Coronavirus: Beer sales slump in China as entertainment venues remain on lockdown, says Carlsberg

05 Feb 2020 --- The coronavirus outbreak is severely impacting entertainment spots and dining outlets across China with widespread closures all over the country. This could lead to short-term impacts on beer sales as consumption declines during the outbreak, says Carlsberg. It is one of many companies closely monitoring the situation as concerns over the spread and impact on public health grows. The Danish brewer, whose breweries in the country remain open, says the Chinese market is uncertain due to the virus but it’s likely to be impacted “negatively.”

Carlsberg is implementing “different initiatives to mitigate the potential impact,” Carlsberg CEO Cees 't Hart, explained yesterday during a Carlsberg Group FY2019 financial statement conference call.

“Sales will be impacted. We have not seen any major lockdowns of cities for areas where we are present so from that respect, at this time, we are outside of the zone where the virus is predominantly present. However, sales across the country will be impacted by closure of outlets,” he said.

Carlsberg has restricted employee travel in China as has Nestlé. “Almost all entertainment outlets and more than 50 percent of dining outlets are closed. Off-trade (retail outlets, convenience stores, mini markets, kiosks, etc.) are also impacted but to a lesser extent. We estimate that a double-digit percentage of off-trade outlets are closed so it impacts the whole country,” Hart added.

“The virus will affect our business negatively. We had a very good start in January up to the New Year but then the outbreak happened. At this point in time, it’s difficult to estimate the impact, which depends on how long it lasts and how wide it spreads.”

Carlsberg has restricted employee travel in China as has Nestlé. The Swiss food giant has also put in place biosecurity measures at its China-based factories, offices and distribution centers.

“Our key focus currently in China is of course to ensure the safety of our employees. We have taken several initiatives to ensure this, including restricted traveling. At this time, no infection among employees has been reported, and our breweries remain open,” Hart continued.

China is the world’s largest beer market and one of the leading growth markets for Carlsberg. The Asia region had “a good year,” thanks to strong sales in China, notes Carlsberg.

“The main driver was China where we delivered very strong results. Revenue grew organically by 12 percent. This was the result of 6 percent volume organic growth and 6 percent price mix,” Hart explained.

“This is a very sad situation for China and its people. The government is taking it seriously and has implemented a series of initiatives. We hope the government will succeed to stop the virus spreading and we are monitoring the situation closely,” Hart concluded.

Starbucks has closed around 2,000 outlets in China to protect staff and back government efforts to contain the outbreak.Closures and safety precautions
Obviously a multitude of other businesses will be financially impacted as outlets stay closed. Starbucks has closed around 2,000 outlets in China to protect staff and back government efforts to contain the outbreak. The company has also already warned this will likely impact its financial performance. Luckin Coffee has also shut its stores in Wuhan.

Several fast-food chains in Wuhan and neighboring Chinese cities have also closed as well as retailers and other food and drink outlets.

As the outbreak accelerates, global markets have been unsettled with some commodity prices affected.

Meanwhile, a Nestlé spokesperson tells FoodIngredientsFirst that it takes its responsibility for employees and to the communities in which it operates seriously. It employs around 43,000 people in China, but does not have any manufacturing facilities in Wuhan, the epicenter of the coronavirus outbreak.

It has taken several actions in the wake of the coronavirus outbreak. These include prohibiting all business travel to and from China for employees worldwide and advising employees on how to minimize the risk of spreading infection and providing them with information to ensure they stay updated.

During the period of the Chinese New Year, which was extended by the authorities to February 3, Nestlé’s factory operations were limited.

“This means that any impact is minimized for the time being. We are monitoring the situation and will make adjustments to our operations where necessary,” says a Nestlé spokesperson. “We continue to follow the advice of public health organizations and have created an internal team to manage this evolving situation. We are also working closely with the authorities in China.”

In light of the virus, Cargill is extending the holiday leave of its employees in China until February 9.Cargill distributes face masks for employees as a preventative measure
The outbreak is obviously a quickly evolving issue, one of which is being very closely monitored by the global F&B industry. There could be more information in the days to come with regards to supply chains and market impacts.

FoodIngredientsFirst also spoke with Cargill, which has over 50 business locations and more than 10,000 employees in mainland China. Cargill’s businesses in China include grain and oilseed supply chain, animal nutrition, animal protein, starches and sweeteners, edible oils solutions, texturizing solutions, structured finance, energy, metals and transportation.

“At Cargill, the safety and well-being of our colleagues is our top priority. Due to the ongoing coronavirus outbreak, our global security and local country management are recommending that Cargill employees defer or cancel business travel to the Hubei Province, where the current outbreak originated,” says the Cargill spokesperson.

“Our plants remain operational, but we have asked our employees in our Cargill Beijing, Shanghai and Nanjing offices to extend their holiday leave until February 9, in alignment with Centers for Disease Control and Prevention guidance.”

“We are offering support services for any employees who have been exposed to coronavirus or have traveled to Wuhan, and are working to procure face masks for our employees, their families and local communities as a preventative measure.”

Cargill has a significant footprint in China and stresses its commitment to assisting in the aid and relief efforts in the local communities, by committing two million Chinese yuan to the Chinese Red Cross.

The 2019-20 Wuhan coronavirus – capable of rapid human-to-human transmission – outbreak is an ongoing viral epidemic primarily affecting Mainland China, along with isolated cases in 27 other countries and territories. These include several countries across Europe, North America and especially the Asia-Pacific reporting cases. Symptoms include fever, coughing and breathing difficulties, and the virus can be fatal.

To date, approximately 24,567 cases have been confirmed with 493 deaths attributed to the virus.

The outbreak of the coronavirus has already led the World Health Organization to declare a public health emergency of international concern and earlier this week Environment and Public Health MEPs discussed the outbreak in Brussels.

UN food agencies offer support to China
The Food and Agriculture Organization of the United Nations (FAO), the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP) have offered support to the country as it battles the novel coronavirus (2019-nCoV) outbreak. FAO is working closely with the World Health Organization (WHO), the World Organisation for Animal Health (OIE), and the International Atomic Energy Agency (IAEA) through its joint FAO/IAEA Division, to help identify potential animal hosts of this virus. In particular, FAO has activated an incident coordination group that brings together global, regional and country specialists to assess the situation and ensure coordinated awareness and activities. It is working to ensure the readiness of all national veterinary laboratories to rapidly detect the new virus in animals and animal products destined for human consumption, as well as to thoroughly conduct surveillance of host animals and 2019-nCoV circulation in the environment, as needed.

FAO together with WHO and OIE, under the concept of the One Health approach, has been promoting increased awareness of zoonotic (animal-to-human) diseases and devised best practices in combating them. FAO also has a long history of cooperation with WHO in reducing food-related risk, and in promoting healthy food production and consumption, including through the Codex Alimentarius - a reference-setting compendium of international food standards, guidelines and codes of practice which is a vital tool in an age of globalized food trade.

By Gaynor Selby

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