SCOTMID chief executive John Brodie has declared the inflation crisis facing businesses will be felt “for some time to come” as the latest annual results for the co-operative revealed a sharp fall in profits.

Edinburgh-based Scotmid booked a £2.7 million fall in trading profit to £3m for 2022, a year Mr Brodie said had proved to be “much more challenging than expected”, with inflation running at a higher rate than forecast.

The fall in profits came against a “turbulent” economic backdrop which Scotmid said had been dominated by the cost-of-living crisis and soaring business costs, notably on energy following Russia’s invasion of Ukraine.

Scotmid, which was originally founded as St Cuthbert’s Cooperative Association in 1859, has businesses in grocery and toiletries retailing, property, and funeral care. It lifted turnover by £3m to £406m over the period.

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The Society said it had invested £21.9m in capital projects "for the long-term benefit of the Society", while net assets climbed by nearly £10m to a record £122.5m.

Speaking to The Herald, Mr Brodie said the Society's convenience store business “faced the most significant challenges” during 2022, and highlighted the impact of energy costs, food price inflation, rising pay and weak consumer sentiment stemming from the cost-of-living crisis.

He said the year had been “more challenging than we even expected” but noted that Scotmid had “delivered a solid underlying financial performance from everyone in the society”.

“There are some positives there of all-time high, record assets for the society, [and] mitigating most of the cost challenges that came our way,” he said, adding that rising costs had “not stopped our core purpose of serving our communities and improving people’s everyday lives.”

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However, Mr Brodie said he does not expect the cost pressure to ease soon.

“I would say the cost pressures are still there and I anticipate they will still be there for some time to come, as businesses work through all the elements,” he said. “For example, we have seen commodity price inflation but labour price inflation has still to come through in products, given that largely salary reviews are an annual thing. So, my anticipation is that inflation will continue for a period yet.”

Asked how Scotmid is responding to the pressures facing households from inflation, following news that Tesco and Sainsbury’s have cut prices on certain lines for loyalty card holders, Mr Brodie said “you have to take into context we are a very different operation, particularly in small stores that we operate, and we don’t differentiate – we offer flat pricing for all our customers”.

He noted that Scotmid has some “fantastic offers locally in store”, including a deal for two 2-litre cartons of milk for £2.50, and had increased its value and “Scottish local favourite" ranges.

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“There are a number of different things we have done to help customers. And obviously our stores are local, so people are not having to travel and incur costs to travel to get their product. It is there in a local environment as and when they need it,” he added.

Earlier this year, Scotmid announced that 30 jobs were at risk at its Edinburgh headquarters as it moved to a “more streamlined operating model” and attempted to mitigate the impact of the cost inflation.

Asked if there was any update on the situation, Mr Brodie said the consultation process was nearing its conclusion. He said the Society had been able to find roles for a number of the people affected, while others have applied for voluntary redundancy. Scotmid employs around 4,000 across its operations.

Meanwhile, Mr Brodie said Scotmid was as “prepared as we can be” for the introduction of the controversial deposit return scheme in August “given the lack of clarity” from the Scottish Government around its operation. He said the Society and groups such as the Scottish Retail Consortium have asked for “clarity on what need to do, because the clock is ticking.”

He said: “The analogy I’d give is a lot of us are piloting super-tankers. You just can’t change course instantly. You need time to plan things. So, from a practical basis, we only do so many software upgrades in a year, [so] they have to be released in time. You have to train staff to know what the new scheme is. And something as simple as, does the shelf edge include the 20p [to be given to consumers when bottles are returned] or not the 20p? So our call is, clarity as soon as possible.”

Asked how confident he was of that clarity being forthcoming, Mr Brodie replied: “Given what has gone before, I am not over-confident. But if the date is stuck to in August, it is going to have to come, otherwise it is not going to happen.”