Coronavirus Pandemic & Food Processing Industry – Impact, Opportunities and Dynamics

Amidst all the fear and hopelessness that has been spreading, there seems to be some silver lining after all as the Fruit and vegetable exports are coming back to near-normal levels for this period of the year. Although most of the exports through the sea route have resumed, the air routes are still not viable as prices are still very high. So let’s look at some of the immediate issues that the food industry could be facing now.

Demand Side: A combination of declining income, fear of the spread of the pandemic in general, and due to the rumors being spread around, people would rely more on staple food such as rice, wheat, ragi, jowar, and other unprocessed food. Demand for comfort food or processed food as such will be low, although government demand for food will remain high.

Supply-side: a sudden stop of manufacturing activity in the most affected regions will cause bottlenecks in value chains. Inventory can support supply for a while, but with today’s just-in-time production structures, it seems reasonable to assume that the duration of the Covid-19 outbreak has already exhausted inventory stocks. Such disruption will in turn trigger widespread factory closures for lack of intermediary inputs. . The consequences of disruptions on the supply side can therefore contaminate aggregate demand, reinforcing the first channel mentioned above, as well as threatening financial stability. The increase in risk aversion since the Covid-19 shock and the usual flight to liquid assets in face of uncertainty have already pushed equity markets into correction territory. Heavily-indebted commodity exporters are likely to be on the front-line of debt-related economic stresses from the spread of the virus, particularly where foreign exchange reserves have been on a falling trend.

Brief Impact on different sectors:

Poultry:

• The poultry sector which is the fastest-growing sub-sector of India’s agriculture eco-system and where the country has created a foothold at the global level (India is the third-largest producer of eggs and fifth largest producer of broilers) is already facing losses. The poultry industry in different parts of the country has been hit hard amid rumors that the novel coronavirus can be transmitted through the consumption of chicken, the prices of which have fallen considerably as a result. The cost of production of the poultry in India is tentatively Rs.75-80 per kg. Every poultry farmer is suffering an average Loss due to low Price hovering around Rs.20-25 per kg.
• The national and international lockdown due to COVID 19 has also raised concerns and uncertainty over exports. The exporters are unable to move cargo in the port. Manufacturers and Exporters are forced to close down processing units by Local Corporation. Stuffed containers are on the road, waiting to get in the port. Exporters are also not willing to risk sending containers as they are not sure of many other factors such as labor for loading, Bill clearances, Seaway bill clearances, etc.
• The restrictions on the movement of vehicles due to lockdown are disrupting the supply-chain at various levels- hatcheries, feed mills, poultry farms, and retail outlets.

Diary:

• The dairy industry in states like West Bengal, Assam, Karnataka, Gujrat, Maharashtra, and other states has come to a standstill with farmers having to deal with lockdown regulations that have severely impacted their livelihood. All hotels, Sweet Shops and restaurants are closed, so wholesalers do not buy milk from the farmers. This affected their daily routine and transportation of milk to the wholesale markets as a result farmers throw away thousands of liters of milk daily.
• The problems of dairy farmers are as the raw material for producing cattle feed is getting exhausted and the industries producing the feed would have to discontinue production. The main reason behind this is the logistic and manpower problem of those dairy, fish, and cattle feed manufacturers.

Pulses:

• Few laborers are taking the risk to work in mills that are in remote areas, about 40% of mills in remote areas are shut down because of labor. People cannot travel due to no transportation in these areas.
• Only 20% of labor is working with double labor charges as well as transportation charges have also increased.
• Lockdown has hampered the movement of trucks carrying essential commodities. Several cold storage and warehouse owners complained regarding the dearth of laborers. Unwillingness to work fearing police beating, many labourers are staying at home or leaving for their hometown.

Beverage Industry:

• In spite of very clear advisory from the MoFPI, they are facing major hurdles at the state level to run distribution routes. Most of the states are still allowing only water and juices while the entire beverage portfolio and processed foods are part of the grocery and food baskets.
• They should also be given permission to operate plants with all the measures of social distancing and health safety.

Restaurant and Dine Services:

• With no dine-in services and a big drop in online orders the restaurant industry has been severely impacted due to the pandemic.
• Orders on Swiggy and Zomato have dropped 60 percent amid the pandemic. While both the platforms are operational, they are working with minimal delivery executives and restaurant partners.
• Kitchens are also facing difficulty in procuring supplies as well as labor shortage, forcing a lot of them to shut shop
• Dine in and restaurants in malls have also been shut for almost 3 weeks now and this has led to inability to pay rents, bills and salaries on time

Food Consulting:

• Food processing consultants will be in high demand to help industries meet the new requirements.
• Previously food processing consultants were required only to give the formulations etc but now there will be a good demand for food processing consultants looking after food packaging, hygienic handling and increasing shelf life of foods
• Food processing consultants will be required to formulate immunity-boosting food products, organic food products, and supplements.

Opportunities during the current pandemic situation

• Organic food products seem to be in high demand. The outbreak of Covid-19 is making consumers pay attention to what they eat.
• Online sales increase about 30 per cent over the last month. Breakfast cereals as well as bars have seen a surge in demand as people have stopped eating from restaurants due to the health scare
• Due to the increased awareness among people to eat healthy, organic food processing companies are now upping the ante and re-launching existing products, which includes amlabars, ginger oats cookies, and chia turmeric cookies, etc

Suggestions for measures to be taken by Government

• Delivery of essential items continued to face challenges after the lockdown being imposed, with the industry urging government for uniform classification of essential items across various states.
• While the government has allowed delivery of all essential goods including food, pharmaceuticals and medical equipment through e-commerce, companies have been facing disruptions in delivery to their customers.
• Companies are finding it difficult to procure passes for their logistics and delivery staff separately for each state
• The food industry supply chain is disaggregated and dependent on inter-state movement of goods; disruption to any one part will have a ripple effect and the impact would be felt back to the agriculture sector.
• It is imperative that the supply chain for food products be restored in entirety and allowed to function with adequate safety measures and police protection.
• Support is required from district authorities in allowing factory workers to travel to the factory premises with appropriate safeguards; this will help the company kick start production and ensure uninterrupted supply of essential packaged foods throughout the country.

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