COVID-19 pandemic continues to hit food and beverage sector

COVID-19 is officially a global pandemic, the World Health Organization (WHO) announced on March 11, the first such declaration since the H1N1 “swine flu” a decade ago. Now confirmed in 114 countries and responsible for 4,000-plus deaths and rising, COVID-19 has, in the last few days alone, forced cancellations of major professional and amateur sports leagues and caused President Donald Trump to enact a 30-day ban on travel from most of Europe to the U.S. (specifically, beginning midnight March 14, foreign nationals who have visited any of 26 specific countries in Europe would be barred from entering the U.S. for 30 days, though Ireland and the U.K. were exempt). And, of course, the global food and beverage industry continues to be hit hard by the pandemic and its fallout.

Though President Trump originally stated, “These prohibitions will not only apply to the tremendous amount of trade and cargo, but various other things as we get approval,” he later posted on Twitter that it was "very important for all countries & businesses to know that trade will in no way be affected by the 30-day restriction on travel from Europe. The restriction stops people not goods.”

Even if the president’s latest executive order will spare trade, COVID-19’s impact on the global economy – and the global food trade in particular – is already being felt. On March 9, the National Retail Federation (NRF) released a report showing “the coronavirus outbreak is expected to have a longer and larger impact on imports at major U.S. retail container ports than previously believed as factory shutdowns and travel restrictions in China continue to affect production.”

“There are still a lot of unknowns to fully determine the impact of the coronavirus on the supply chain,” Jonathan Gold, NRF vice president for supply chain and customs policy said.

What is known is monthly retail imports, measured in “twenty-foot equivalent units,” or TEUs, have already taken a massive hit in 2020. Imports dropped from 1.82 million TEUs in January to an estimated 1.42 million in February, a drop of 12.6% from 2019 and “significantly lower” than the original pre-outbreak forecast of 1.54 million. The report also showed March is expected to see a drop of nearly 20% from last year and will likely see fewer imports than February did. Overall, 2020 is now forecasted to see fewer total imports than in 2019, which would represent the first year-over-year drop since 2009-10.

The actual and potential impacts of COVID-19 go all the way down the supply chain, from importers and exporters down to farmers. For example, Elizabeth Strater, director of alternative organizing with United Farm Workers, explained to Food & Wine how easily farmers could be affected, and the quick repercussions if they are.

“If the … schools closed,” seasonal farmworkers who typically travel to and from Mexico would have to stay home with their children, she said. “There would be nobody to pack for distribution. Apples would start being scarce in stores within three days.”

Strater also noted that most of the necessary hardware to plant new orchards will be affected. “Did you know that orchard trellising hardware is only manufactured in Wuhan [where the outbreak began]? Nobody will be planting orchard acreage this year,” Strater told Food & Wine.

In China, epicenter of the outbreak, food prices continue to soar, with the Daily News reporting a 21.4% increase in prices compared to this time last year. With food shipments into China delayed, shortages of both foodstuffs and livestock have contributed to the price increases.

India is also being hit hard. A March 12 report from India’s Economic Times noted a 12% to 15% decline in meat exports and a falling global demand for rice as among the key issues brought forth by COVID-19.  “Meat is the worst-affected sector in food, where there is a 12-15% decline in exports. Non-basmati rice orders have declined and overall container movement is restricted,” an Indian government official said. The natural products industry stands to be affected as well, with the Indian government restricting exports of more than two dozen pharmaceutical ingredients, including vitamins B1, B6 and B12.

As the U.S. government continues to scramble over policies and procedures, USDA Secretary Sonny Perdue went on the record recently with recommendations for Congress. One such recommendation: Congress should consider rebooting the Pandemic Supplemental Nutrition Assistance Program (P-SNAP) as part of the stimulus package that lawmakers are currently negotiating, according to Politico. P-SNAP, according to a USDA spokesperson, “gives households with children who are eligible for free and reduced-price school lunch additional funds on an Electronic Benefit Transfer card when schools are closed,” among other things. The program was last authorized—though never actually carried out—in 2009 during the H1N1 pandemic.

“We’re in a place where it’s likely we will need more resources, not fewer, to address the situation that faces both our farmers and those who need to eat,” said House Ag Committee chairman Rep. Collin Peterson (D-Minn).

The effects go further than imports and could begin to affect areas such as food safety as well. On March 10, FDA announced it would suspend most foreign inspections of food, drugs and medical devices through April.

“We are aware of how this action may impact other FDA responsibilities, including product application reviews,” FDA Commissioner Stephen Hahn said. “We will be vigilant and monitor the situation very closely and will try to mitigate potential impacts from this outbreak in lockstep with the whole of the federal government.”

With so much uncertainty surrounding importers and exporters, not to mention governing bodies, CPG brands in the food and beverage space are struggling.

“I tell brands this all the time: Eventually you're going to face a disaster and the question is not if, it’s when,” Deb Gabor, CEO of Sol Marketing, told Food & Beverage Insider during a recent interview. “I would say that if you’re responsible for a brand right now and you do not have a crisis … playbook in place for any kind of crisis…you should have this crisis plan in place.”

Gabor also noted these plans should be in place throughout the supply chain.

“I’d also say that anybody who's involved in a supply chain-based manufacturing or distribution business … you 100% must have something like this in place. How are you going to respond? What is the protocol for communicating? Who do you communicate with first? Who does that communicating? Where does the message come from? Who is the primary spokesperson?”

In these difficult and confusing times, with the situation changing constantly, preparedness is the key. With so many questions and far too few answers, Gabor gave advice that should apply to all those responsible for companies or brands dealing with the pandemic.

“Even if you don't have answers, you’re taking full accountability and responsibility and telling the world what you’re going to do and when you’re going to update them. Do those things, and then provide the updates.”