ASIA April 2020
 
Are Ingredients Suppliers facing the heat from COVID-19 ??
 
Logic always tells us that the food and beverage industry will be one of the last few industries that will be affected by COVID-19 pandemic. This is because consumers will continue to demand for food and beverages, in fact their demand will even go higher as many will stock up these essential products for future emergencies.
However, this can only be true if the factories and its production workers are allowed to continue working at churning out food products from the manufacturing plants to the food retailers, while ingredients companies and agricultural suppliers are allowed to continue supplying their products to manufacturers. And not to forget, the middle men – the logistics, transport and distribution companies. In the short run, there will not be a problem as these food manufacturers still have adequate stock of raw materials, however if COVID-19 persist longer into the 3rd quarter of 2020, we might foresee a potential problem of supply.
Already, several ingredients companies in China saw their revenue dipped as they have to close their plants due to the outbreak. Kerry Group earlier announced that its revenue in China will fall by 30% in the 1st quarter 2020 due to COVID-19, however it hopes to have its 5 factories back to full production capacity in the 2nd quarter of 2020. Kerry added that the slowdown in China will cut its annual global revenue by 0.5% in its core Taste & Nutrition unit which contributed more than 80% to group revenue. Said Kerry CEO Edmon Scanlon, during the recent outbreak, Kerry’s 5 manufacturing plants in China, which accounted for 5% of global revenue, were only working at 30 percent capacity with a skeletal manpower due to travel restrictions.
Another ingredients supplier, Ingredion also faces some challenges as its 2 factories are located less than 850km away from Wuhan. It has 2 factories in China with one running uninterrupted whereas the other one had reduced operation and will resume full operations shortly. Finance Chief James Gray said the company expects a slowdown in demand from customers in the short term.
For an agri-commodity giant like Cargill, it has recently announced the opening of all its facilities in China, after weeks of shutdowns due to the coronavirus. In China, Cargill operates crop processing plants, feed mills and chicken slaughterhouses with more than 10,000 employees. The last facilities to be opened include its 2 feed mills located in the sensitive zone of Hubei province where its capital city Wuhan was the centre and the start of the coronavirus epidemic.
Cargill’s successful self-quarantine exercise has resulted in zero cases of COVID-19 among its workers in China.
 
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