Coronavirus & the Food Supply Chain

Food Companies See Threats in Wake of Coronavirus

The effects of Coronavirus (COVID-19) are being felt globally. The food and beverage industry is no more immune from the illness than the average person. Employee shortages, financial insecurities, and manufacturing issues have already begun vexing businesses.

Whether it is due to ingredient shortages, supply line interruptions, or full-scale closings of manufacturing centers and warehouses, there's no sidestepping this international emergency. 

Ingredient Shortages

Aside from employment-based production issues, a big threat to the F&B industry is coming from those dependent on ingredients imported from China. Companies like Coca-Cola are closely monitoring the situation, especially in relation to their use of non-nutritive sweeteners. China is the #1 producer of these sweeteners and their factories have been heavily affected by the virus.

While Coca-Cola has activated contingency supply chains, these cannot sustain the market needs long term. Without a resolution there will inevitably be a shortage of the ingredient.

Additionally, the FDA has announced enhanced efforts to monitor food safety to screen, examine, sample, and alert imported goods. This added process is slowing down import speeds, but for a necessary purpose. While there is currently no evidence to support transmission of COVID-19 associated with imported goods, the FDA sees this process as essential to remaining on top of a dynamic situation.

Coronavirus Travel Bans

Many F&B companies have taken the proactive step of implementing travel bans to and from effected areas. While this may seem less direct of a supply chain influence, it can delay things agreements and QA benchmarks, some of which could backlog systems for months.

Companies like Nestle and Cargill have been on the forefront of the non-essential travel ban, citing the importance of protecting their employees and the communities in which they serve. On a much smaller level, these travel bans can also affect the import of more delicate food items that are flown in, like fresh fish and fruit.

Hoarding

Panic purchasing is a real threat to retailers internationally, and therefore to producers as well. In this case, shoppers aren't simply stocking up on masks and personal protective gear, but also non-perishable foods. And since many big box retailers (i.e. Target and Walmart) operate on a just-in-time inventory model (shipment expectations are forecast in advance), a surge in product purchasing can lead to empty shelves nation-wide.

The stress this puts on producers will be palpable, especially when compounded with ingredient shortages, additional FDA screenings, and travel bans. Fortunately, the retail consumer response thus far has been tame, especially when compared to the 2003 SARS outbreak. That being said, Ed Kelly, an analyst at Wells Fargo Securities, warns that stores could be seeing empty shelves as early as April 2020.

What's Next?

At this point, there's not much else the F&B industry can do aside from monitoring the situation closely. Close adherence to FDA and WHO recommendations will ensure we minimize the impact of the Coronavirus outbreak on food systems but cannot avoid it. In the meantime, as individuals, it's important to understand and follow the WHO's Basic Protective Measures Against Coronavirus:

1. Wash your hands frequently
2. Maintain social distancing
3. Avoid touch eyes, nose, and mouth
4. Practice respiratory hygiene
5. Seek medical care immediately
6. Stay informed

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