How The Pandemic Impacted The Food & Beverage Industry
It’s been exactly months since the Covid-19 lockdown.
So far, we have seen many reports regarding businesses, employment and government regulations taken place. However, we tend to overlook another department that has taken a hit from Covid-19: the food and beverage industry. During the past few months, the consumer product food & beverage industry faced the issue of reduced consumption and supply chain disruptions.
To best explain the situation, here’s one question I would like to ask:
Ever since the lockdown, have you struggled to find your favorite snack, food item, or beverage at every grocery store down the block?
If your answer is yes then you witnessed the situation first-hand.
High Food Demand
When you hear about the food and beverage industry, it involves processing raw food materials, packaging goods, and distributing food to stores and restaurants.
During the lockdown, the demand for food items becomes higher than ever before. Retailers across the country are selling out food items left and right, leaving the grocery store shelves depleted. This leaves big companies such as General Mills and Campbell Soups to have more than 60 percent increase in food sales over a four week period. On the other hand, it becomes an issue for retailers to constantly restock their shelves and set purchasing limits. These limits force customers to purchase low quantities of food items or increase the price of the product. For instance, the price of avocado has risen because products that are viewed as healthy have high demand due to consumers desire to improve their immune system. Another issue of food demand is food product waste. When consumers and restaurants purchase large quantities of food, they overlook the expiration dates. Food such as fruits, vegetables and bread expire quickly compared to packaged goods. This leaves an endless cycle of consumers going out of their way to purchase and waste more food.
Despite this situation, people are now spending less and focus their finances on purchasing necessities as consumers are working less. Once the pandemic is over, consumers will most likely go back to explore and impulse buying. As for now, keep in mind that not all food products have high demand so the next time you go to the grocery store, be a mindful buyer.
Supply Chain Disruption
For those who may not fully understand the importance of supply chain, it’s a network between companies and suppliers to produce and distribute a specific product to the final buyer. Basically, think about it like a chain or a spider web. In this situation, the supply chain starts with the suppliers sending their raw materials to the manufacturer to create the product and distribute it to the retailers or restaurants. When a disruption happens, there’s a sudden change that negatively affects the process of these interconnected chains. In fact, it makes our supply chain more complex than it already is.
Due to the pandemic, many challenges arise for farmers, food-service distributors, consumer and packaged goods companies, and grocery retailers:
Farmers require a significant amount of labor to manage their agricultural production. However, the pandemic caused workers to distance themselves and reduced the availability of farmers to work. As a result, it caused a shortage in agricultural production and put the harvest at risk.
Distribution is affected by inbound and outbound orders. Inbounds orders are at halt due to shortages from farmers, food service producers and processors. Outbound orders such as restaurants suffered from the lockdown at the beginning of quarantine but it is slowly recovering due to take out services.
Consumer and packaged goods companies bear several issues such as manufacturing and distribution problems. Manufacturers can not normally work since factories are short in workers due to social distancing. Even if there’s high demand for products, companies are limited in supply and capabilities to produce the supply. As for distribution, the challenge is the demand for delivery trucks and limited third-party working facilities which increases the competition and price for the services.
In addition to the high food demands problem at grocery stores, retailers have issues involving the expenses of expanded operation hours, online ordering, delivery systems adoption and customer service.
At the moment, it’s hard to say what the future holds for the food and beverage industry. According to a Deilotte article, once the situation begins to normalize out-of-home consumptions, it will be hard for the industry to cover the lost sales during the time in lockdown. Although the pandemic reveals the country’s food system is flawed, it will inevitably help strengthen the industry in the long run. In the meantime, take the initiative and be aware of the situation at hands because everything that is currently happening is a learning experience.