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Impact of Covid19 on the Irish Food Industry

This post is a summary of a report by Grant Thornton which assesses the impact of COVID19 on the Irish Food Industry. It looks at the initial responses to the pandemic and looks at the potential learnings to be gained to further increase the resilience of the industry.

Grant Thornton is a professional services company with 7 offices throughout Ireland. They have a dedicated agri-food team. 

The food industry is the largest indigenous industry in Ireland employing 7.1% of the workforce. 

Challenges to the Food Industry created by COVID19 included

  • protecting human health, 
  • adjusting and adapting to the shift in the marketplace from food service to retail. 

To survive the industry has had to look at their operations, incorporating lean practices and sweating their assets, (i.e. getting more out of their existing assets) in addition to looking at innovative ways of doing business, from pivoting their business model to raising finance. 

Research Method

The Grant Thronton agri-food team conducted a survey into the impact of COVID 19 – the respondents included participants from the dairy, meat, seafood, horticulture, beverage, prepared consumer foods, wholesale/distribution, retail and foodservice sectors. The report is divided into 4 sections:

  • Positive and Negative Impact of COVID-19
  • What steps business owners have taken to manage their businesses through COVID 19.
  • Long-term effects
  • Learnings

Positive and Negative Impact of COVID-19

Challenges included;

  • Human Resource management
  • Supply chain effects, especially sourcing ingredients/products from abroad
  • Access to storage
  • Restrictions on the global movement of products
  • Operational efficiencies
  • Relationships with buyers and suppliers were negatively affected
  • Overall financial performance of their businesses was likely to be negatively impacted in the medium term (1-3 years) – this means that cost savings need to be achieved or new product offerings with a higher value-added need to be introduced. However over one-third of the respondents that COVID 19 and to reduce spending on new product development. This is a risk to the industry if global competitors continue to develop new products to stay abreast of changing consumer demands.
  • Resources for Brexit planning being diverted to Covid19 mitigation

Opportunities

  • Companies have quickly enacted a digital transformation that will help their business be moe efficient in the long term
  • Increased consumer spending on retail food
  • Remote working may reduce the physical office space needed
  • Improved terms of business with suppliers due to renegotiation of terms
  • A small number of respondents cited better relationships with customers due to the increased  contact with them as they worked together to keep business going during covid19  

Revenue

80% of respondents stated they expect a decline in revenue due to covid19

 11% of respondents expected an increase in revenue

Corporate Strategy
As the future is so uncertain, most respondents were unsure how Covid19 would affect their business strategy.  Managing financial loss was defined as the greatest challenge.

Reacting to Covid19

57% of respondents said they had no business continuity plan prior to Covid19.  Of those that had a plan, 25% said it wasn’t fit for purpose to deal with the pandemic.

Less than 50% of businesses had availed of the many government supports. Of those who had availed of the support, the temporary wage subsidy scheme was by far the most popular with 47% availing of it.

Cost Reduction

Over 50% of respondents indicated that they had delayed or postponed internal improvement projects as a result of COVID 19, while a similar number had been forced to reduce staffing levels

Cash Flow

Just under 50%respondents had engaged with their financial institutions to renegotiate their credit terms. Food businesses have also looked to renegotiate more favourable terms of business with buyers and suppliers.

Innovating and Adapting 

The chart below shows where businesses have adapted their business processes.

Long term Impact of COVID19

It is believed that COVID 19 will lead to a more strenuous regulatory environment within the industry.

The industry also expects additional customer requirements.

The industry needs to consider how to operate facilities efficiently and offset increased costs while also minimising the risk of a resurgence of COVID 19, with social distancing requirements likely to be maintained in the long term. Additionally, reduced demand for some products will leave factories operating at partial capacity.

Staffing challenges that existed before COVID19 was made worse by the pandemic.

Business owners expect to curb planned capital expenditure as part of cost-saving measures and this may result in reduced operational efficiencies as plant that should be replaced continue to be used.

Failure to innovate and keep up with changing consumer demand may also hinder business growth.

The chart below shows that the majority of respondents were slightly more pessimistic about their business outlook.

Lessons Learnt

The report concludes that the following lessons can be learnt by the food industry:

  1. Business model and operating model agility

The ability of a business to quickly pivot its business model to survive unprecedented changes can be determined by how well the business understands its operating model and the impact that changes will have. Management need to make informed decisions quickly.

  1. Maintain focus on what matters

During a time of chaotic change such those wrought by the pandemic, processes need to be put in place to prioritise the important management issues and create a sense of focus on the business-critical issues.

  1. Cash flow management

The flow of cash through a business will determine its ability to continue trading. Many

businesses acknowledged complacency in their cash flow management processes.

  1. Embrace technology

Reviewing technological capabilities and establishing a

digital transformation strategy will help businesses to realise efficiencies and enable

greater agility in a time of crisis.

  1. Communicate

Businesses should know who their key stakeholders are and engage with them early.

Early engagement with suppliers can ensure security of supply or enable contingency

planning. Discussions with buyers can create a cohesive relationship. Communication

with staff is key to achieving engagement and creates a cohesive vision for change.

You can read the full report here. 

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