Coronavirus: Fears are growing over the impact on food and drink supply chains
As latest figures this week revealed that over 100 people in the UK have so far been diagnosed as having the virus, Prime Minister Boris Johnson said that one in five people could be off sick from work with the virus at any one time.
A spokesman for Make UK, the trade association for manufacturing, has said the impact of the virus on the sector is likely to get worse before it gets better.
“Companies are already seeing a wide range of impacts, from a shortage of goods to travel restrictions and increased shipping and freight costs which have put severe pressure on transport capacity,” the spokesman said.
“The situation is likely to get a lot worse before it gets better, with disruptions to supply chains in particular likely to choke production for companies at some point. Given the economic prospects for this year were already cloudy due to Brexit, the impact on the wider economy is now likely to be significant.
British supermarkets are reported to be making contingency plans in an effort to counter panic-buying.
Managing disruption to the supply chain
Andrew Opie, director of food & sustainability at the British Retail Consortium, said:“Retailers are continuing to monitor their supply chains closely and are taking all necessary precautions to ensure consumers have continuous access to products they want. They are adept at managing disruption and moving sourcing from one country to another to mitigate any impact.”
Will Broome, CEO of retail tech company Ubamarket, said: "It's very encouraging to hear that Britain's supermarkets are already planning to ensure they can provide the best service possible in the midst of the coronavirus outbreak. However, the potential of mass-stockpiling, dramatically increased demand for products and irregular footfall in stores poses a particularly complex problem.”
Steve Purvis, operations director at Bis Henderson Space, the warehouse space supplier, said that there was a “new and very real risk” to supply chains from the growing threat of the COVID-19 coronavirus.
“With the virus having become an epidemic during, and perhaps partly because of, the Chinese New Year break, it is too early to quantify likely impacts on production, but ‘not good’ seems a reasonable assessment,” he said.
He said with the impact would mean that businesses will be looking for alternative suppliers for some goods and will also be looking at stockpiling.
“The course of these events is impossible to predict. But for many businesses there is a real likelihood that stocks will build up at some point in their supply chains, and it is only sensible to start scoping out contingency arrangements,” he added.
Limited amount of cold storage
Shane Brennan, chief executive of the Cold Chain Federation, has indicated that there is a limited amount of cold storage available for goods to be exported to markets such as China. He said that there are reports that “storage is currently at capacity and export flows to China have slowed to a near standstill. This has created a bottleneck in storage availability.”
Meanwhile, import demand has already slowed, particularly in the restaurant and hotel trade, the Scottish Salmon Producers Organisation (SSPO) has told Food Manufacture.
“The small number of our member companies affected are looking for other markets for fish that would have been destined for China, particularly in the US and around Europe,” a spokesman said.
Scottish salmon exports account for more than 8% of all UK food and drink exports to China, and the market is the third largest after France and the US, according to the SSPO.
The news came as Diageo warned its operating profits could be up to £200m lower than expected due to the disruption across Asia. China imports £75m-worth of Scotch whisky and £55m in seafood each year, according to a spokesman for the Scottish Government.
“Clearly, the coronavirus outbreak ... will be a concern for the Scottish industry,”he added. “We are aware that demand in China has slowed and Scottish businesses are actively looking at opportunities in alternative markets.”
Assessing the impact
The Scotch Whisky Association said the situation was “rapidly changing”,but claimed it was too early to assess the impact.
“Despite some inevitable disruption to exports, we remain confident in the long-term growth opportunities for Scotch whisky globally,” a spokeswoman said.
Meanwhile, Shore Capital's head of research Clive Black said that any talk of food riots and panic buying as a result of the COVID 19 was irresponsible and pointed out that the virus that does not present a serious medical threat to the majority of the population.
"That said, attempts to contain should be undertaken and so common sense needs to be applied by all industries; so food companies, which tend to have high levels of bio-security in situ, should be reiterating the imperative of hand washing, perhaps augmented by COVID 19 messaging, whilst being alive to where their people are travelling from and to; some caution may be sensible in the near-term around travel policies," he added.
“If folks feel genuinely unwell around the COVID 19 symptoms then self-isolation should be encouraged as opposed to colleagues being a hero; that said for malingerers COVID 19 represents a field day.”
Food stockpiling
He acknowledged that people will start buying more tinned and frozen food lines, boosting sales in the short-term, but such purchases may not be a net gain though as stocking up would be followed by destocking.
“Greedy and selfish folks may also buy up fresh produce and freeze it in their big cabinets, albeit doing so is unnecessary and uncaring of less well positioned people. Again, such actions are just the bringing forward of demand,” Black continued.
“For perishable food retail supply chains there is clearly more fragility to broader societal disruption than longer life players on the supply side. From a demand perspective, hoarders aside, there is less scope for demand led disruption due to limited home storage and few should see merit in buying product only to throw it away…”
