April 29, 2020
Impact of Covid-19 coronavirus on the fresh produce industry
The current COVID-19 coronavirus pandemic is forcing fresh produce companies around the world to adapt as countries are taking different precautions to protect their citizens. Simultaneously, on a consumer level there is a large shift in buying patterns and social behaviour while the situation around the virus is still evolving.
Here we examine some of the current effects and predictions for potential future impact of the Covid-19 virus on the Fresh Produce industry.
Countries on lockdown
With multiple countries around the world on lockdown, and the already limited air freight and haulage traffic being slowed down by border controls, many logistical issues arise. Products that were previously imported from countries that are now on lockdown can experience delays and put more pressure on the supply chain. Similarly, companies that rely heavily on exporting their products can also face difficulties as traffic held at borders for prolonged periods of time can have a negative impact on the quality of the goods that are being transported.
As a response to this, the European Union presented practical guidelines on ‘green lanes’ to ensure the continuous flow of goods across the EU. To protect the supply chain within the EU under the current circumstances, the designated green lane border crossings should take no more than 15 minutes to cross. This requires procedures, checks and screening to be optimized and streamlined to what is strictly necessary.
Shortage in (seasonal) labour force
The fresh produce sector requires a large workforce around the harvest season. However, with an increasing amount of people getting sick and required to stay at home, a shortage of people starts to develop. Furthermore, many of the seasonal workers are returning to their home country in fear of closing borders and the health of their families, or are not able to travel for seasonal work due to imposed restrictions after a country’s lockdown.
For various fresh products, the current coronavirus pandemic comes at a very bad time as the harvest season is just around the corner. This process requires a large amount of people and without this, companies may not be able to harvest in time before crops start to go bad. Countries like Germany, Italy and Spain require anywhere from 200,000 to 370,000 regular seasonal workers from abroad every year. As the gravity of the coronavirus is growing, concerns regarding the lack of seasonal workers have been increasing over the past weeks. A recent letter to the EU Agriculture commissioner also addressed that free movement of labor is a critical issue for agriculture given the high dependence on seasonal labor.
In the UK, Farmers are calling for a ‘land army’ to sustain UK food production during this crisis, where a shortage of 80,000 workers is expected. There has been a good response to this call so far with over 10,000 Brits applying for the vacant picking jobs. But there is still a long way to go to fill the void.
Consumer behavior is unpredictable
As the coronavirus pandemic caused a lot of stress and uncertainty among consumers, many started to hoard various products as a precaution. Driving up demand for certain goods to absolute new records. Consumers now want to eat healthy and show a clear buying trend towards fresh, natural healthy foods. One example is the rapid growth in demand for citrus due to its Vitamin C levels. Spain, as one of the main supplying countries, is moving all its produced citrus directly into the market instead of moving some into stock due to the high demand and consequent rising prices. On the other side, traders are afraid that due to the negative economic consequences of the corona crisis demand for more luxurious products like mango, avocado, and berries will drop. As the situation around the coronavirus continues to evolve and countries and consumers adapt to the latest news, companies try their best to speculate on where consumer demand will go to next.
Demand from the hospitality & restaurant industry sinks
As countries have imposed restrictions around restaurants, social events as well as traveling, the demand that’s normally generated by the hospitality and restaurant industry has had an immediate drop. Businesses that heavily rely on these industries for their revenue are now trying to shift towards alternative business models such as direct home delivery of meals to the consumer market. As the situation evolves, companies may come up with more alternatives to bring their products to market and generate revenue.
Help for smaller suppliers
In the UK, major supermarket retailers, such as Sainsbury’s and Morrisons, have introduced temporary supplier payment terms to support its suppliers and partners with their cash flow as they try to navigate the coronavirus pandemic.
The temporary terms are designed to help the retailer supplier businesses increase their production volumes quickly to meet the bourgeoning customer demand. Sainsbury’s has committed to paying small suppliers immediately, which will benefit around 1,500 small businesses who have under £100,000 of business with the supermarket. The retailer is also extending its support to its “shop-in-shop” tenants and concession partners by offering the opportunity to pay rent on a monthly basis as opposed to quarterly in advance. This move is expected to benefit around 250 tenants and concession partners.
Similarly, major grocery retailer Morrisons announced earlier this month that it has switched to immediate payments for its smaller suppliers to help them during the ongoing coronavirus pandemic. The retailer has temporarily reclassified its “small” suppliers from those with £100,000 of business-a-year with the company to those with £1 million of business. This will mean an extra 1,000 small food businesses will qualify for the new payment terms.