Coronavirus affecting the global food & beverage industry

As the global coronavirus pandemic accelerates, the hoarding of food continues across the country impacting all retail outlets and reaching into all product categories. It appears clear that consumers are moving beyond the cleaners, sanitizers, and paper right aisles. The call for calm and assurances that there's plenty of supply has not eased consumer's anxiety over having their favourite perishable and non-perishable brands.

In a time of "social distancing," having the cupboard and fridge filled with your favourite specialty item is becoming critical. In essence, this becomes even more important to consumers used to having gluten-free, sodium-free, dairy-free, no sugar added, plant-based meat, vegan, non-GMO, or rainforest alliance certified products readily available. And those items are starting to get seriously challenging to locate.

The extreme confidence expressed by retailers and food manufacturers that the food supply is in good order and can accommodate the unprecedented surge in demand is rather staggering when considering the new consumer landscape we've been navigating.

The combination of consumer hoarding, disruption to transport in supply chains and the lack of migrant workers is threatening food production and distribution.

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Governments are looking at ways to ease any shortage, including "green lanes" to allow fresh produce to move quickly across EU borders, recruiting a "shadow army" of harvesters and loosening travel rules for migrant workers.

Fresh fruit and vegetables will become increasingly scarce in Europe, suppliers warn, as the coronavirus pandemic hampers the global movement of produce and of the people needed to gather crops.

Greenlanes for Europe

Governments are looking at ways to ease any shortage, including "green lanes" to allow fresh produce to move quickly across EU borders. The largest food brands in the world have been struggling in recent years to maintain their share position (Battling the 3G effect) and compete with innovative specialty foods that appeal to the stomachs and souls of finicky consumers. This battle has been raging for almost a decade and the financial health of big brands like Kraft Heinz, Dean Foods, TreeHouse Foods, and others has deteriorated rapidly as has their liquidity, ability to leverage capital, keep plants open and employees motivated. Kraft-Heinz stock was downgraded to "junk" last month, and they are seeking a $4 billion credit line (KH$4BillionLineCredit) to operate.

At a time like the one we find ourselves in, it's going to be extremely challenging for these larger food manufacturers to place more stress on their businesses by quickly filling orders and pushing supply-chains to deliver – particularly over the next four to six critical weeks across the country. There may be several that face potential bankruptcies if they push too hard.

American farmers are concerned. The coronavirus pandemic is posing a threat to their livelihoods, as it is for many others across the globe. But unlike some shelf-stable goods producers, farmers have very little flexibility. They're on a strict planting and harvesting schedule and cannot ramp up or decrease production at will.

"A peach [that] is good today is not good tomorrow. That's how quick things ripen," Chalmers Carr told CNN Business. Carr owns and operates Titan Farms in Ridge Spring, South Carolina, where he grows peaches on around 6,200 acres, in addition to bell peppers and broccoli.For blueberries and strawberries, he said, "if you leave them on the bush or the vine one extra day, they're virtually worthless." Even more forgiving crops, like bell peppers, have a short harvesting window of two to five days, Carr said.

April and May are critical planting and harvesting times for many US farmers. They need skilled labourers to work their fields, and a reliable supply chain to deliver their goods. And they don't have any time to waste.If farmers can't find enough workers or if their farming practices are disrupted because of the pandemic, Americans could have less or pricier food this summer. And because international farmers and their supply chains face similar problems, we could receive fewer food imports, potentially limiting supply and driving up prices.

Two terminals for the Port of Houston were shut down for a day this month after an employee tested positive for coronavirus, and Pennsylvania briefly closed most of its truck stops and service areas to slow the spread of the virus, threatening also to delay the distribution of food and other goods. Some meat packagers around the country were at three-fourths capacity because of illness

Food Shortages

In these and other small ways, the coronavirus has begun affecting the nation's food supply chains, raising the potential that as the virus spreads, it will become harder to get food into stores from both American producers and ones abroad.

So far, the worst of the problems in the United States have been temporarily empty shelves at some stores. But the consulting company Fitch Solutions says that it sees "risks at all levels of the supply chain, from production to trade" that could lead to a "re-acceleration in food price inflation globally." The United Nations, Food and Agriculture Organization, says it expects disruptions in the food supply in April and May. How bad could it get in the United States? What happens in California and abroad could provide a big part of the answer.

The food industry is one of the nation's most labour-intensive. California produces a third of the nation's vegetables and two-thirds of its fruits and nuts. The statewide "shelter in place" order gave an exception to agriculture, but counties are enforcing it differently, and there are concerns about outbreaks of COVID-19 among farmworkers. Delays and higher prices could result.

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Making matters worse, the food industry relies on more than 200,000 guest workers each year. About 90 percent of the H-2A temporary visas these workers need are issued in Mexico, where American consulates have shut down. Last Thursday, the State Department made the visa process easier for returning workers, but prolonged delays in temporary help could further limit farm production in California.

Sought after by chefs for their high meat-to-shell ratio as well as their sweet, buttery flavour, Orchard Point Oyster Co.'s oysters have been served by Sean Brock of Husk and celebrity chef Wolfgang Puck. Until recently, though, the only way to eat them was at a restaurant. When The Jefferson Hotel's restaurant Plume slashed their oyster order a few weeks ago, it was the canary in the coal mine for the Chesapeake Bay company. The free fall of room bookings meant fewer diners, and the cut in seafood spending gave the oyster farm a hint of what lay ahead. Within days, Orchard Point had an arrangement set up with The Retriever, a local shop, allowing anyone to purchase harvested-to-order oysters.

Yes, we know what you are thinking: "Oh no, not another preachy piece on coronavirus or COVID-19 or the Wuhan virus or whatever you wish to call it." We don't want to preach to anyone nor do we want to elaborate on the many things that we all have been told to do to minimise the chances of transmission and to protect ourselves from the novel coronavirus SARS-nCOV-2. This event has been a once-in-a-century event. We have seen nothing like it since the influenza epidemic that succeeded World War I and, if we are fortunate, we will not see it again in our lifetimes. But, as they say, never say never.

 The Future

So, let's step back and take a look at what we have seen and learned from this event and determine how we can upgrade our businesses and practices to be in a position to address a future pandemic better. The following is a list of actions that most food and ingredient processors, food handlers, warehouse operators, and restaurants.

Contingency planning is usually included in the emergency planning program, but I think it would be good to break it out as a stand-alone program. Contingency programs are designed to fill a gap in production. For example, A company's roof over the production floor collapses under heavy snow, effectively curtailing production. What should be done to meet orders while repairs are made? Many operations establish agreements with contract packers or sister companies to produce for them in such a situation. The last few weeks have underscored the importance of developing contingency programs or reviewing current applications to determine whether they need to be upgraded.

As efforts to contain the coronavirus pandemic limit consular services, US farmers are worried they won't be able to hire the international workers they rely on.

"We are a sector that is very dependent upon guest workers coming into this country, particularly for the planting and harvesting of specialty crops [like] fresh fruits and vegetables," said Chuck Conner, president and CEO of the National Council of Farmer Cooperatives.

According to the USDA, in the fiscal year 2005, the government distributed 48,000 H-2A visas, which grant foreign workers temporary access to the country as agricultural workers. In the fiscal year 2018, that figure had quintupled to about 243,000. Because the average length of the visa stay was about five months, the agency estimates that those visas were the equivalent of 108,000 full-year positions.

The spike in the number of visa holders is "one of the clearest indicators of the scarcity of farm labour," said the USDA. The 2015-2016 National Agricultural Workers Survey, the most recent of its kind, found that 69% of hired farmworkers interviewed for the survey were born in Mexico. Only 24% were born in the United States.

H-2A workers have been deemed essential by the government and should be allowed to work in the United States. These workers don't seem to be avoiding coming to the United States for fear of catching COVID-19 — the economic incentive is just too significant to give up, Carr said. But workers may eventually decide it's too risky to enter the United States.

And if they do have a hard time getting in, it's not clear that domestic labour will be able to fill in the gap.

It might seem like there's an obvious solution to the problem. US unemployment claims have reached unprecedented levels as businesses close their doors because of the pandemic. In the week ending March 21, initial jobless claims reached a seasonally adjusted 3.28 million — the most significant number since the Department of Labor started keeping track of the applications in 1967.

People currently seeking work could find it on farms. But most of the newly unemployed are not qualified."It's very skilled labour," said Tom Stenzel, president and CEO of the United Fresh Produce Association. "If you're a peach picker, you're very different from a strawberry picker. And the ability to handle the volume and keep up with the pace — it's a professional job."

People without experience could theoretically transition to agricultural work, he said. "Farmers will hire anybody that they could right now, I would bet you." But they wouldn't be very efficient, and could slow down farm operations, he added.

And it's unlikely that unemployed Americans will actually seek agricultural jobs, or relocate to take that type of work. Carr said that in general, he's found it very difficult to recruit American workers. "There was no domestic workforce for me," he said.

"It's tough work, out bending over, harvesting crops all day," Stenzel said. "It's tough to get Americans to do that."

But the country's complex food supply chains will nonetheless face mounting risks as the virus persists. This will require steps to keep food prices in check and to meet demand. One potential opportunity is repurposing, for consumption at home, food generally sold to restaurants, hotels and other hospitality locations, where slightly more than half of the nation's food expenditures are made. This could reactivate supply chains catering to those businesses. Otherwise, some of this food, especially fruits, vegetables and other perishable products, could go to waste.

Also, China and South Korea, now believed to be past the worst phases of their outbreaks, offer lessons in how to avoid food supply bottlenecks. Food producers in those countries built trust by sharing information across the supply chain. They reallocated labour to ease bottlenecks and build reserves in areas where shortages could result. For instance, delivery and retail companies borrowed furloughed staff from restaurants and foodservice providers. Food production was shifted to areas less affected by the virus. Delivery routes were also redirected through those areas.

And having faced the SARS epidemic in 2003, many food companies in Asia had established plans for business disruption, enabling them to modify packaging, storage and testing to maintain quality and safety despite delays in delivery.

With the spreading virus creating uncertainty, the readiness of the food industry to make rapid changes in how it produces and delivers its products to a nervous population will be crucial. So will the willingness of state and federal authorities to provide flexibility while ensuring food safety and minimising waste. Coordination among all will be vital.

While the good news is that we have sufficient food production to meet our immediate needs, the next few weeks will be critical to keeping Americans supplied with food during a pandemic that has already caused turmoil and could lead to even more upheaval.

One of the many consequences of the coronavirus pandemic is that potato consumption has fallen sharply so that potato growers now expect a surplus of 1 billion kilos of French fries, Dutch agricultural organisation Brancheorganisatie (BO) Akkerbouw has claimed.

This is said to be due to the enormous volumes of food outlets that have been forced to close amid government regulations across the world. The organisation has now named the month of April as 'potato month' with the aim that everyone does their bit to consume potatoes and, occasionally, fries. This aims to reduce the potentially vast amounts of food waste that could result from this surplus of vegetables.

Further, in April, companies in the potato sector will offer free french fries to people in crucial professions who are ensuring the Netherlands continues to function during this time of crisis.

Over the weekend, the Department for Environment, Food and Rural Affairs announced that food redistribution organisations across England would benefit from £3.25 million of government funding to help them cut food waste and redistribute up to 14,000 tonnes of surplus stock during the coronavirus outbreak.

From overcoming operational barriers in obtaining, storing and transporting food safely from restaurants as they close in response to coronavirus, to supporting drops in volunteer numbers, grants will be available to redistributors working hard to ensure valuable food supplies do not go to waste.

Environment Minister, Rebecca Pow, said: "I am proud of the many organisations across the UK working to ensure food and supplies are provided to those who need it most during this challenging time.

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"This funding will support people in need while ensuring that we minimise the amount of food which goes to waste – benefiting both society and the environment."Families unable to access food as a result of the coronavirus (COVID-19) outbreak will get support from local authorities with £30 million of new investment from the Scottish Government Food Fund.The funding will support those most in need, including families with children who are eligible for free school meals, older people, those with long-term health conditions and pregnant women.

Councils will have the flexibility to use this additional resource in ways that best meet emerging local needs and circumstances, working with community groups and businesses to support home delivery, provide financial help and meet dietary requirements. 

Allocations include more than £4.7 million for Glasgow, £2.2 million for Fife and £2.1 million for North Lanarkshire. Communities Secretary, Aileen Campbell, said: "This pandemic is impacting on all our lives, but for some, it is more than a disruption, it is severely restricting their ability to access food for themselves and their families."It is vital that we work together to ensure the most vulnerable people in our communities receive the support they need. Local authorities are uniquely placed to respond swiftly in partnership with community groups and organisations to help those struggling. "We know that free school meals are vital for families across the country and an essential way of ensuring their children receive the nutritious food they need. That is why it is so important that support continues while schools remain closed. "This fund will help ensure the most vulnerable people in our society during this outbreak receive support. The guidance shared with local authorities today supports local thinking about how funding can best be targeted and deployed."

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