Farm Diversification - Rural Vibrancy Index Case studies Planning and funding a diversification - Savills
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
UK Rural - November 2020
S P OT L I G H T
Farm
Savills Research
Diversification
Rural Vibrancy Index Case studies Planning and funding a diversification
Savills Rural Vibrancy Index
65%
Of all farms have some
5.5%
The amount by which
1.6%
The amount by which the RVI
type of diversified activity the RVI rose in 2019 is forecast to rise in 2020
Resilience amidst adversity
Estates and farm businesses in the UK have found creative ways to
respond to the Covid-19 restrictions and changes in consumer behaviour
This Spotlight features our updated Rural diversifications that were forced to shut, LOOKING AHEAD…
Vibrancy Index, which tracks some of the key just as they were entering their busy season. 2020 has been a uniquely disruptive year
economic and social factors influencing farm In spite of this, many diversified businesses for the diversification sector, but our Rural
diversification. We explore opportunities and have been incredibly adaptable and resilient Vibrancy Index forecast for this year is not all
key consumer trends for 2021 through a series in embracing the “new normal”. Throughout doom and gloom. We have taken into account
of business case studies. In addition, at a time the year, we have heard inspirational stories the most recent data available in combination
when many businesses are struggling, we focus about how they are reshaping their offer to with insight on the other elements and predict
on innovative ways to fund diversifications keep businesses afloat and customers happy. an overall rise in the Rural Vibrancy Index
and improve communication through the for 2020 of 1.6%. An estimated decline of
power of social media. ON TRACK FOR GROWTH -2.2% in the Base Economic Index and a flat
The UK, like so much of the world, was The Rural Vibrancy Index 2019 showed strong forecast for farming performance means that
desperately unprepared for the pandemic. annual growth of 5.5%, continuing a positive the positive result is entirely attributable
For farmers and landowners it came at a trend for the Index. Of the various elements to the continued strength of the Diversified
time of existing disruption as Brexit and that it tracks, diversified enterprises showed Enterprise Index, albeit forecast to grow
the consequential reform of agricultural the strongest performance during the year at its slowest rate (3.8%) since the Index
and rural development policy challenged (8.5%). The Rural Vibrancy Index also looks began. Despite a difficult time for many, we
business plans. at indicators of the underlying performance predict that core elements of the Diversified
As well as the serious effects on people’s of farm businesses. A rise in Total Income Enterprise Index, such as British vineyards
health and wellbeing, the implications of from Farming (Defra) in 2019 compared to the and renewable energy returns, will continue to
Covid-19 for business and the economy previous year, contributed to an annual growth show strong growth through 2020.
have been severe. Many diversified farm of 5.1% in the Farm Drivers Index. The final They say a crisis creates opportunity, and
businesses have suffered losses due to closures element of the Rural Vibrancy Index is the this year we have seen how the pandemic has
and the restrictions on the movement of Economic Base Index, which represents the accelerated pre-existing trends and new ideas.
people. Wedding venues, accommodation strength of the underlying economy. In 2019 it Reflecting on this, we highlight in the panel
providers, visitor attractions, adventure parks acted as a drag on the overall Index, with a fall (right) how we think key elements of the Rural
and festivals are some of a long list of rural of -1%. A strong year overall. Vibrancy Index might perform into 2021.
Rural Vibrancy Index
300
250
Index 2011 = 100
200
150
100
Source Savills Research
50
2012
2018
2020
2015
2013
2016
2011
2014
2017
2019
Economic Base Index Farm Drivers Index
Diversified Enterprise Index Rural Vibrancy Index Forecast values
The Savills Rural Vibrancy Index (RVI) tracks some of the key influences on farm
diversification and aims to give a comparative indication of the strength of the sector over
time. The index combines a wide range of indicators in three separate categories: farm
business drivers, economic indicators and enterprise performance results. The vibrancy of
the sector is represented as standardised values indexed relative to the year 2011 (2011=100).
savills.com/research 2
Navigating the New Normal
As the march towards net zero gathers urgency
and pace, renewables will increasingly be called
upon to fulfil our insatiable need for energy
2021 SHOULD BE AN
UPBEAT YEAR FOR:
SHORTENING SUPPLY CHAINS
Home delivery offerings from local
businesses have been a lifeline both to
producers and consumers during lockdown.
But consumers wanted assured provenance
and convenience before 2020 and the trend
will only accelerate in the future.
STAYCATIONS
The number of single day visitors
to the countryside has declined from a
peak in 2012, but it seems likely that the
lack of overseas holiday options may
Navigating
compensate for this in 2021.
New
DISTILLERIES
the
The “Ginaissance” appears
unstoppable. Smaller businesses have
Normal
been better able to adapt to local, direct
and online retail compared to larger Disruption can bring risk but also
businesses more exposed to the opportunity. Businesses must be
hospitality sector. ready to react and adapt to change
QUARTER Of all UK weddings are held at
The difficulties of recent months
Proportion of grocery sales
has seen diversified farming
ordered through the internet
13.5%
businesses transform themselves
AND COULD BE A
country or manor houses
to adapt to the new normal.
CHALLENGING YEAR FOR:
4
in 10 people
moving house
Change does not mean ruin. are thinking of
Explore new ways of meeting a rural location
BREWERIES clients’ needs and expanding reach.
Staycation boom:
6x
We have seen relatively few new
95% of couples have not cancelled Increase in
brewery openings in an industry
their weddings. Many have kept the
that is vulnerable to restrictions on original date but are changing to a camping
socialising and suffering from a lack smaller, more intimate celebration. bookings
3.5 million
of government support.
Veg boxes delivered between end of
As a business evolves, strengthen February and mid April
HALF
INCOME FROM FARMING and refine the offer to ensure it is
£9.3 billion Planned spend on “post-lockdown treats”
Uncertainty around the Brexit negotiations competitive and sustainable.
continues to weigh on the minds of the Pitchup.com has received 1,400
sector even though farmgate prices are bookings for next summer. But even
buoyant, reflecting a change in consumer the most successful enterprises Proportion of consumers
must adapt and evolve to survive.
buying behaviour during lockdown. who intend to continue
online shopping at
lockdown levels
Create business resilience. Review Proportion of
71%
OVERSEAS VISITORS
the offer and look forward to how
A weakening pound combined this might look in 2021 and beyond. caravan and
with constantly changing regulations motorhome
around foreign travel will not be viewed While wholesale markets collapsed
and cafes closed, demand for veg sales made
favourably by overseas travellers.
Major heritage attractions will
boxes rocketed, more than doubling to first time
in six weeks.
continue to suffer from a lack buyers in June
of traveller confidence. Source Savills Research, American Express, Deloitte, Pitchup, Kantar, Food Foundation, Hitched, Salop Leisure
3
Case studies
As the first wines became available, markets
have been established not only locally but
across Europe and beyond
CASE STUDY
Tillingham Wines
Nestled in the rolling hills and woodlands of across Europe and beyond. To promote the from a large catchment area so an 11-bedroom
East Sussex, Dew Farm enjoys far-reaching branding of this new vineyard and ensure that boutique hotel has been built to cater to those
views down the Tillingham valley to the it stands out from the competition, particular wishing to stay overnight, with vineyard tours
fortified town of Rye and beyond across effort has been made to emphasise the ethos forming part of the offer.
Romney Marsh to the sea. The location of regenerative farming and low intervention
prompted the landowner, Viscount Devonport, wine making. In a thoroughly modern way, the ADAPTABILITY AND RESILIENCE PAID OFF
to research the farm’s suitability for growing business has relied heavily on Instagram to The restrictions imposed by Covid-19 during
vines. While undertaking this research he was reach new markets. the first summer season meant that nearly
introduced to wine maker Ben Walgate and all the staff were furloughed, however the
they jointly formed Tillingham Wines Ltd. The DIVERSIFY THE DIVERSIFICATION previous couple of years of building up a loyal
first priority for the new venture, alongside This attractive location, enhanced by the following paid off with direct orders from
planting the initial 10,000 vines back in 2018 recent planting of its hillsides with vines, customers. Once the restaurant re-opened, the
– with a further 30,000 vines in 2019 – was prompted the business to focus heavily on the airy space in the farmyard under an old Dutch
to develop an on-site winery with sufficient opportunities provided by tourism in order to barn was the ideal site for a few tables and a
equipment to make a range of interesting optimise potential returns. wood-fired pizza oven.
wines. The winery is certified organic and the Wine pairs naturally with serving locally- The land not suitable for vines continues to
wines are made using biodynamic techniques, sourced food and so it seemed logical for the be grazed by sheep, cattle and chickens and a
including the use of qvevris (terracotta urns) business to develop a small restaurant and walled garden on the estate is used for growing
imported from Georgia that are buried in the wine bar with a bottle shop in the old farm vegetables. All of these enterprises are
ground, which influences the flavour. buildings. The business plan also assumes that connected, providing produce for the restaurant.
It takes three years for vines to mature many customers will be drawn to the vineyard The conversion of the farm buildings has
so in order to improve cash flow while the been sensitively undertaken with minimal
vines grow, Ben has been making around 20 intervention, which has not only kept costs
different wines using bought in grapes. He
has produced some very successful reds, 30,000 down but also ensured that there is a seamless
link between the history of the buildings and
whites and rosés, including different styles of vines were planted in their use today.
sparkling and orange wines.
As the first wines became available markets 2019, adding to the n Tillingham.com
have been established not only locally, but 10,000 planted in 2018 n Peasmarshplace.co.uk
savills.com/research 4
Case studies
61%
used supermarkets less
50
deliveries a day made by
69%
increase in sales at smaller,
during the period Newton Farm Foods independent stores
CASE STUDY Newton Farm Foods
Hugh and Celia Gay are the third the shop. Using refrigerated vans, the
generation to operate the mixed business was able to make 50 deliveries
farming business at Newton St Loe, a day to 250 households a week.
three miles west of Bath. They initially Demand for local food was not
started marketing their own beef in limited to Newton St Loe. One YouGov
2000 after deciding to sell the dairy survey showed that 61% of people
herd. Over time, direct meat sales grew used supermarkets less during this
and redundant farm buildings were period and a separate survey by Kantar
used to create a farm shop and a café. suggests many turned to smaller,
In 2010 the family established Newton independent stores, which saw sales
Farm Foods, selling their own beef, increase by 69%.
lamb and pork directly to the public.
The farm shop has proven extremely CREATIVE OPPORTUNITY
popular and has grown significantly Lockdown also provided the perfect
over the last 10 years. With the support opportunity to realise an ambition to
of an EU Leader grant, the business
was able to extend the café in 2019 and
produce their own range of quality
ready-to-eat meals. Their range now
CASE STUDY
Pylewell Park
can now serve 1,400 covers per week. extends to eight mains, three desserts Pylewell Park is located in the New Forest National Park on
Around 50 other local suppliers have and three side dishes, all handmade in the south coast of England and is owned by Lord Teynham,
also come to rely on the farm shop as an the café’s kitchen using locally sourced who inherited the estate in 1988. Because the property was
important outlet for their own produce. produce. The ready-to-eat meals have vacant and in need of repair, the trustees agreed that a
The family also use the new facilities to fast become a customer favourite and commercially viable and sustainable use was needed for the
host supper evenings, craft workshops the delivery service still operates twice house, gardens and parkland in order to contribute towards its
and wellbeing classes along with farm a week, making essential deliveries to restoration and ongoing maintenance. In 2015 Simon Foster of
open days and seasonal celebrations. those shielding or vulnerable. the Tourism, Leisure and Events team was instructed to assess
As lockdown measures eased, the opportunities at Pylewell. The conclusions from the initial
DEMAND FOR LOCAL FOOD the café and farm shop returned assessment highlighted an opportunity to create a significant
Like many other businesses, Newton to operating as normally as they weddings and events enterprise in a semi-permanent marquee
Farm Foods was heavily impacted by could within the regulations. Always in the gardens, complemented by guest accommodation in the
Covid-19. The lockdown meant that the looking to grow, the business is now numerous, but unrestored guest bedrooms in the house.
café had to close overnight and the farm developing an online ordering system
shop was restricted to reduced opening and is hosting a pick your own pumpkin WEDDINGS AND STAYCATION MARKET
hours. In order to survive, the business enterprise developed by Hugh and A feasibility study and a subsequent business plan were
has had to adapt. The family decided Celia’s son Josh, who now manages the completed, which included projections on the likely number
that if the public were no longer able to day-to-day farming operation. of events over a 10 year period and the return on investment.
visit them, they would visit the public. Covid-19 has shown that businesses Savills helped the Pylewell management team secure planning
In March the Gay’s created a delivery must be able to adapt and diversify in consent, source key suppliers (including a state of the art
service, initially for people over 70 order to maintain business continuity. semi-permanent marquee and external event caterers), and
and those shielding, before extending recruit a new marketing and events coordinator to manage the
to others within a five mile radius of n Newtonfarmfoods.co.uk day-to-day business.
Two years later bookings have exceeded targets and, as
part of a second phase, 10 bedrooms in the house have been
refurbished for overnight guests. In addition, the development
of the website and the effective use of social media have been
crucial in attracting a high volume of enquiries.
In response to the changing restrictions caused by the
pandemic, Pylewell has adapted its offering to create a “micro
wedding” package that includes exclusive hire of the house
for a weekend, with a small ceremony, dinner and overnight
accommodation for family and close friends. As a result, a
number of clients have happily adapted their wedding plans
rather than cancel or postpone. This has ensured that cashflow
has been better protected during this challenging time.
In addition, a penthouse flat has been turned into a holiday
let to make the most of the flourishing staycation market and
help cashflow in the short term. Looking forward, the estate
is looking at other leisure opportunities, including outdoor
events and third party glamping enterprises.
n Pylewellpark.com
5
Learning to communicate
147m
Instagram posts
191m
Instagram posts
245m
Instagram posts with
with #holiday with #wedding #foodporn
The rise of
the ‘farmfluencer’
Communicating the value and reality of farming has become key
The growing disconnect between people and the annual Open Farm Sunday turned into Online Farm
food they eat is well known. Not understanding how Sunday, while hashtags such as #backbritishfarming
milk is produced, which animal pork comes from, went viral. Covid-19 also resulted in a revival of
or when strawberries are in season is increasingly interest in locally produced food and, once again,
commonplace and signifies an urban society with a technology was an enabler, creating online platforms
worrying lack of exposure to the rural world. such as Farms to Feed Us, an open source website
This disconnect is even more concerning at a time connecting consumers and local growers.
when the rural sector holds many of the solutions to
the challenges society is currently confronting – the DEMAND FOR RURAL ONLINE CONTENT
race to net zero emissions, the need to improve diets,
enhance health and reverse the decline of nature. This,
We spoke to Amy Eggleston, aka @thedairydaughter,
who returned home to work on her family dairy farm
Key steps to
combined with the seismic policy shifts facing the
sector, means that demystifying and communicating
in Leicestershire. She set up her farm Instagram
account (now with over 10k followers) to “show
diversification
1
the value and reality of farming has become a priority. people what dairy farming really involves”. Amy’s past
work experience combined with her love of the farm What does a good business
CONNECT TO THE CONSUMER inspired her to start a rural communications business, plan look like? It needs to
Historically, farmers have been among the last people offering advice to businesses on how to promote be clear, well-structured and
to jump on the self-publicising wagon. However, the themselves. She has a variety of different clients in relevant to the project or
growth of online platforms such as Instagram, Twitter, the agriculture sector who want to spread the word business. A plan that is used
Facebook and TikTok mean farmers and farm workers and often social media is a great place for them to to support a loan application for
can now share their stories on social media at the click start. She agrees that the pandemic has confirmed example should have a different focus
of a button. Not only is it inherently Instagrammable the importance of engaging with online platforms, to one that is targeted at equity.
– think photos of fluffy lambs or dramatic arable and believes in the benefit that this can bring in Once the basic structure is in place,
sunsets – but, more importantly, this growing online educating people about food, nature and farming. it is important to make sure:
communication is pivotal in reconnecting the urban n It is realistic – and can be
public with the lived reality of the rural world. n @pasturesgreencommunications implemented in the real-world
The concept of the farmfluencer, farming celebrities environment, rather than just looking
who have shot to fame through their online content, good on paper.
may sound unlikely to some, but the numbers speak n It is focused – through setting
for themselves. Instafarmers @redshepherdess (42K targets, timeframes, action points,
followers) and @bentheoandrews (40K followers) etc, all of which can be tracked and/
among many others make it their daily mission to or measured. Set key performance
share the dirt on what farming really entails. And indicators to assess ongoing
it’s not just Instagram – famous Lake District sheep performance.
farmer James Rebanks sprung to fame on Twitter with n Define responsibilities – part of which
his shepherding tweets. Two books down the line will include how the management
and he’s a trailblazer in communicating what farming team will be structured and the
means and the hurdles farmers face on a daily basis. business resourced. Consider
Lockdown has exaggerated society’s increasing qualifications, licences, etc required,
demand for rural online content. Our new-found plus who is responsible for them.
propensity for the virtual world has meant farmers n Justify assumptions – and challenge
have had to scale up their communication – LEAF’s yourself on how realistic they are.
n Consider the way you want to
communicate the plan – who will
HOW TO SPREAD THE be afraid to try it – it’s really for pictures of cute calves. read it, how will it be incorporated
not rocket science. The demand on the rural into other aspects of the business
WORD EFFECTIVELY n Engage with others, make sector to scale up online management. Don’t get too lost in
Instagram friends – there is a communication may well be one technical detail.
We asked Amy for her top tips really supportive community silver lining of the pandemic.
n If it’s for the purpose of raising
for rural businesses looking to out there. As farming continues to be
funding, don’t just produce it for “the
diversify their communications: n To increase your reach, put under the spotlight and
make sure you have a variety undergo substantial change,
bank” – and leave it in the bottom
n Do something – anything of platforms for different the sector will need public drawer once done. It should be
is better than nothing, just audiences. For example, use support, which is a lot easier referred back to, reviewed, revised as
set up a page, a website, even Twitter for information on when everyone understands the business develops (and as targets
a newsletter email. Don’t fertility rates, Instagram what farming means. are inevitably missed…).
savills.com/research 6
Business planning
A good business plan needs to be clear, well-structured and relevant to the
project or business. A plan used to support a loan application for example
should have a different focus to one that is targeted at equity
2
What supporting the proposal for a lender, as the etc) and working capital – the lender or equity partners need to be a part
evidence will I need? value of the cash equity is effectively will want to see how these different of the capital structure and this is
There is no set list to work replaced by the security value. aspects of the business will be funded. where a joint venture can play a
5
to, but a good starting Engaging the services of a part – they could be active, where the
point includes: professional advisor – a consultant, Will my loan be reviewed diversification benefits both parties,
n Market analysis – what does the accountant, etc is advisable, as they at any point? Generally, or silent, where the equity only,
current commercial landscape look will consider different business banks will hold a formal and possibly a limited element of
like at the moment? structures, efficient ways of investing, review at least once a management input is provided.
n What’s the competitive edge – if it’s effective use of tax reliefs, as year, but often more Lenders will want to see
a new product or service, how have well as sources of capital, but the frequently where new diversifications management teams with well-
you identified the gap in the market? end position will invariably be a are concerned as there is an increased balanced skills and suitable
If it’s an additional or replacement compromise between all of the above. risk with the lending. Lenders will experience. If this involves bringing
product, what will compel your Banks are still the main source often want to see an independent in specialist operators, do your
target customers to switch from their of funding, especially for more consultant’s report, eg. to monitor homework. Who are they? What is
current provider? Analysis around traditional purposes such as land performance against budget, and this their history and track record? Can
Target Addressable Markets is useful purchase and investment in fixed may be carried out on a quarterly you obtain references? Are they
here as a tool to define the potential assets, but specialist lenders are or even monthly basis. More formal individuals or part of a professional
opportunity and scale of the business. increasingly active in the market monitoring via loan covenants is operator (such as is common in the
n Credentials – management and may offer more bespoke funding another means of assessing how a hospitality sector)? Another option
experience and track record. structures, particularly for working borrower is performing. could be a franchise model, where
6
n Contracts – or other evidence of capital solutions. the business benefits from an
4
support from potential customers, What about tenants operating template and central
to demonstrate some form of What are the common who are aiming to franchise support that often includes
commitment (key if looking for pay back periods? diversify, how do a financial package
7
long- term funding). Generally, these are they raise finance
n Supply agreements – from suppliers, aligned with the useful without security? A How should a landowner
where cost of sales are important to life of the asset. In the conversation with the landlord is a raise finance for a
manage and preserve margins. case of property and buildings, up to good starting point, especially where diversification project
3
25 years is common, and for plant there will be an element of capital if they have little or no
What are the options in and machinery, typically three investment – it could ultimately trading history? This
terms of finance, loans, to seven years. It’s important to serve to benefit the landlord as can be difficult as track record and
and remortgaging and differentiate between finance for well, so they have an interest in the experience are important in an
where are the main fixed assets (ie. buildings, machinery, project. Debt is available, but equity overall risk assessment, but areas of
sources of finance? weakness can be mitigated by bringing
Establish how the diversification in external parties.
will be structured with the existing Don’t start off with unrealistic
business. If it is as a part of an expectations. It might take longer
established business, obtaining to get to realise your long-term
funding may be easier, but the lender ambitions, but it is better to start
will want to make sure the new out small and build up than risk
enterprise won’t be a drain (in cash everything on day one.
terms and management time) on the Explore different funding options,
existing business. Conversely, if it is including grants that may be available
set up as a separate business, don’t in your region or targeted at specific
necessarily expect the same terms areas or sectors, and be prepared
– it’s not the same business or legal to obtain funding from a number of
entity, so you shouldn’t expect it to be different sources.
treated as such.
A start-up or diversification project Ashley Lilley, Savills Food and Farming,
will often fail to get bank support spoke to Tom Windett of Ashbridge
if the expectations for funding are Partners about planning and funding
unrealistic. It can be a challenge for a diversification.
those starting out, often with limited n ashbridgepartners.co.uk
cash to invest, but consider external
equity as a way to bridge this. (Yes,
it means giving away some of the
value in the business, but it could also
mean bringing in some additional £740m
experience and business management Total income from
skills.) Alternatively, providing
security over other property via a
diversified activities
re-mortgage can be a way to “de-risk” in England alone
7
UK Rural - January 2020 UK Rural - Spring 2020
S P OT L I G H T
Natural Capital S P OT L I G H T
Hemp Cultivation
Savills Research Savills Research
in the UK
Carbon Offset Market Biodiversity Net Gain Nitrate Neutrality Rewilding Market evolution Growing costs Multiple end uses Investment opportunities
1_Savills_Spotlight_NatCapital_10.indd 2 15/01/2020 14:56
UK Rural - Spring 2020 November 2020
S P OT L I G H T
Red Meat S P OT L I G H T
Rural Logistics
Savills Research
Outlook Savills Research
Is the rise of veganism overplayed? Disrupting the supply chain Achieving net zero Urban migration Logistics capacity Rural repurposing
Savills Research
We’re a dedicated team with an unrivalled reputation for producing well-informed and
accurate analysis, research and commentary across all sectors of the UK property market.
Nicola Buckingham Joe Lloyd Ashley Lilley Debbie Queen Adam Davies
Rural Research Rural Research Food and Farming Tourism, Leisure and Events Tourism, Leisure and Events
07807 999 011 07790 824 970 07770 652 964 07971 762 790 07929 854 314
nbuckingham@savills.com joe.lloyd@savills.com alilley@savills.com debbie.queen@savills.com adam.davies@savills.com
Savills plc: Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offices and associates throughout the Americas, the UK,
continental Europe, Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. This report is for general informative
purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. While every effort has
been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form
is prohibited without written permission from Savills Research.
You can also read
