It is amazing to see what food and beverage companies have accomplished during the peak of the COVID-19 crisis to support essential business. The crisis is not yet completely behind us, but it is already time to look into the so-called “New Normal.” Before diving into the new normal, let’s look at what has changed due to the COVID-19 pandemic in and around the F&B sector.
Many food and beverage companies have become inundated with orders as most are related to essential segments of the economy — such essential food items like shelf-stable food and basic meat proteins, as well as frozen foods. In fact, the entire consumer packaged goods (CPG) market has been affected. Toilet paper, disinfectant sprays, and essential home appliances like freezers and bread makers have been gobbled up by panicked buyers. Many consumers have stocked up on basic food, beverage, and personal products for fear of long-term shut-ins, lockdowns, and supply chain collapse. This situation has been confirmed in enough regions worldwide to make it a global trend.
Some have reduced capacity and are, for the moment, operating less efficiently. This is due to five driving factors:
1. Many F&B companies supply products to the foodservice sector, which has all been shut down during the crisis. Sales to these businesses have evaporated and those F&B companies that solely rely on those businesses have shut down.
2. The extra time spent cleaning because of new wipe-down procedures.
3. Social distance mandates, resulting in manufacturers being forced to operate with smaller crews.
4. Disruptions in the supply chain that may impact production costs and transportation.
5. Fear in the workforce of contracting the illness has had many workers in high-risk demographics choose to take unemployment, compromising manufacturers’ productivity.
New work-from-home norms and reduced site visits for operational and quality management personnel, as well as USDA and FDA inspectors, could potentially put food safety and integrity at risk.
Workflow disruptions for admin, approvals and tracking procedures, and customer services processes have been linked to work-at-home policies for non-essential plant operators and management. IT infrastructure has been significantly stressed to ensure all day-to-day operations can continue remotely.
Working capital is being strained as a result of increased order volume. While the foodservice sector has been decimated, many retail products including essential and quick-cook-and-serve shelf-stable and frozen meal components and products have reported a substantial increase in orders. Flour, yeast, soups, canned meals, and frozen meals for some producers have increased 100%. This in turn has put a stress on suppliers of necessary food ingredients and packaging, as well as a strain on transportation and distribution services.
Online purchases of food and beverage products will increase. With stay-at-home orders, closures of some retail businesses and critical food items being depleted from store shelves due to panic buying, many consumers have turned to on-line purchases of food. On-line food purchases have increased 25% over the last three years but, during the crisis period, it is estimated that more than half of the consumable foods will be purchased on-line.
Manufacturers that have always relied on the traditional distribution center supply chain networks (produce/ship to warehouse/ship to customer) are now developing their own manufacturer-to-consumer networks to make it easier for people to purchase their products without going out. This trend will likely continue post-pandemic.
As the crisis continues, changes and impacts to the industry occur daily, so this list will continue to evolve and grow as we move forward.
Advice for the future.
What’s the new normal in terms of activity compared to pre-COVID? Companies, experts and industry analysts are still trying to assess what that will be. But it is reasonable to assume the result will be somewhere in between what we had pre-COVID and what we are seeing as this continues to unfold during the COVID-19 crisis.
Moving forward, food and beverage companies are likely to see volumes reduce slightly on those products that were primarily purchased during “panic buying.” However, as we have seen throughout history, consumers are quick to change habits, so some of the new eating trends during the crisis might stay with us. The new “normal” will mean social distancing regulations will be relaxed, but not eliminated. Therefore, inefficiencies will continue. People will still eat and drink more at home, which in turn, will sustain the increased level of demand and volume for many of the products consumers purchased for the crisis.
Other key trends of the “new normal” are:
1. Many practices implementing during the COVID-19 pandemic that have been disruptive will be part of day-to-day operations. So, things such as cleaning/wipe-downs, social distancing, remote working, tight working capital, additional costs, higher prices from vendors, and inefficient processes, to name a few, will continue.
2. Demand for many products will most likely be higher for a longer while. But no one knows how long this “long while” really will be. Getting used to it will also mean looking at better ways to achieve efficiencies even during stressful moments.
3. Demand for lower prices coming from consumers has started and will continue until unemployment levels drop.
4. Stock-keeping unit (SKU) proliferations have occurred, as many manufacturers reduced production to more popular items and might alter their portfolios. However, promotions and quick introductions of special products to accommodate consumers might continue to incentivize manufacturers to develop innovative products.
5. Food and beverage manufacturers are learning that there will need to be some smart decisions made on technology to better manage all processes and areas of the business that were made vulnerable through the crisis. These will include all necessary business systems such as ERP, Supply Chain, and Supplier Communication and Quality. But not just those systems. Companies should perform an in-depth analysis of cloud computing, if it’s not already underway.
Technology investments will need to contemplate full data exchange between key departments and functions, and eliminate manual spreadsheets and workarounds. Cloud-based solutions will also be necessary to reduce infrastructure hardware investments. This will free capital for investment on productive assets, ensure business continuity, mitigate risks, and reduce costs related to the information technology (IT) network.
6. Experts, especially those in the healthcare field, do not see this virus as a one-time occurrence. Many say this will occur in waves, so we might see re-occurrences of this pandemic. With this in mind, food and beverage manufacturers will need to have a clear risk management/mitigation strategy in place, as well as focus on the issues that have been addressed.