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Boutique food shops

Deli-licious

As supermarkets flounder, small food and drink retailers are booming

Chi-chi cheese

INVESTORS in Tesco, Britain's largest supermarket chain, could be forgiven for weeping into their Christmas pud this month. On December 9th the retailer issued its fourth profit warning in five months, cutting its full-year trading forecast by almost a third. Shares plunged (again), topping off a dreadful year for the former darling of the City. Tesco's only solace is that it is only doing marginally worse now than its direct competitors, such as Sainsbury's and Morrison's.

There is no need for solace at the Keelham Farm Shop, on the outskirts ofBradford, however. Here it is mulled wine and treats all round, as Victoria Robertshaw, the co-owner, celebrates another fine year and big plans for the future. Founded in the early 1970s, Keelham was one of the country's first modern farm shops, selling meat, vegetables and much else, but only from the family farm or from other local producers. Its growth has been spectacular.

In 2006, Keelham had a turnover of ￡2m, already large for a farm shop. Today that figure is over ￡11m, and achieved in one of the less prosperous parts of the country. Such is the demand that Ms Robertshaw is investing ￡4m next year in opening a much larger Keelham's in Skipton, a nearby town. Her new outlet will also boast a cooking school and a café. Much of what it will sell, such as sausages, will be made on site.

The expansion of Keelham's reflects the robust health of the country's boutique food-and-drink business. There are about 4,000 such businesses today, and more are opening all the time. The National Farmers' Retail and Markets Association, which represents about 300 farm shops, says that many members have reported a 5-10% increase in turnover this year.

Some analysts expected the burgeoning sector of small food-and-drink companies to be decimated by the financial crash of 2008. Surely tasty treats from the local deli would be the first casualties as household budgets were slashed. In fact, the reverse has happened. The sector has not only survived, but prospered, partly due to the change in shopping habits provoked by that same recession.

After 2008 many consumers started shopping at cheaper supermarkets, such as Aldi and Lidl. Customers also started buying in bulk online. However, in contrast to previous downturns, says Hugh Padfield, a director of the Bath Soft Cheese Company, this time people continue to buy basic products at the cheapest price, and spend the money they save on products that are better quality, like his own renowned Bath Blue cheese.

This sort of “promiscuous shopping”, as the analysts call it, is replacing the traditional once-a-week trip to an out-of-town Tesco or Sainsbury's. Those retailers are therefore being squeezed by Aldi and Lidl undercutting them and the farm shops taking business away at the top end, albeit still on a modest scale. Small producers like Mr Padfield are doing very nicely; he has tripled his turnover in just five years, to ￡750,000, and will struggle to meet all his orders for Christmas. Ms Robertshaw says her prices are not more expensive than those of the supermarkets, putting her produce within range of most shoppers.

Another essential ingredient in the success of the small producers is the increasing demand for locally sourced food. After various scandals inBritain's food production, from “mad-cow disease” to the discovery of horse meat in some products, consumers are much more concerned to know where their food comes from, and how it was produced.

Farm shops and delis thus stress the local content of their food in a way that supermarkets, with their central distributions systems, usually cannot. “Provenance is really important now,” says Asad Khan, who has recently set up a luxury ice-cream business in London, called Snowflake. The fact that his gelati are all made of the best quality British milk and are prepared in the store is a large part of Snowflake's appeal. Mr Khan has seen his turnover more than double in two years of business. He even sells pricey tubs of ice-cream that customers would previously have bought only from a supermarket.