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Navigating the New Normal: The Impact of COVID-19 on the Food Supply Chain

15 May 2020

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We’ve all felt the effects of the coronavirus pandemic on our lives and our economy. While no one can say with certainty how long this “new normal” will last, we can all recognize that adjustments are needed to get us through the near term.

The need for adaptation is abundantly clear in our food supply chain. Nearly every aspect of our food system has been affected, causing bottlenecks that lead to food uncertainty and waste. Food companies are needing to navigate new challenges and adapt to shifting demand.

Agricultural Harvesting Workforce

America’s agricultural sector depends heavily on foreign workers to pick crops; last year, nearly 250,000 foreign workers were employed in American agriculture. Travel impediments and delays processing work visas have slowed the inflow of labor in this sector, and the migrant workers who do arrive often reside in close living quarters, putting these populations at higher risk of an outbreak. Labor supply bottlenecks and the health risk to workers could lead to lower agricultural yield, decreasing the availability of some crops.

How to Adapt: Plan ahead by lining up backup suppliers in case of procurement issues. If you encounter ingredient shortages, consider consulting with a food scientist to identify viable substitutions until supply levels recover.

Virus Outbreaks at Food Plants

Food processing plant workers operate in close quarters on cramped assembly lines, putting employees at risk of contracting the virus and increasing the likelihood of plant-wide outbreaks. Meat processing plants in particular rely on tightly staffed assembly lines to keep up their high output, which has led to outbreaks within the plants and subsequent closings. The novel coronavirus has kept thousands of meat processing plant workers away from work, raising concerns about the possibility of supply shortages.

How to Adapt: If your product requires a labor-intensive manufacturing process, stay up to date on the health and safety measures taken by the facility. You’ll want to ensure the plant is taking the necessary precautions to protect employees and avoid a closure.

Alt-dairy and alt-meat companies will want to take into account the ways in which livestock and dairy farmers have been affected. Constraints on meat processing plants’ capacity limit the amount of meat that can be processed and supplied to grocery stores; several large meat suppliers are offering fewer varieties in order to increase the production of standard cuts despite these limits. At the same time, consumer demand for meat that was once distributed between grocery stores and restaurants has shifted to grocery stores alone. Meat suppliers cannot shift as quickly, as it is difficult to adapt larger cuts and quantities intended for food service to grocery store shelves. Alt-meat companies might consider this an opportunity to supplement grocery stores’ unmet demand for meat.

Mismatches Between Supply and Demand

Mismatched supply and demand is not unique to meat. Grocery stores and food banks have experienced a surge in demand, but many US farmers have needed to dispose of unsold goods. Supply chains equipped to service restaurants and grocery stores have struggled to repackage bulk goods into consumer packages suitable for grocery shelves, and grocery stores don’t have relationships with these suppliers. This has led to a shortage of consumer packaged goods and a surplus of bulk food products.

How to Adapt: Start by assessing the changes in your customer makeup. You’ll want to pivot to service customers with the highest need levels for the near term.

Restaurants: Restaurant demand has been suppressed significantly. Recovery is likely to be gradual as safety measures required to reopen, such as tighter maximum capacities and a necessary 6 feet between customers, will prevent these buyers from operating at full capacity until additional protective measures like accurate antibody testing, contact tracing or a vaccine can be broadly implemented.
Schools and Universities: The recovery of school cafeteria demand will depend on timing at the state level. Many universities have announced that online classes will continue through the fall semester. Expect a slow demand recovery here.

Grocery Stores: Grocery stores have experienced increased demand as a result of restaurant closings, but have seen a shift in consumer preferences. Shoppers are ‘panic buying’ shelf stable goods and paper products, as well as buying more in fewer trips. If you’re currently producing in bulk and consumer packages, find out if your manufacturer has the capacity to move some of your product intended for bulk packaging to CPG. If you are unable to repurpose excess bulk product for retail and online sales, don’t let it go to waste! The economic downturn caused by the novel coronavirus is expected to increase the number of food-insecure Americans by nearly 20 million, adding to the 37 million already considered food-insecure. Resources like Feeding America can connect you with food banks in your area, many of which are able to distribute bulk deliveries to people in need. A staggering increase in unemployment has required many Americans to cut back financially, and widespread uncertainty and lack of consumer confidence are likely to decrease unnecessary spending among those fortunate enough to have stable employment. Spending on necessities like food will continue, albeit more consciously. CPG brands might consider pursuing private label opportunities to offer lower-cost items for grocery store shoppers.

E-Commerce: Many people have turned to online grocery shopping to avoid the long lines and potential health risks of going to the store. While launching online D2C sales through your company website will help maintain sales from a loyal customer base, you might miss an opportunity to reach new customers by limiting yourself to this approach. The influx of online grocery shopping has led to shortages of well-known brands on popular online grocery providers like Amazon, creating an opportunity for lesser-known brands. New companies should aim to have their products available on these sites to gain awareness amongst consumers looking for substitute products.

Prevailing through today’s challenges is no easy task for a business, especially for emerging brands who lack the financial cushion of larger corporations. Startup companies have the advantage of being adaptable, though, and alt-protein startups in particular have an opportunity to fill the increasingly evident gaps and inefficiencies in our food system.

This report was contributed by knowledge partner Big Idea Ventures