a one-hour slot, so we have to compete with them to a degree.

“Our wholesale operation used plastic boxes, for which we have a washing scheme before reuse. However, it wasn’t clear if this was the best method for infection control. So we went for cardboard boxes, thinking these would be easy for people to recycle.

“We quickly found that people were asking to return the cardboard boxes. So we changed our operation to allow for people to return the boxes, either on delivery or on the next visit. We set up on-site compacting and recycling at our depot.

“On the plus side, many customers have remarked favourably on the lack of plastic wrapping in our products, compared to supermarket deliveries. We use compostable punnets, and plastic packing is confined to items like salad leaves.”

Meanwhile, Watts is also working closely with the supermarkets. As part of its diversification plan, it has provided some of its 40,000 sq ft warehousing space to supermarkets struggling to find extra storage amid high demand.

Next steps

Inevitably, the initial frenzy of domestic orders has calmed as shopping habits have reverted to normal.

By July, 2,000 customers were making regular orders, which meant up to 250 deliveries a day. “That gives us around 35% of our previous turnover,” says Ed. “With half of our staff on furlough, that is manageable.”

The return of the wholesale business is harder to predict. Some restaurant clients have resumed orders while diversifying into takeaway offerings. Future working patterns will determine demand for workplace catering.

Watts Farm aims to fill the gap with home deliveries, which will remain a key element of its model: “It’s a competitive field, but we’re investing in social media advertising to help establish ourselves in that market. Our medium-term strategy is to derive a third of our business from domestic consumers.”

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