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
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.
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
80% of respondents stated they expect a decline in revenue due to covid19
11% of respondents expected an increase in revenue
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.
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
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.
The report concludes that the following lessons can be learnt by the food industry:
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.
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.
The flow of cash through a business will determine its ability to continue trading. Many
businesses acknowledged complacency in their cash flow management processes.
Reviewing technological capabilities and establishing a
digital transformation strategy will help businesses to realise efficiencies and enable
greater agility in a time of crisis.
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.