How Is Coronavirus Impacting the Food Industry? (Updated 5/29/2020)

Originally published on March 5, 2020.

Coronavirus is affecting businesses across industries and across the globe, and the food industry is no exception. In light of the outbreak, food companies are having to make difficult decisions like shutting down operations and instituting travel bans — and the impact doesn’t stop there. 

Here’s how the food industry is responding to coronavirus.

Consumers are stockpiling shelf-stable goods

Consumers in areas where coronavirus has hit are filling their cupboards with shelf-stable foods like canned goods, dried beans and rice, powdered milk, and plant-based milk. According to Nielsen, sales of such products rose dramatically in the week ending March 7 — dried beans sales went up by 63%, rice by 58%, chickpeas/garbanzos by 47%, powdered milk products by 126%, water by 42%, and canned meat by 58%.

Although the panic-buying in recent weeks has caused temporary product shortages, the nation’s overall food supply is in good shape to weather this storm. And some food companies are making changes to their operations in response to increasing demands. For example, Campbell Soup announced on March 4 that it would increase soup production. And, since restaurants across the county are closed, Tyson Foods has shifted operations at its processing plants to fill grocery supply needs instead of restaurants. They’re also “running slaughterhouses at full capacity and on weekends” and expect to balance out supply and demand soon.

Analysts at Bernstein predict coronavirus will boost makers of frozen and shelf-stable packaged foods including Campbell Soup, Conagra Brands, General Mills, Kellogg, Mondelez International, and JM Smucker, in the short term, FoodNavigator-USA reports. Meanwhile, companies that supply the foodservice/QSR channel (e.g., Beyond Meat, Tyson Foods, McCormick) may “face near-term headwinds in the event of a large-scale outbreak in the U.S.” 

Consumers have been avoiding fresh produce, dairy, and meat, but not necessarily because of the shorter shelf life associated with such products — “shoppers are leery of fresh products that have travelled far because of the increased likelihood of multiple human touchpoints before reaching the shelves in the grocery store,” Nielsen says. 

Companies are anticipating supply chain interruptions

Only a small percentage of ingredients are sourced from China, but processors are still bracing for impact. For example, Campbell Soup gets less than 2% of their ingredients from China, and they’re currently working to find alternative sources to prevent supply chain interruptions. 

Coca-Cola has had to navigate delays in its supply of artificial sweeteners sourced from China. This may have an impact on some of the company’s sugar-free and diet beverages.

Imports and exports are being disrupted

The U.S. imports and exports billions of dollars worth of food to and from China every year, and the COVID-19 outbreak is having an impact. In February, Tyson Foods and U.S. agricultural groups said that coronavirus is disrupting meat shipments to China. As China enters its recovery phase, however, workers are returning and starting to relieve port congestion. 

The dairy industry is also experiencing disruption — the strict procedures required for dairy exports could delay supply and reduce prices. 

The FDA issued a statement that they are “not aware of any reports at this time of human illnesses that suggest COVID-19 can be transmitted by food or food packaging.” Still, Matthew Wadiak, the co-founder of Blue Apron, suggests coronavirus will prompt companies to source more of their grains and other commodities domestically.

After closures, plants in China are beginning to reopen 

Back in February, several companies decided to shut down operations in China, including Danone and McCormick. The food industry giants both closed factories in Wuhan — the epicenter of the coronavirus outbreak.

However, food facilities in China are beginning to come back to life. Tyson Foods has reopened some of its Chinese operations, and Hormel Foods announced on March 18 that the company’s manufacturing plants in China were back in business. Hormel’s CEO, Jim Snee, said, “There’s actually a return to normalcy and so our plants are fully staffed. What we’re hearing just out and about is that people are in the communities, our retail business is strong and the food service business is really starting to bounce back.” 

Many companies are changing the way their employees work

Food and beverage companies — like Campbell’s, Cargill, and Nestlé  — are taking cues from public health organizations and taking steps to ensure the safety of their employees. 

Precautions and supportive efforts include: 

• prohibiting international travel
• restricting all non-essential domestic travel
• asking office-based staff to work from home
• putting extra practices and procedures in place to protect plant employees from exposure
• offering extended sick paid leave and other financial supports 

“We are prioritizing our employees’ health and well-being,” Cargill’s March 18 announcement states, “as they are essential in delivering the food we all need to stay healthy and nourished.”

Companies like PepsiCo are taking their employee support a step further during these difficult times. The beverage giant is offering additional compensation to more than 90,000 of its frontline employees, including an incremental $100 or more per week for full-time staff. In the next few months, PepsiCo also plans to onboard 6,000 new full-time frontline employees with full benefits.

Some companies have reduced their financial forecasts

Consumption is dropping in Asia, causing companies to rethink their financial forecasts. Diageo expects a loss of up to $259 million in sales. Coca-Cola “does not expect to achieve its previously provided financial guidance for 2020, as the negative impact of the COVID-19 pandemic has significantly increased.” 

Other companies, including General Mills and Mondelez, say it’s too soon to tell how severe the financial impacts will be. However, General Mills is predicting that food at home will be in high demand as schools and restaurants close down around the country. 

Trade shows are being canceled and postponed

Natural Products Expo West, one of the biggest food shows of the year, was canceled at the 11th hour, causing a “huge blow” to the industry. The organizers will instead be focusing on Natural Products Expo East, which is scheduled for September 23-26, 2020. 

Several other trade shows and industry events have been modified, canceled, or postponed due to coronavirus concerns: 

Manufacturers are struggling with new product launches

Trade show cancellations and changes in consumer buying behaviors are creating complications for food and beverage product development. Many companies were counting on Expo West to boost their marketing efforts and had planned their product launches around trade show opportunities. While virtual trade shows are an option during these uncertain times, it’s hard to match the exposure a physical trade show booth offers.   

Now isn’t the best time to put a new product on grocery store shelves either. Retailers and consumers are stocking up on essentials, and any new products are likely to get lost in the shuffle. This is prompting launch delays as companies focus on ensuring sufficient supply of their current products. 

State and local policies are causing confusion for manufacturers

Many states and local areas are now recommending that non-essential businesses close while essential businesses continue to operate. But differing policies and languages have caused some confusion as to whether or not CPG manufacturers should keep their doors open. 

Via a letter dated March 18, CPG organizations are urging officials to “coordinate a unified, clear and public framework that clearly explains that food (for human and animal consumption), beverage and consumer packaged goods manufacturers are exempted from the gathering and curfew bans that are starting to take effect.”

During an FDA stakeholder call on March 18, the agency specified that “food suppliers are considered a critical infrastructure sector and should not be shut down.”

The FDA suspended routine inspections

The FDA announced early in March that it would postpone foreign facility inspections that are not considered mission-critical. And on March 18, the agency decided to temporarily discontinue domestic facility inspections for the safety of its staff and due to industry concerns about visitors.

Coronavirus resources

For more information, refer to our list of coronavirus resources for the food industry.