This column first appeared on Jim Prevor's perishablepundit.com
We’ve been working with John Giles for many years. He has produced many pieces, including these:
We thought we would reach out and ask what he saw in the COVID-19 situation in terms of the future for the UK produce industry. He was kind enough to lay out his thoughts:
Divisional Director of Agri Food
Nantwich, Cheshire, UK
COVID-19 has had a devastating impact in the UK with the current death toll reaching some 21,000 and the likelihood that we will remain in lock down for anywhere between the next 4 – 8 weeks.
The last few weeks have shown us both how fragile our fresh food supply chains are; but they have also shown us how resilient they can be too. While initial modest panic buying in the UK led to supermarket shelves being cleared of some products, most shops have ensured supplies are getting through. With some exceptions, consumers can get what they want — even if some products are being limited.
For agricultural or food business heavily reliant on supplying the foodservice sector — where demand all but disappeared overnight — things will very tough now. It reiterates the need for fruit and vegetable companies to have balance in terms of customers and not to put your eggs all in one basket.
At the same time, it could be that COVID-19 will see online shopping systems come in to their own, as consumers look at different ways of buying food and drink. The online channels have been in strong growth for the past two or three years, and COVID-19 is likely to accelerate this market further provided they can get to grips with delivery issues experienced during the early weeks of the pandemic.
A GLOBAL ISSUE
It is clear, however, that there’s not a food or farming business in the land, and potentially in the world, that won’t be impacted by COVID-19. In the UK, every business will have someone affected by the virus, and given there is already a shortage of labour, companies will undoubtedly find it difficult to find get the right staff in the right place at times.
Imports of fruit or other agri food products from the likes of Holland, Italy or Spain, might also become more difficult. In Spain, clients have told us of labour shortages in processing plants, as well as concerns that if trucks leave the country, drivers might not be allowed back in. Fruit suppliers from the Southern Hemisphere were amongst the first to suffer when fruit couldn’t be landed or distributed into China and other Southeast Asian markets, even when fruit was already en route.
The coming weeks, undoubtedly, are going to test the resilience of every business in the fresh food supply chain. Farmers, processors and food businesses can carry on for a short period, but if this goes on for many months there could be those who just can’t deal with the pressure.
For fresh food companies that have already had to deal with the global financial crisis of 2008, the fundamental change in the structure of the retail market — with discount retailers such as Aldi and Lidl taking market share from the big four supermarkets and the uncertainty of Brexit — this is another supply chain shock they must deal with. In the foodservice sector, the overall pressure in the High Street has seen the sector tighten and, as a result, we have already seen a number of high-profile casualties.
AND WHAT NOW FOR THE ‘B-‘ WORD ?
COVID-19 has all but sidelined the issue of Brexit from the media, but behind the scenes, this is now where one can assume, the serious hard work begins. Despite leaving the EU at the end of January, our final departure from the EU is still far away in terms of how it will work on the ground. Everyone wants an end to the Brexit process —business, politicians and the voters. The stakes are still high, though,and Boris Johnson must find a way of resolving them when the issues are still complex and full of political, economic and social challenges. But in the next few months, we all probably want an end to COVID-19 even more.
Long term, UK consumer confidence could also be an issue. The government has promised to pump in billions of pounds to help support businesses through this difficult time, but some of the further economic impacts are likely to be hard. There is a danger that, just when it looked as if a sustained period of economic austerity was coming to an end, we might find ourselves in the middle of another two or three-year period of recession.
Hard-pressed consumers might either stop buying high-value products, cut back on purchases, or trade down to more value-oriented options. The foodservice sector could also continue to struggle if consumes are cautious about going out and what they spend their money on.
FINDING WAYS TO DEAL WITH SHOCK
I think it’s fair to say that for most of the UK supply chain, the whole of 2020 will be challenging and uncertain. Produce companies around the world are going to have to find a new level of resilience in how they run their operations. This is something that needs constantly looking at, but will be bought in to a sharper focus by COVID-19.
While many UK companies used Brexit as an opportunity to review all aspects of procurement, buying and selling, staffing, management, relationships with suppliers and technology, businesses would be wise to perform similar reviews now too.
COVID-19 certainly won’t last forever. However, the impacts of what we are going through — and what lies ahead for consumers and UK fresh produce businesses alike — may well last for some time to come, and we all need to be prepared.
In some ways, the likely impact of an extended pandemic would have served to separate the UK from Europe in any situation. Laborers who might carry the pandemic are being blocked all around Europe, Italy is furious at Germany because it held back shipping important medical supplies to keep them for its own population, and, of course, travel and tourism is at a standstill across the world.
More broadly, the pandemic has made people around the world less willing to rely on international sources of products. The UK government is seeking refunds after buying millions of coronavirus test kits from China, and US senators are urging a new approach when the US had to beg for masks, testing kits and other medical resources from China. Indeed, one of the questions is whether this COVID-19 situation will really change attitudes or if these problems will be forgotten as the virus fades.
There are no easy answers, of course, but in a tighter economic environment, it is likely that many trends are predictable. Surely we can expect hard discounters, such as Aldi and Lidl, to grow as money gets tight. Surely people will travel less, both for reasons of economy and reasons of fear. Overall trade is likely to be restrained as people and governments look to deal with environments they can control.
A lot, of course, depends on the unpredictable: Will there be a vaccine? When? What will happen to the restaurant and sports industries? Can people be safe and do these things? But, at very least, the situation has reminded us of our vulnerability.
The job of the produce industry will thus be to serve a consumer who thinks differently. That is a challenge… and an opportunity.
Many thanks to John Giles for sharing his thoughts.