Turning Crisis into Opportunity

While the unprecedented threat of the COVID-19 pandemic looms large over the entire food industry, frozen food sees a chance to grow, as consumers’ behavior takes a new shape.

By Bogdan Angheluta, web&digital editor Frozen Food Europe

As things continue to unravel, it is important to take a look at how the pandemic impacted the frozen food sector and all connected industries. I have talked to experts to get a comprehensive, region-by-region view of the current situation.

Light and shade in the frozen food industry

The demand for frozen food in the food trade has risen strongly, in some cases even in the double-digit range from week 9 onwards, compared to the same week last year, with growth varying according to a particular product group, the German Frozen Food Institute (dti) representatives say. „It is a fact that with the increasing standstill of public life, people (have to) consume more food at home, and out-of-home consumption has largely shifted to the home. They go shopping more often (+10%) and spend more per purchase (+13%) than usual. Consumption at home has thus increased, partly because of schoolchildren who are now indoors and office workers working in the home office. Many people have only started to stock up on frozen foods more since the end of February.”

The dti says that growth in the food retail sector will only temporarily remain in double figures. Shoppers are buying frozen food either for immediate consumption, or for stocking up. But unlike long-life foods in the dry range, the frozen storage capacities in households are not infinite. If these are occupied, the goods must first be consumed, before they are bought again. The significant increase in demand for frozen products among the frozen food home delivery services, which report a doubling of their online orders and many new customers, is also a clear indication of this. Another driver for demand among home delivery services is customers who are currently refraining from going to the supermarket.

„On the other hand, consumption outside the home slumped drastically from week 9 onwards, and reached its lowest point in week 12, with the final lockdown due to the initial restrictions. In figures: 75% less spending in the restaurant trade, two thirds fewer visits!,” dti officials state. „Bakers, butchers, and delivery services remained stable. Many out-of-home operators have entered the delivery business and are trying to compensate for lost sales. Some restaurateurs are joining forces on delivery platforms, others are selling vouchers for local gastronomy or calling for donations. Still other initiatives, such as Cooking for Heroes, supply the nursing staff in hospitals and old people’s homes with goods that can no longer be sold. These activities cannot replace the lost sales, but they have a different effect: solidarity and a sense of community, a return to the local – this will continue to be important after the crisis.”

dti says the German Federal and local governments have very quickly put together extensive aid packages, to support the economy. Of particular importance was the instrument of short-time work compensation, which has long been a familiar feature in Germany, and financial assistance such as loans and grants.

„All in all, very unbureaucratic action was taken to help as many companies and their employees as possible, to get through the crisis in good shape. The most important concern right now is to communicate a clear roadmap for the resumption of public life and economic activities. Particular care must be taken to ensure that the medium-sized structures in the economy and especially in the catering and tourism industry are not destroyed.”

The frozen food industry will certainly witness a rethinking of supply and procurement structures, dti representatives say. „A one-sided dependence on individual countries and economic players must certainly be viewed critically. This could lead to a reorientation of procurement and customer structures.”

As far as a „new normal” is concerned, dti officials say there will be no return to the old state of affairs, as the crisis was and is too massive a disruption in private and business lives for that.

„We believe that there will be a return to values such as solidarity and security and that a new culture of living together – also in a business sense – can be created. We believe that the telecommunications industry in Germany is well-positioned for this and, as an industry association, can make an important contribution to networking and communication. But most of all, we are looking forward to meeting our members again in person, especially at our next Frozen Food Conference. Personal contacts simply cannot be replaced!”

„A great story to tell consumers”

Richard Harrow, chief executive of the British Frozen Food Federation (BFFF) thinks the industry should be split into two halves, when addressing the current crisis: one is retail, the other out-of-home. „Retail has seen a massive increase in sales, it was manic, in the week ending March 22, frozen food saw an 84% increase, it’s unbelievable”, Harrow points out. „It’s started to settle a little, and now we see people buying more rationally. Interestingly enough, across the whole grocery [industry], the massive increase was not driven by people buying lots and lots of products – what we call hoarding – but actually, it was most people increasing their baskets by 5% and the number of trips they went on by 15%. Those things combined created that massive spike, and it wasn’t just frozen food, it was across all grocery [segments].”

Some categories seem to be selling much better in the UK, and frozen food is one of them. „I’m hearing that we’ll see double-digit growth year-on-year, and what we are seeing is quite a different sales mix, away from ready meals and into people buying ingredients to cook at home. I also think the retailers have seen a massive increase in their costs: although they’ve seen big sales, they’ve seen massive costs around introducing social distancing measuring, cleaning systems and employing more staff. So, there’s a lot of positives, but a lot of negatives as well,” says Harrow.

As far as the other half of the industry is concerned, which is out-of-home, the hospitality sector is faced with a massive challenge. „Anyone who is supplying for the out-of-home market will see most of it disappear overnight. If you’re a manufacturer or if you’re a wholesaler, for the moment it’s about survival, hoping that the hospitality sector reopens. Have you got enough cash to pay your staff, pay your utilities, and keep the business running? That’s a real challenge.”

The demand for freezers has also jumped significantly, Harrow says, and he hopes people will still see frozen food as a good option after the crisis had passed. „We have a massive issue in the UK, we still throw away 9.5 million pounds of food a year. The environmental impact of throwing that much food away is amazing, I think it accounts for something like 6% of the UK’s carbon footprint. I think we have a great story to tell consumers: buy frozen food, it can help reduce environmental damage. We hope that when we come out of this, maybe consumers will view frozen food in a different way. We do not want to benefit from such a crisis, but we do hope the message is that frozen food has a lot to offer”, the BFFF official concludes.

COVID-19’s impact on HR

Jakub Lesniewski, Food Safety Professional, EMEA, AIB International says that as there are shifting consumer preferences, ill manufacturing employees, difficulty in receiving raw materials and facility closures, impacts are rippling across the global food supply chain. “There may be increased incentive for food fraud or economically-motivated adulteration, each of which can have additional impacts through to the consumer. One thing we’ve seen from our employees and clients is that their steadfast commitment to continue producing safe food has not changed.”

Due to the pandemic, given limitations on travel and in-person meetings, manufacturers are having to think about how they access expertise differently. “In response to these disruptions, we’ve seen strong interest in our virtual training, inspection, and consulting tools. Specifically, our Virtual Classroom offers participants access to our world-class training seminars from home, or their facilities. We’re also offering technical expertise through our Assign an Expert program, helping manufacturers minimize operational disruption, by providing temporary virtual or on-site experts.”

One by-product of the pandemic has been an elevated awareness of the importance of food safety and quality practices across the global food supply chain, Lesniewski points out. Through production, warehousing, cold storage, and distribution, each step has to ensure that the proper food safety and sanitation procedures are in place, and working as they should. “We can each work to limit future disruptions, by using what we have learned over the past few months. For manufacturers, that includes an increased focus on food safety, to ensure consumers have access to the foods they want and need. It also means thinking about and accessing expertise differently, including virtual solutions that provide desktop assessments, training without travel, and allow for social distancing.”

Jakub Lesniewski thinks that moving forward, there will continue to be a heightened focus on food safety, ensuring that the global food supply chain will meet consumer needs and demands. Now that manufacturers have become more familiar with using virtual technologies, they will continue to utilize them as a way to efficiently and effectively provide their teams with world-class expertise, “wherever they are in the world. This focus on food safety, paired with manufacturers participating in an enhanced training, will better prepare us for what will be our new normal, and also future disruptions.”

Challenges facing the industry worldwide

As it has international coverage, the Global Cold Chain Alliance (GCCA) was able to point out issues occurring in multiple areas across the world.

Despite the fact that foodservice is suffering strict containment measures, taken by governments across Europe, the cold storage sector is functioning strongly and intensively, according to Julie Hanson, GCCA director in Europe. Cold stores have been able to continue functioning and be strong players in the food supply while taking strict measures and smart operational strategies internally, to protect their workers and prevent infection by COVID-19. The major challenge came from a shortage of reefer containers stuck in China, as ports are generally not working at full capacity. In terms of sales, „in some places we saw an upsurge in demand for frozen food, however, mostly for essential goods, not the more sophisticated or luxury products. Most of the food producers continue production, some have been affected by workforce shortage, leading them to slow down. In some segments, demand has decreased and some producers have had to shut down their line temporarily.” Some of GCCA’s equipment supplier members have reported high business activity as directly related to the food or pharma sectors, so cold stores, and refrigerated transportation have been able to access services and equipment essential to their functioning.

The perishable food supply chain in the United States, especially as it relates to temperature-controlled warehousing, has shown itself to be extremely resilient and adaptive, GCCA representatives said. „At the beginning of the pandemic in the U.S., panic buying led to empty grocery store shelves, however, this was just a result of the supply chain not being able to catch up to the number of products being bought, not an issue with lack of products in the overall supply chain. Warehouses, prior to the COVID-19 crisis, were full/at capacity and continue to be. There is not a shortage of food. Like many other countries around the globe, warehouses in the US are also seeing a product that would normally go to foodservice starting to back up, but food going to retail going out extremely fast. In some cases, a product originally designated for foodservice is being redirected into retail markets.” Warehouses were deemed essential businesses at the beginning of the pandemic and have been able to continue operating. Their biggest challenges include a lack of access to cleaning supplies and hand sanitizer, and personal protective equipment (PPE), such as face masks and gloves, and a lack of access to priority COVID-19 testing for employees.

The cold chain industry is extremely responsive to new consumer demand. Cold store warehouses, design-build companies, suppliers, and transportation companies have all adapted operational procedures to build-in CDC-recommended practices, such as social distancing and increased hand-washing and surface sanitization; to rethink processes to make them as “touchless” as possible, sometimes deploying automation, or other technology, and adapting workforce HR policies around absences, leave, illness, and more, sometimes adding shifts to accommodate increased demand, GCCA officials state. “Typical business practices prior to the pandemic included storing a certain number of days, usually 30 or 60, of food supplies at regional warehouse distribution centers, and at retail distribution centers, to keep the supply chain lean. This model creates some challenges during emergency demand situations like natural disasters, or the one we’re in with the pandemic, so the cold chain has had to shift operations. That takes time, but is being done. Warehouses are also working with their customers to identify additional efficiencies to help replenish grocery shelves that were depleted during the surge in demand. One of the solutions has been to reduce case picking, where possible, and move more full pallets both into and out of warehouses.”

In Brazil, the cold storage industry has found the pandemic has hurt certain markets, such as food service and imports, but has seen an increase in regards to retail and exports, so most companies have not experienced a negative impact, because they have found a balance between these, according to Isabela Perazza, GCCA director in Brazil. Here, the response was effective in extending the hygienic measures on the facilities, and also being flexible about payments from the foodservice industry, that is going through a hard time. In terms of international trade routes, Perazza says exports have actually slightly increased the demand, so Port Facilities are experiencing a good moment. China is still the biggest buyer for general goods from Brazil. „With fewer ships leaving China, there is an accumulation of containers in the Asian country, which generates a global shortage of equipment. Here, we can feel the lack of empty reefers for exports because of that.” Isabela Perazza thinks that the entire logistics related to the food industry has been playing a leading role during the pandemic, and that it will remain this way for many years to come. All in all, she believes that „more than ever, the frozen food industry is relevant and needs to keep working to ensure that food is safe and reliable.”

In Latin America, the perishable food supply chain throughout the region continues to be very strong, with food moving to retail outlets. However, the industry is facing some challenges, like enhancing risk and emergency management plans to assure business continuity, although the crisis has forced people to work longer shifts with less workforce, to respect the guidelines for social distancing, according to Debbie Corado, GCCA Latin America office director.

„The demand for products is changing, on the one hand, there is a much higher demand for frozen products but a drop of almost 40% in certain fresh products (mostly fruits and flowers) for export, especially as it goes to Europe. In Europe, they are consuming more local produce, and due to the change in habits, consumers are buying more essential products, therefore exports of certain products have decreased.”

The COVID-19 pandemic has been a „sudden wake-up call” for the cold chain industry in Latin America. Not only members, but governments in the region now recognize even more the important role the industry plays in the food supply during crisis time, Corado points out. „The transformation of the industry will be clearer here than [in] other regions, and they will have to adapt their businesses to new product distribution models, as a result of more developed e-commerce. The main challenge has been the workforce, either because they work with fewer people, to respect social distancing measures, or because they may face cash flow problems and may choose to reduce payroll. So, it is believed that a major shift towards automation will happen. Faced with this crisis, food producers, exporters, and importers have realized the need for more frozen and refrigerated space.”

Finally, in South Africa, perishable food product movement remains stable, excluding restaurant services and Quick Service Restaurants, says Lizelle van der Berg, director, GCCA South Africa.

“The production, manufacturing, supply, logistics, transport, delivery, critical maintenance, and repair concerning the rendering of essential goods, including components and equipment, have been declared Essential Services. This also means that our refrigerated warehouse members and refrigerated transportation companies and their suppliers are deemed as Essential Services. No one has reported any job losses in the cold storage industry.”

What will the future hold?

As it becomes obvious that COVID-19’s impact on the entirety of the food industry will change the way producers, suppliers, and customers alike behave in relation to one another, a new reality will set upon the way business is conducted.

Frozen food has a unique opportunity to make the best out of an unexpected and brutal experience, by showcasing its qualities and features that makes it appealing.

How has your frozen food business been affected by the pandemic and what solutions are you currently implementing going forward? Feel free to send your thoughts at bogdan.angheluta@trade.media.

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