Posted: 24/01/2022

Farmdrop collapse leaves independent producers facing losses

The collapse of online retailer Farmdrop should act as a warning to independent food producers, commentators have urged.

Farmdrop entered administration shortly before Christmas, leaving many small suppliers with anger and unpaid invoices – while key figures grimly predicted that more businesses could fail.

Accounts filed with Companies House show Farmdrop made a pre-tax loss of £11 million in the 12 months to 30 June 2019 yet still raised £7m in loans over the following year – during which it made another £10m loss.

One anonymous industry source told FFD that Farmdrop’s business model of delivering artisan goods to online customers could only be profitable “at enormous scale”. 

The timing of the firm’s demise in mid-December told its own story, the source claimed, as “you would only give up on Christmas revenue if you knew it was loss-making”.

They added: “Suppliers need to be aware. There are lots of companies out there that appear heavily funded but are just sharks looking for market share. Only one will survive. Whether by acquisition or lack of investment, these loss-making companies will disappear. You have to mitigate the risk by making sure you get paid.”

Mike Duckworth, founder of Somerset producer Nutcessity, said he had already implemented changes in his own approach despite not losing out financially from his relationship with Farmdrop.

“I have now put a policy in place where new customers pay invoices up front and I don’t send any orders out until due invoices are paid,” he said. “You need to be quite headstrong. As a small business you don’t have the time or resources to chase payment and escalate it.” 

Duckworth added that he feared Farmdrop had been “taking small suppliers’ money and putting it on the roulette wheel” by “gambling” that it would find the investment needed to keep it viable.

Nicola Simons, founder of Single Variety Co, expressed fury at how her Bristol-based preserves business was treated by Farmdrop.

“We were owed payment of 12 invoices stretching back to July,” she said. “They owed us £2,200. All we received was a general round-robin email the night before they went into administration.”

Single Variety Co was eventually able to recover stock amounting to about half of what it had sold to Farmdrop and not been paid for, according to Simons. Like other creditors, it will now wait to see if it will receive any cash to cover any of its remaining bills.

“It makes me really, really angry,” says Simons. 

Farmdrop exec: firm sought buyer in bid to save business

Farmdrop chief executive Eleanor Herrin said in an email to suppliers shortly before 11pm on Thursday 16th December that the company had tried for 18 months to secure financing to allow the firm to “continue in our mission to change the food system for the better”. 

She added that Farmdrop had decided last summer to try to sell the business “within four to five months” as finding a home in a larger organisation was “the only viable option to ensure the company’s future”. 

Herrin said that despite “deep and meaningful engagement with a number of potential acquirers” this sale process ultimately failed and Farmdrop had decided to cease trading.

“It has been at our core to try to improve outcomes for suppliers, with whom we have enjoyed working in close partnership to delight customers with amazing groceries,” she wrote. “We hope that we have been able to create a positive impact for all of our producers over the years.”

RMT Accountants & Business Advisors was appointed on 17 December. Administrators said suppliers with valid claims had been invited to collect stock that had not been paid for by Farmdrop. It is understood the administrators set a deadline of 21st January for bids for the intangible assets of the failed company. 

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