John is a Divisional Director at Promar International, the agri-food consulting arm of Genus plc. He is also the President of the Chartered Institute of Marketing’s Food, Drink & Agricultural Group.
One business success
- At the start of the outbreak, it was common to see supermarket shelves empty of key essentials such as fresh produce, and canned and dry goods. To some extent, this was due to a level of panic buying, but also demonstrated how fragile at times UK supply chains can be with their strong reliance on just in time delivery operations. Within a few weeks though, most products could be found on supermarket shelves without too much of a problem. This, in turn, is a testament to how robust UK supermarket supply chains are and how rapidly producers and retailers are able to adapt.
Two challenges for the sector
- At farm level, there have been a number of major challenges to face up to, especially in the early days of the outbreak. Agriculture and food were both deemed by the Government to be “essential industries” and were allowed to carry on working. Some dairy farmers, however, were forced to throw away milk as collection schedules were severely disrupted. There were also concerns over the availability of farm labour – this has been an ongoing issue over the last few years – but was accentuated by the need for seasonal labour, especially in the horticultural sector which has a high degree of dependency on workers from Eastern Europe and it was feared that they would not be allowed into the UK in time for this work.
- Farmers who supplied food to the catering sector saw sales disappear overnight and had to quickly find alternative customers. Some relief was provided by switching to online selling mechanisms. In some cases, deliveries of agricultural inputs were not possible, as distributors struggled to come to terms with reduced workforces, enforcing social distancing measures and general business disruption.
Three forecasts for the sector
- As a consequence of Covid-19, all suppliers and supermarkets which still dominate the UK point of sale, will stress test the robustness of their supply chains and we might well see the shortening of these. The move towards online buying and selling of agricultural and food products with be accelerated and there will be a trend towards more home preparation of food and demand for convenience foods.
- Issues that were important before March 2020 to the supply chain will not go away - these include areas such as plastics reduction, water usage, meeting the challenge and in some cases, the opportunities of climate change etc.
- The ongoing pressure in the retail market as the discount chains continue to gain ground on the Big 4 retailers (i.e. Tesco, J Sainsbury, Asda and Morrisons) and at the expense of the higher value retailers such as M&S and Waitrose. It is reported that some supermarkets have requested significant price discounts over the rest of the year from their suppliers. This is a direct result of the predicted severe downturn in the economy that we have begun to already see.
July 2020
