The food & beverage industry comprises companies working in processing raw food materials, packaging, and distribution which include prepared foods and packaged foods, along with alcoholic and non-alcoholic beverages.
The Covid-19 is a global pandemic of an unprecedented scale and resulted in an extremely challenging time for humankind across the globe. The ongoing health crisis around Covid-19 has affected all walks of life. The outbreak of Corona virus has had significant impact not only on public health worldwide, but also on all stages of the supply chain and value chain of various industries. The F&B is one such industry that is currently experiencing impacts due to the outbreak.
The primary factors for the growth of the F&B industry before Covid-19 pandemic include the rise in the number of on-the-go consumers and increased adoption of ready-to-eat food. However, the key factors that affect the F&B industry after the pandemic include the impact on each stage of its value chain including workforce at industrial level, raw material supply, trade & logistics, and uncertain consumer demand at foodservice outlets. Production, distribution, and inventory levels across the food & beverage industry are also expected to be impacted.
Worldwide Impact
The Covid-19 has impacted the F&B industry in almost all regions including North America, Europe, Asia-Pacific, and the Rest of the World.
Asia-Pacific and Europe are the largely impacted regions across the globe. This is attributed to most of the cases recorded in the regions especially in the countries including Italy, Spain, Germany and France in Europe, and China, Japan and South Korea in Asia-Pacific.
While every industry in the entire world has been impacted by Covid-19 in some way, industries, like some sectors of healthcare are booming. But they are booming so much that they are struggling to keep up with the unprecedented demand. Ayurveda and medicinal herbs, spices, roots, ashwagandha, turmeric, elderberry syrup, Indian gooseberry, ginger and zinc which are known to help in overall immunity-boosting are flying off shelves
Impact on Agriculture and Livestock Industries
Agricultural produce, which forms the key raw material for subsequent stages in the food value chain, can become a potential source of slowing down the processes of F&B industry. This is true especially for countries such as Australia, which imports large-scale essential agrochemicals and crop protection products from China. China is home to a significant number of large-scale manufacturers, accounting for approximately 30–35% of global agrochemical production. . Factors such as poor logistics due to traffic control and restrictions on public movement in the affected state of China can lead to supply disruptions.
In India, in spite of all these measures and in view of continuing restrictions on movements of people and vehicular traffic, concerns have been raised regarding negative implications of Covid-19 pandemic on the farm economy. This is the peak of rabi season in India and crops like wheat, gram, lentil and mustard (including paddy in irrigated tracts) are at harvestable stage or almost reaching maturity. This is also the time when the farm harvests reach the mandis (market yards) for assured procurement operations by designated government agencies.
Moreover, any severe disruption to the supply of perishable fruits and vegetables, dairy products, fish and so on having mobilised to meet the increasing demand from a bulging middle class as well as urban and rural consumers, may create irreparable damage to all actors in the supply chain.
Impact on Manufacturing, Retail and other Service Provider Industries
While the F&B manufacturers & processors are more likely to be affected by the shortage of labour and raw material required in the production process, food retail and foodservice outlets are expected to experience more intense challenges. For food retail outlets, the challenge would be to deal with the possibility of the irregular footfall of consumers and, contrastingly, to also assess the possibility of stockpiling food & beverage products to ensure continuity in consumer access to products they intend to purchase.
Restaurants and other food providers are also reeling from substantial changes resulting from social distancing. Restaurants are rapidly losing their business and it is predicted that over ? of all restaurants will not succeed in the long term post-Covid-19. Those that remain open now are making a mere 20% of their typical sales via takeout and delivery. Many restaurants are choosing to close down entirely for health and safety reasons of their employees and also because it’s hard to compete in the takeout and delivery space.
“Food and cinema will be last to revive at shopping centres which will be a challenge as they are the largest foot-traffickers for a mall. About 10-15% of the traffic comes from cinema alone,” said Ashwin Puri, co-founder of Lake Shore India, that has retail mall projects across Mumbai, Gurugram and Ahmedabad.
The Indian hotels' sector sailed smoothly into January 2020, after a record year in 2019, with 2020 set to be “even bigger.” The country first started feeling the ripple effects of the global Covid-19 turmoil towards the end of February 2020, which worsened at the beginning of March. Occupancy across hotels in key cities declined rapidly and as per our estimates has declined by a staggering 45 percentage points compared to the previous year. Such a steep decline in such a short period of time has never been witnessed by the sector.
The report predicts the second quarter of the year to be the worst hit. Hotels will be unable to drive rates and may even seek to attract business at deep discounts.
The overall occupancy in the branded hotels segment in 2020 is estimated to decline by 16.7 – 20.5 percentage points over 2019, while ADRs are estimated to decline by 7% to 8% for the year. As a result, RevPAR will witness a significant decline of 31% to 36.2%.
Current Scenario in India
Indian government has swung into action since the Corona virus attack created an unprecedented situation. India declared a three-week nationwide lockdown till mid-April in the initial phase, which has subsequently been extended till May 3 for achieving satisfactory containment of the virus spread.
Though the exact potential impact of Covid-19 on the Indian economy is not confirmed yet, several sectors are already getting affected. The F&B sector and the retail sector is definitely among the affected ones.
Making the food grains, fruits and vegetables and other essential items available to consumers, both in rural and urban areas, is the most critical challenge for government machinery during the lockdown period.
For food retail, state governments have allowed free movement of essential items across the states. But due to rumours, poultry sector is heavily impacted. The outbreak of Covid-19 had a dual impact on offline and online food segments. That includes the offline food chains that are restaurants and cafes that are entirely shut down in some regions, whereas, online food deliveries are available. In addition, packaged food and beverage industries are witnessing an increase in the demand, such as shelf-stable foods and beverages including milk products, as consumers rush to stock the pantries.
Food export based companies will be highly impacted due to low consumer demand and port hurdles as major exporting countries and regions like the US, Europe and China will be tackling with Covid-19 for next few months. Prices of many export commodities like seafood, mango, grapes will fall and it can further affect future crop availability.
Apart from the larger F&B firms, India is also home to a large number of startups in this sector and the lockdown is expected to have a major effect on their functioning and even their survival in the industry.
Maya Mirchandani, senior fellow at ORF, in conversation with Anurag Katriar, president, National Restaurant Association of India; Ashish Dev Kapur, founder and director, Moods Hospitality Pvt. Ltd; and Ritu Dalmia, restaurateur and Indian celebrity chef; discusses the immediate impact of the public health crisis on the F&B industry, its trickle-down effect adversely affecting wages and incomes of small and medium businesses and their employees, and the need for proactive state action to aid their sustenance and recovery.
The larger impact of Covid-19 is yet to be seen and it may be months or even years before the economy settles down. Food and beverage companies will need to take aggressive and decisive steps in order to mitigate the risk of a catastrophic loss from this crisis. They will need to be creative in their approach such as boosting their online sales along with meeting customers’ needs and expectations. If all these hurdles are overcome by F&B industries after the pandemic then surely a few years down the line, 2020 will be the example of how to deal with global epidemics in the age of technology.
(The authors are founder & CEO, head consultant, and senior consultant, Farm to Fork Solutions)