The novel coronavirus pandemic is already affecting global food supply chains, availability of ingredients and revenues across many parts of the industry. What are some of the major impacts, and what can food companies do to mitigate its effects?
As of March 13, there have been more than 130,000 confirmed cases of COVID-19 and nearly 5,000 people have died since the outbreak was first identified in Wuhan, China on December 31, 2019. The World Health Organization has said that the pandemic is controllable, but this relies on many actors working together, including public health authorities, individuals and businesses.
Maintaining food supply is vital during the crisis, and the food industry is a major contributor to many countries’ economies, meaning that keeping it running smoothly is a priority wherever possible.
“Safety is always the number one concern,” said Will Surman, Director of Public Affairs and Communications at FoodDrinkEurope, the pan-European trade association.
“Members are ensuring their workforce follow appropriate measures by adhering to official advice from their relevant authorities to protect themselves and others from the coronavirus. Members are also trying to maintain business operations, where possible, to ensure food and drink products reach their intended markets.”
Many food and drink businesses are experiencing restricted ingredient supplies from affected areas, while manufacturing facilities have been shut down as companies and governments ask employees to stay at home in an effort to stem the spread of the virus.
“Some members are reporting business activities to be impacted in several ways,” said Surman. “For example, there are reports of an impact on sales and slow deliveries, difficulty sourcing raw materials and some deliveries postponed or cancelled. Restrictions on festivities, trade fairs and other events could also carry negative business impacts.”
Even the world’s biggest multinationals are not immune from the outbreak’s effects. The Coca-Cola Company has said it expects to see tighter supplies of non-nutritive sweeteners from China as a result of the virus, and Danone has said it will lose about €100 million, mainly from its Mizone water business, which has a Wuhan-based manufacturing facility that remains closed. Fonterra, the biggest exporter of dairy products to China, is also struggling to get its products into the country because fewer employees are available to process containers at ports.
Dr David Acheson is the former US Food and Drug Administration (FDA) Commissioner for foods. He runs an agency called The Acheson Group (TAG), which aims to mitigate risk and improve standards in food supply chains. According to Acheson, disruption of ingredient supply chains could pose numerous risks, as food companies scramble to find new suppliers without their usual checks.
“Of high importance at this point is reviewing your entire supply chain for any products, ingredients, or supplies from China, particularly those for which China is your sole source,” he wrote. “…If you do need to add a new supplier quickly, do as much investigation and assessment as possible in the time you have. And make sure they can fulfil your needs, so you don’t end up with further shortages and have to find another additional supplier.”
Such sourcing, manufacturing and delivery difficulties apply to regions beyond China, too. Italy’s food industry trade association, Federalimentare, has warned that the closure of northern Italy puts the food manufacturing sector at risk. The shuttered regions of Lombardy, Veneto and Emilia Romagna together represented 52% of the Italian food sector’s production in 2018.
Within China itself, the entire food and agribusiness supply chain is disrupted, according to analysis from Rabobank.
“The overall impact – which is most severe for foodservice and on-trade channels – could be more serious and longer-lasting if the virus is not contained within Q1 2020,” it said. “…However, quick and effective containment of the virus could lead to a rapid bounce-back, as experienced after the SARS outbreak in 2003.”
European industry trade association FoodDrinkEurope says many national food and drink federations are in contact with national authorities to find ways to minimise the impact of the outbreak on businesses, and companies are advised to keep in touch with these organisations as the situation develops.
“The geographic location of business operations, raw materials and end markets are likely to determine the impact [on any particular company],” Surman said.
In the United States, FMI, the Food Industry Association, has issued a “Coronavirus Preparedness Checklist” for the food industry. Its recommendations for manufacturers include exploring the possibility of telecommuting for employees wherever possible, establishing communication with local health and agricultural authorities, and implementing frequent and thorough cleaning measures.
