The Future of Food & Beverage

Modern Manufacturing for Challenging Times
Written by Nate Hendley

The food and beverage manufacturing industry has been hit hard by COVID-19. From coronavirus infections in food plants to restaurant shutdowns, strained supply chains and new consumer shopping and dining habits, the industry is the middle of a huge reckoning.

“As the effects of COVID-19 are felt around the world,” food and beverage firms are facing serious “supply chain disruption challenges,” noted a March 25, 2020 report from professional services firm Deloitte.

Food and beverage manufacturers are trying to cope with increased demand for some grocery items and collapsing demand for in-house restaurant meals. In the United States, meat processing is the largest segment of the food and beverage manufacturing sector, followed by dairy, beverages, grains and oilseeds, fruits and vegetables, and bakery products. As of 2017, there were roughly 36,500 food and beverage processing establishments in the U.S. In 2018, these plants employed over 1.7 million workers. That same year, the food, beverage, and tobacco manufacturing sector (as the USDA categorizes it) contributed over $400 billion.

In Canada, nearly 300,000 people work in the food and beverage processing sector. This is the “second-largest manufacturing industry in Canada in terms of value of production with sales of goods manufactured worth $117.8 billion in 2019,” stated Agriculture and Agri-Food Canada, a government agency.

Of all the segments in food and beverage manufacturing, meatpacking has arguably suffered the most from COVID-19. A May 7, 2020 article in Wired magazine reported that the Centers for Disease Control and Prevention data indicated that “nearly 5,000 plant workers in 19 states tested positive for the virus as of April 27. In Iowa and South Dakota, close to a fifth of the workforce in the states’ largest slaughterhouses have fallen ill.” It is a similar story in Canada and around the world, where meatpacking plants have proven to be epicenters of infection.

There are several reasons for this. Slaughterhouse workers perform physically demanding jobs standing close to each other on crowded production lines, a perfect environment for passing on disease. The fast-paced nature of the work “can make people breathe hard and have difficulty keeping masks properly positioned on their faces,” added Wired.

Also, meat plants are usually kept cold and well-ventilated. Medical officials believe cold temperatures allow COVID to thrive and that the virus might infest HVAC systems. On top of this, many low-income meat plant employees live in cramped homes and, in rural locales, often travel to work on company buses. Authorities have urged meat plants to slow production, introduce staggered shifts, and put fewer workers on the line to allow for social distancing.

Industry experts quoted in a June 8, 2020 article on the website of Food Engineering magazine said food manufacturers might want to upgrade and renovate their facilities, increase capacity in their warehouses and production lines, and institute new employee safety practices.

Food and beverage manufacturers also need to consider how the coronavirus has changed the way people shop and dine. “More than eight in 10 Americans have altered their food habits as a result of the COVID-19 pandemic,” reported the 2020 Food & Health Survey from the International Food Information Council.

Sixty percent of survey respondents said they were cooking at home more often while thirty-two percent said they are snacking more. People are also stretching out the time between visits to the supermarket. The number of people who described making multiple trips in a week to the grocery store declined from twenty-eight percent to twenty percent on the most recent survey. To no one’s surprise, online grocery shopping is becoming more popular. The percentage of Food & Health Survey respondents who said they online grocery shop at least once a month increased from twenty-seven percent in 2019 to thirty-three percent in 2020.

Food safety awareness is also on the rise. “In the context of the pandemic, roughly half [of respondents] are at least somewhat concerned about eating food prepared outside the home,” notes the survey.

For all this, most Americans trust the overall state of food safety in their country. “Despite COVID-19, nearly 7 in 10 are at least somewhat confident in the safety of the U.S. food supply,” adds the Food & Health Survey.

This is reflected in increased consumer spending in certain parts of the grocery store. “Consumer preferences are changing. There has been a noticeable shift in consumer buying habits with a surge in sales of non-perishable food staples such as pasta, frozen foods and canned goods. Consumers are stock-piling inventory in their homes due to uncertainties around stockouts and potential store closures if a lockdown is put in place,” noted a May 14, 2020 article in Plant magazine.

High sales in certain areas, however, present new challenges for food and beverage manufacturers. “A trip to the grocery store quickly reveals the pressure retailers are under as they struggle to keep products on the shelves as demand rises.” said Plant magazine, which also pointed out that, “Without a doubt, higher demand is stressing the supply chain. Manufacturers are running production around the clock and in some cases paying premiums for raw materials as some goods become more expensive to import. These manufacturers are bearing additional overtime costs as employees work longer hours to support the increase in production runs necessary to maintain a robust supply chain.” Manufacturers might have to pass these costs on, resulting in higher prices for grocery store products, adds Plant.

Supermarkets and food stores are only one part of the consumer market served by food and beverage manufacturers. The restaurant industry has also been rocked by COVID-19, especially in areas where lockdown orders closed dine-in eating establishments. “While at-home consumption has been showing a spike over the last two weeks, out-of-home consumption has come to a standstill,” noted the Deloitte report. In a May 11, 2020 press release, Ipsos Foodservice Monitor (FSM) statistics revealed “a $3B decline for Full Service Restaurants (FSRs) and Quick Service Restaurants (QSRs), combined, from March 2019 compared to March 2020.”

The situation is equally dire for full-service restaurants (FSRs) in the United States, most of which focus on on-premise dining over take-out. “Sit-down table service restaurants were hit hard. Visits to FSRs were down 47 percent in the April, May and June quarter, the height of the mandated dine-in closures, compared to the same quarter a year ago,” market research firm NPD Group said in July 30, 2020. “Quick service restaurants (QSRs) which already have developed off-premises operations like carry-out and drive-thru, realized a traffic decline of 17 percent in the same quarter.”

On the other hand, food deliveries have soared and restaurants that offer locally-sourced foods have become attractive options. “Delivery channel orders grew by 36 percent in the second half of March compared to a year ago. This includes both third-party aggregators such as SkiptheDishes as well as traditional delivery focused operators like Domino’s. In fact, pizza operators collectively grew traffic by double digits in the second half of March compared to the first,” according to the Ipsos press release.

The NPD Group’s COVID-19 Foodservice Sentiment Study conducted for the Canadian market stated on August 4, 2020 that “demand for locally sourced foods is only going to rise. More than one-third (39 percent) of respondents source local products because they are perceived as safer. Moreover, half of all respondents plan to visit local and independent restaurants to support the local economy once the restrictions are lifted.”

The popularity of locally-sourced options is obvious. COVID-19 has thrown global supply chains into chaos, making some items scarce or more expensive. Secondly, as the coronavirus was first noticed in a food market in China, health-conscious consumers are more apt to trust food products grown or raised locally over anything shipped from overseas.

The heightened popularity of online grocery shopping, meanwhile, might lead to big changes in how supermarkets operate, with a greater focus on the digital market. “As consumers become more comfortable with online grocery shopping as opposed to the in-store shopping experience, this new trend could lead to a long-term change in consumer habits, requiring retailers to permanently alter their business models to adapt to these ‘new norms,’” stated the Plant magazine article.

Eventually, COVID-19 will either go away or a vaccine will make it unnecessary to maintain lockdowns and restaurant closures. It is doubtful, however, that the food and beverage manufacturing sector can simply resume pre-coronavirus practices once the threat dissipates.

“Food and beverage companies should revisit their sourcing strategies, rationalize their product ranges, and assess the resilience and agility of their supply chains as well as their route-to-market channels,” advised the March 25, 2020 Deloitte report. “E-commerce and distribution networks should be optimized and streamlined. Considering the impact of changing commodity prices and other costs-to-serve, as well as ways to increase demand, companies will be forced to revisit their pricing and promotion strategies.”



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