Listen to the follow-up to this webinar, a 30-minute episode of Rabobank’s Consumer Foods-to-Go podcast, where global strategist Cyrille Fillot and senior analyst Maria Castroviejo answer more questions about the impact of COVID-19 on food and ag businesses.
Changes in consumers behaviour, supply chains and the role of startups
FoodBytes! brought together a panel of experts across the Food & Ag value chain to discuss the current, immediate impact of Covid-19 on the consumer and his preferences as well as the long term changes we might expect. Cyrille Filott from Rabobank, Emilie Vanpoperinghe from ODDBOX, and Kim Anders Odhner from New Crop Capital addressed the channel shift from foodservice to food retail, the upcoming recession, potential behavioural and production shifts.
We had 455 participants tune in. For those who missed it or for the ones that would like to revisit some of the insights: you can watch the webinar below, listen to it here, and read on for the main takeaways.
Four different topics were discussed to explain the impact of Coronavirus on companies short-term (the now) and in the longer run (the reset). These were the main takeaways of each topic:
The now: the channel shift from foodservice to food retail
- Foodservice sales are down 40-80%, while food retail sales are up 5-10%. (Cyrille)
- Companies mostly relying on foodservice are currently suffering. It’s not easy for these companies to shift their product and supply chain to respond to the rising demand in retail channels. (Kim)
- Many companies on the retail side have seen an explosive demand due to hoarding. Afterwards, there’s a week where sales slow as everybody is already stocked up, leaving the supply chain struggling to catch up. (Kim)
- Oddbox has seen a huge increase in demand from existing and new customers. People who would never been shopping online now value the service of having groceries delivered to their door. (Emilie)
- Technology and logistics are bottlenecks for companies coping with increased demand, and many companies are barely capable of dealing with this. (Cyrille)
- Both on the production and the distribution side, companies are experiencing a tremendous amount of pressure. When companies do not have the inventory on hand, they have to go back to their manufacturers. In many cases, manufacturers are not producing at normal levels due to illness or distancing concerns. (Kim)
- With production constraints in the market place, many manufacturers are already trying to weed out some of the lower volume companies and focus more on larger volume ones. (Kim)
- Retailers are using this opportunity to look at the categories and determine whether or not it’s a good time for them to add a little more variety in what they’ve been previously offering. In some cases this represents opportunities for companies. These conversations have already been taking place ahead of COVID-19, but the virus has lent greater confidence to retailers to turn the SKUs. (Kim)
“We had to stop accepting new orders as we couldn’t cope with it. We had to put in place additional packing lines so that we could increase our capacity.” – Emilie, Oddbox
The reset: the recession coming
- Rabobank expects a decline of 2.6% in the economy in 2020, with a huge impact in the US (-6.4%) and the UK (-6.8%). Although the stock market has rebounded, there are many economists who have negative predictions for this and next year. (Cyrille)
- We don’t know about the recovery pace. Whether it’s a V-shape recovery or an L-shape recovery, we’re in an unknown scenario and this will have an impact on valuations and potential funding. (Cyrille)
- Right now, it’s going to be very challenging to raise money at any kind of a valuation premium. (Kim)
- One of our concerns is that we see a shift of foodservices delivering direct to consumers. We’re wondering whether this is something that will remain also after the virus, or whether this is something temporarily. Therefore, it is important that we differentiate ourselves from others. (Emilie)
“If it’s going to take longer to get return on investments, that will obviously have implications on the valuation. One way or another, you got to be able to deliver some kind of justifiable return on investment. As a result, you either have a lower cost of entry or you have a more rapid return on investment.” – Kim, New Crop Capital
The reset: potential behavioral shifts
- Digitization of consumers is here to stay. Everybody is ordering online. Various companies are struggling with their systems or have long waiting times to get their delivery. (Cyrille)
- Preliminary statistics say that people who are obese or overweight have a higher chance of getting Coronavirus. Therefore, it is likely that health and wellness are put high on the agenda by governments and consumers. (Cyrille)
- There is currently more of a focus on food safety and health than on climate and sustainability. However, we do expect people to become more mindful to reconnect with their community; and try to do something good for themselves and for the planet. (Emilie)
- In the longer-term, people are likely to move away from animal protein foods and might start eating more plant-based products. (Kim)
- There are many people becoming unemployed and the disposable income is going down. (Cyrille)
- People will become more cost-sensitive. (Emilie)
- What we might possibly see is less meat analog purchases and more plant-based purchase when price becomes an issue. (Kim)
The reset: a potential shift to more local production
- Going local is becoming more important from a sustainability point of view, as well as from a comfort point of view, as it is more comfortable for consumers when food is coming from an area nearby, or in a negative way, when consumers are fearful when a product comes from afar. (Cyrille)
- There’s a big role of government to play in this. Currently, the UK is not self-sufficient and France is to a degree self-sufficient. These countries already announced that they want to grow more within their country. (Cyrille)
- More than 80% of all fresh produce in the UK is imported. When we decide to grow locally, it’s challenging, as the UK is very reliant on foreign labor. In previous years, only 2% of the labor force was local and the rest was all mostly coming from Eastern Europe. The government is pushing recruitment for local staff, but they will be less experienced and more expensive, impacting our margin. (Emilie)
- In the last few years, we’ve seen the de-globalization of the consumer much more focused on the local consumer towards personalization. Companies are also setting up more local manufacturing footprint and more local marketing organizations. (Cyrille)
- In the alternative protein space, growing locally is a struggle. The current forms of protein that we see today already struggle with scaling. The idea of producing locally theoretically could work, but in reality it doesn’t work as the scale is simply not there. (Kim)
- However, we’re starting to see more novel proteins and we see great potential for localization of these novel protein facilities, as they’re able to produce at much lower price points. (Kim)
If you have additional questions, you can drop us a line in the comments or reach out directly (FoodBytes@rabobank.com). Want more? Register for our next webinar, “The Fast Pivot: How F&A Businesses Are Pivoting to Prepare for the Post Coronavirus Economy”, happening Wednesday, April 22.
The views and opinions expressed during this webinar are those of the speakers and do not necessarily reflect the official policy or position of Rabobank or its affiliates. The information provided herein is for informational purposes only and is not intended to, and does not, constitute legal, tax, investment, accounting, or other professional advice.
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