How and where food is being consumed has changed dramatically in a matter of weeks. How can agri-food businesses best adapt to the coronavirus outbreak crisis?
Despite a rush worldwide by consumers to their local supermarket to stock up on basic food items the FAO Food Price Index fell by 3.4% in March. According to the FAO, this steep decline was “…driven mostly by demand-side contractions linked to the effects of the COVID-19 pandemic and the drop in global oil prices due mostly to expectations of economic slowdown as governments roll out restrictions designed to respond to the health crisis.”
Not with standing March’s Index fall, demand for food can be expected to remain robust for the duration of this crisis. Indeed, for many of us working from home, resisting the urge to constantly visit the refrigerator is a struggle.
However, the food consumed and more importantly where consumers eat their food has changed profoundly in just a few weeks creating unexpected challenges for food manufacturers. Here are five ways to respond:
1. Re-orientate your product portfolio
The crisis has created a particular problem for manufacturers focused on serving food service rather than retail. While suppliers to supermarkets have experienced a surge in demand, foodservice suppliers have seen demand evaporate as their customers have been forced to shutter their outlets.
Untapping this food retail capacity, particularly in sectors such as meats, ready prepared meals and baked goods, will be important to help keep consumers supplied with fresh, safe and quality food for the duration of the crisis. The challenge for manufacturers is to rethink their products, packaging and labelling to meet retail requirements at lightning speed.
2. Streamline your product portfolios
Suppliers of basic food staples have experienced an unprecedented and unexpected surge in demand. Bringing spare capacity into production is not without its challenges. One strategy manufacturers should consider is streamlining their production to reduce the number of SKUs in their portfolio. Concentrating on fewer stock-keeping units (SKUs) can help manufacturers meet demand and serve a greater number of customers.
3. Securing labour
Implementing safety measures to protect workers (both full-time and seasonal) is of the utmost importance, in terms of an effective agribusiness strategy in the current climate. However, many European countries hardest hit by Coronavirus Outbreak face an additional problem – who will harvest fruit and vegetable crops this season?
Approximately 75% of France’s harvest workforce comes from abroad. Meanwhile, Germany and the UK are also estimated to rely upon 300,000 and 80,000 seasonal migrant agricultural workers respectively. This problem is likely to be replicated across all major agricultural production countries.
The scope for harvest mechanisation, attracting a local labour pool and developing solutions to navigate travel restrictions and assure worker safety all need to be considered and quickly to minimise losses as harvest kick off is imminent.
4. Maintaining connection and customer loyalty
It’s more important than ever to reach out to your suppliers and customers to stay in touch and look for opportunities to co-operate. Even if foodservice businesses are currently closed down, most will want to return to growth as soon as the crisis lifts.
How are your suppliers and customers adapting to the challenges? Are they looking at new ways to sell their products and how can your agri-food sector business adapt to meet their current needs?
Communication is important, even just to offer support and maintain relationships and customer loyalty.
5. Where are the other opportunities?
Amid all the uncertainty and disruption, are there agriculture business opportunities emerging where you know you have the skills and capacity to capitalise? Are there additional product offerings that can be supplied to retail? How can product preparation or presentation be improved?
This may be a good opportunity to target new or innovative offerings to both existing and new customers. This is also a good time to review processes and implement planned changes.
While the scope for short-term fixes may be more limited, driving creativity today will also serve to re-position the product offering for the longer-term.
Coronavirus Outbreak has the potential to disrupt or harm your agri-food business, but there are proactive ways to adapt and overcome this challenge. Retail is thriving while catering has receded so re-orient your product portfolio to forge a new path for your product to match that new reality. Streamline stock to serve a greater number of customers, find local employees and mechanise to make up for labour shortage and communicate more effectively to ensure customer loyalty. Above all, this difficulty presents an opportunity. Strategise and implement the creative solutions your business needs to survive.
Farrelly & Mitchell offers depth in all the areas your business needs to help you manage through this challenging period.