Industry Insights · 26min read
How COVID-19 Has Impacted the Entire Food Industry
See how the B2B and B2C food industries have fared over the last 18 months as we take a look at what has changed and what hasn’t since the early stages of the pandemic.
Original post: March 2020 | Updated post: August 2021
In March 2020, the coronavirus pandemic took the world—and with it the food industry—by a storm. In Europe, every day we woke up to new government regulations and recommendations, which included a continent-wide shift toward remote work wherever possible alongside widespread restaurant shut-downs and a rapidly rising number of bans on people's movements and activities. Everyone grappled with developing emergency measures to keep businesses running and the economy afloat. At foodcircle, we carefully monitored the situation as it unfolded.
In August 2021, we updated our overview of the food industry’s various sectors to show how the landscape has developed over the last 18 months.
The B2B Food Industry - Supply Chains
Looking at the B2B landscape, there is still much uncertainty around how supply chains have been and will be affected in the food industry. In the United States, eatery.com recently published the alarming claim that “[...] there have been major interruptions in the food supply chain as factories temporarily close amidst the outbreak and concerns grow surrounding the importing and exporting of goods”. It is our understanding that this statement was primarily referring to distribution shortages between traditional wholesalers and supermarket retailers, not to eCommerce. Many EU member states, including Poland, implemented emergency measures this weekend and closed off their borders to tourists, giving rise to worries surrounding trade blockages. European governments are working to keep their trade routes open and truck drivers, for example, are currently still exempt from the rapidly spreading border-crossing bans.
One global concern that is currently still very much overlooked is the indirect effects of the coronavirus's spread on food suppliers and farmers around the world. BBC Newsday’s James Copnall recently spoke to the Ivory Coast’s Prime Minister, Arthur Coulibaly about how the cashew industry in his nation has suffered from the indirect effects of the coronavirus’s spread: “[...] China is about 10% of the global cashew kernel consumption. And that kernel consumption is mainly supplied by Vietnam. So with coronavirus, that means the Vietnamese got some stock in hand. And it happens that they are trying to find ways to dispose of that kernel, so the price of the kernel really decreased during the last two to three weeks. [...] The second point is that if the Vietnamese are expecting a slower market in China, they would also be slow to buy raw cashew nuts from Cote d’Ivoire and from other African countries.” As digital wholesalers with a global network, we will continue to monitor how developments around the world are impacting pricing, demand, and supply.
Prior to Italy’s nation-wide shut-down FoodNavigator highlighted how the peninsula’s government was preparing emergency economic measures and support packages for businesses in all industries. According to the Financial Times, this now also includes the suspension of mortgage payments. Across the EU governments are currently pushing to develop emergency packages for businesses in their countries. Please consult your local government’s regulatory bodies for more information on what support is available for your business as there is currently no pan-European strategy in place for this.
Since the start of the pandemic, Europe has not grappled with one but three notably strict lockdowns which caused chaos, shortages and blockages along the supply chain. But COVID was not alone in causing these disruptions—with Brexit’s last-hour deal thrown into the mix, at the start of the new year, food manufacturers, distributors and wholesalers grappled with a tsunami of customs challenges, including piles of paperwork and unclarity around imports and exports.
As a result, investing in supply chain resilience has emerged as a top priority. Food Manufacture assessed the situation in spring and pinpointed the various efforts, which include working to shorten supply chains (fewer steps and actors) wherever possible, increased reliance on automation, decentralised logistics and delivery plans that allow for more flexibility. Manufacturers responded to the need to keep supermarket shelves stocked by simplifying production lines which included putting a stronger focus on best-selling products and thus reducing SKUs. Other business strategies include, the continuous adaptation to the shifts in consumer behaviours to respond swiftly to changing demands, the diversification of ingredient sourcing to avoid putting all eggs in one basket and developing a clear labelling strategy to minimise errors. Likewise, the importance of digitalisation, i.e. Industry 4.0., is as important as ever for businesses working to become more resilient to the persisting challenges.
For food manufacturers, in particular, worker health and safety—both of which have always been a strong area of focus for this sector—have been taken to new heights. Beyond additional safety gear and social distancing measures, tools such as AI health data management tools are making waves across the sector in response to a long string of Covid outbreaks in food processing plants in the UK and EU which made headlines in 2020.
Furthermore, although logistics has become more manageable than it was at the start of the pandemic, food manufacturers are still grappling with a certain level of unpredictability. Despite the use of increased technology, bottlenecks, such as closed borders or ingredient shortages, are expected to persist for at least another two years.
Last but certainly not least, food manufacturers continue to respond directly to shifts in consumer demand which were prevalent before but rapidly accelerated by the onset of the pandemic, such as the demand for sustainable, regional and healthy foods and ingredients.
The B2B Food Industry - Trade Fairs
While goods continue to move freely between countries, trade shows were amongst those to take the biggest blow in all sectors. With widespread bans on large-scale events of 1000+ people extended throughout the EU, as of 16 March, over 550 trade shows in Europe have either been cancelled or postponed. In the food industry, this includes Natural Organics Products Europe in London (postponed until 7-8 July), Alimentaria in Barcelona (postponed until 14-17 July), and Cfia in Rennes, France (postponed until 26-28 May). While these changes have admittedly also put a dent in some of our planned efforts to generate new business in upcoming months, at foodcircle, we continue to offer our entire wholesale organic ingredients portfolio and services online. Deutsche Welle assumes that bulk of the losses will fall on backs of trade fair operators and that, while exhibitors will certainly experience losses in revenues, they will most likely be able to reclaim exhibition and travel costs under current legislation. While numbers for this do not currently exist, the economic repercussions that come with these unforeseeable alterations are expected to be extensive.
On the trade fair front, business has certainly not returned to usual, however, many reputable trade fairs opted to digitalise their events (or at the very least offer hybrid events) this year and are now weighing the possibility of returning to in-person conventions in 2022. Examples include BIOFACH / VIVANESS ESPECIAL 2021, which is now looking forward to the 2022 convention in Nuremberg and the Free From Virtual Summit Series, which will be followed by the convention at Rai Amsterdam in November 2021.
That being said, whether or not events can actually take place in real life is subject to change on a country-by-country basis depending on the respective incident rate at any given time. We recommend referring to individual event pages for updates and changes.
The B2C Food Industry - Restaurants
“Of all the industries threatened by the novel coronavirus (COVID-19) outbreak, few have felt the impact as deeply as the food industry. Restaurants around the world have experienced dramatic drop-offs in customer traffic [...]” Eater.com aptly highlighted last week. Since then, the escalating situation in many European countries has given way to further crackdowns. In Austria, all restaurants are shut, and residents are no longer permitted to leave their houses unless they are going to the supermarket or seeking medical help. In Germany, while bars and places for social gatherings were ordered to close on Saturday, non-smoking restaurants are still permitted to stay open if they can guarantee a 1.5-metre distance between tables and adhere to strict hygiene policies. Measures such as these also extend to numerous other member states, such as the Netherlands, Spain, and France. The short and long-term economic effects on the restaurant industry remain to be seen.
An overview of how European countries are responding to the coronavirus can be found here: politico.eu
Restaurants have undoubtedly remained some of the hardest hit actors in the entire food industry, and in many countries, such as Germany and the Netherlands, foodservice only opened its doors (or terraces) earlier this summer. A significant growth in online orders during lockdown helped keep many players in the industry afloat while the bulk of gastronomers relied on financial support from their governments to make it through this period.
Recent data released by the European Commission showed that restaurants and hotels showed a 15% decrease in turnover in the first quarter of 2021 compared to 2020, which is no big surprise as COVID only began hitting the industry in most parts of Europe in March 2020. Estimates show that in Germany, for example, 400,000 of the 1,000,000 jobs that were lost as a result of the pandemic were in the hospitality industry. Precise comparative data is not yet available for this year, however, it is clear that the road to recovery is long, and many businesses did not survive. For those that did, one of the biggest struggles is grappling with the see-sawing demand and regulations.
For some businesses, simply opening their terraces was not lucrative enough to re-open their doors let alone a team of staff employed. And incidence-based changes in regulations make planning of resources, such as employees and ingredient volumes, difficult. Ultimately, the industry is still struggling and the road ahead is still long.
The B2C Food Industry - Supermarkets
While widespread social distancing measures seem to be resonating with the general public in Europe, hoarding of food in supermarkets has led to a dramatic uptake in empty shelves. According to Katy Askew at foodnavigator.com, research conducted by HIM & MCA in early March found that, even at the beginning of this month, “one-third of UK shoppers [were] stockpiling food” and “67% of shoppers [were] concerned in some way about shops running out of groceries due to a major coronavirus outbreak”. Fast-forwarding one week, The Guardian revealed that the outbreak of empty shelves across the United Kingdom has led to a unified outcry from retailers: “Britain’s leading supermarkets are pleading with customers to refrain from panic buying during the coronavirus crisis, with some already rationing items and turning new customers away to cope with demand.” The Guardian goes on to highlight that this has resulted in leading retailers, including Tesco’s and Sainsbury’s, issuing a government-backed joint plea directed at consumers asking them to shop considerately, “We are working closely with [the] government and our suppliers to keep food moving quickly through the system and making more deliveries to our stores to ensure our shelves are stocked”, while vowing that they are working to speed up deliveries.
In Germany, on the other hand, zeit.de reported this weekend that, while the dent in German supermarkets’ shelves is “clearly tangible”, notable industry associations, such as the German Retail Association (Handelsverband Deutschland, HDE) and the Food Federation Germany (Lebensmittelverband Deutschland) remain confident that the industry has “sufficient stocks” to supply the country. Their biggest challenge now is to continue to extend this confidence to the general public.
Earlier this year, shortages on supermarket shelves in the UK were not brought on by the pandemic but by Brexit. While many hoped stock shortages would be short-lived, the reality is that supermarkets are still struggling to keep their shelves filled this far into the year. Since consumer stockpiling subsided in summer 2020, EU-based supermarkets have managed to maintain stability on their shelves.
In fact, grocery retailers have come out as some of the beneficiaries of the pandemic as new consumer behaviour carved the path for new business. These include a substantial shift towards online shopping as well as increased demand in health, organic and lifestyle products, the latter, which also comes with a higher price tag in many instances. While the 2020 closure of restaurants led to a substantial surge in grocery sales, the expectation is that the re-opening of restaurants will cause a dip in sales on a YoY basis as a result. England, for example, is still struggling to implement a reliable test and trace strategy as their existing system still struggles to meet targets.
The B2C Food Industry - Food Deliveries
While the retail industry is facing some severe setbacks, food delivery services are benefiting greatly from consumers choosing to stay home during the spread of the coronavirus. To minimise exchanges between individuals who are ordering and delivering foods, US and European delivery services are now hastily catching up to their Chinese and Japanese “zero-contact” or “contactless” counterparts. For some time now, numerous food delivery services in these nations have already introduced innovative processes by which foods can be dropped off at people’s doorsteps instead of handed to them at the door.
The European food delivery market has registered a CAGR of 10.3% thus far this year and is expected to maintain an 11% CAGR until 2025. Food delivery surged throughout the course of the pandemic and the expectation is that growth will remain steady as consumers have now become well-familiarised with the ease of ordering in.
How We Are Dealing with the Effects of Coronavirus at foodcircle.com
At the start of the pandemic, foodcircle saw a strong uptick in orders as a direct result of our inherently organic ingredient portfolio. As a digital service provider, our customers welcomed the flexibility, transparency and swift response rates we maintained during this time. While many players in our ecosystem grappled with transitioning to digitalised solutions under pressure, our foundational digital infrastructure was already in place, making it much easier for manufacturers to meet their procurement needs through our platform.
Since launching our exciting new digital food procurement portfolio, we have been supporting a rapidly increasing number of customers across Europe with financing, logistics and sourcing solutions. Because these areas proved themselves as particularly prominent pain points for many manufacturers during the pandemic, our customers welcomed the simplicity and ease of relying on our network, especially at times when many of their suppliers were still struggling.
We are actively working to help them become more competitive and resilient in the months and years to come. We also continue to maintain close contact with our suppliers and can respond swiftly to any shortages or changes in delivery dates.
Buy organic wholesale ingredients online: foodcircle.com/products
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