COVID-19 update: Food excellence may “fall into the eye of the hurricane,” say Italian industry reps

28 Feb 2020 --- The coronavirus (COVID-19) outbreak is causing concern for the Italian F&B industry, amid reports of a rapid increase in laboratory-confirmed cases in the northern region of the country, since last Friday. Representatives of the nation’s F&B sector have released statements outlining how the spread of the virus may significantly curb industry’s operations. Meanwhile, in China, sales of alcoholic beverages slump amid the closure of popular entertainment spots, while local businesses expect opportunities in food delivery service.

“The risk of a production blockade of the northern regions after the Coronavirus alarm could impose a brake on the Italian manufacturing sector, including the food sector [translated from Italian],” says Ivano Vacondio, President of the Italian food and drink federation Federalimentare, in a statement addressing the latest news related to the “closure” of the northern regions of the country.

“It is still too early to understand the extent of the problem, but it is clear that we are following the matter with great apprehension: what is happening due to the alarm surrounding COVID-19 could be capable of disrupting economic flywheel of the most productive part of the nation and the very difficult recovery path that the system needs,” continues Vacondio, commenting on the recent data.

Food excellence could also “fall into the eye of the hurricane,” spelling concern for a whole sector that has so far proved to be against the trend of the rest of the industry, asserts Federalimentare. In 2018, the northern Italian regions of Lombardy and Veneto accounted for 36 percent of the sector’s overall export. “If you add the export of Emilia Romagna, the sum of the three regions reaches an incidence equal to more than 52 percent of the total sector export,” outlines the federation.

The outbreak is most challenging for smaller local Chinese businesses without the resources to deal with lagging operations.Sourcing from China
Speaking to FoodIngredientsFirst about the impact of the outbreak on supply chains in China, Shasha Yu, Marketing Director of Sweet Green Fields, details, “The outbreak of coronavirus doesn’t affect the continuity of our supply as we maintain stocks in many regions around the world. But we see the impact on our upstream, the stevia propagators in East China. Due to lack of labor, they are struggling with propagation of stevia and transportation of the seedlings to regions where the plants are planted.”

“So it may lead to a shortage of the leaf raw material in year 2021 and increase on the pricing of stevia extract. SGF has a sufficient supply of stevia leaf raw material and our own stevia propagation and planting bases,” she adds.

Yu explains that the viral outbreak in China is also leading to new marketing strategies. “The epidemic situation has even expedited innovative product development. For example, a well-known manufacturer of plant-based drinks in China has recently launched a walnut drink with an addition of GABA and L-theanine in the formulation that claim a benefit of alleviating stress caused by the spread of coronavirus.”

The outbreak has led to a slump in beer sales in China, due to the closures of entertainment spots.Booze sales slump
The coronavirus outbreak is severely impacting entertainment spots and dining outlets across China with widespread closures all over the country. Notably this has influenced a slump in beer sales, as reported by Carlsberg in previous FoodIngredientsFirst coverage.

Similarly, British booze heavyweight Diageo has released a trading update detailing the impact of COVID-19 on its 2019 performance. “The COVID-19 situation is dynamic and continues to evolve and these ranges exclude any impact of the COVID-19 situation on other markets beyond those mentioned above. We will continue to monitor the situation closely,” the company states.

“We estimate the negative impact [of COVID-19] in fiscal 2020 on the group’s organic net sales and organic operating profit to be in a range of £225 million [US$290 million] to £325m [US$419 million] and £140 million [US$180.4 million] to £200million [US$257.7 million], respectively, with the timing and pace of recovery determining the impact within these estimated ranges,” Diageo outlines.

“Bars and restaurants have largely been closed and there has been a substantial reduction in banqueting. As the majority of consumption is in the on-trade, we have seen significant disruption since the end of January which we expect to last at least into March. Thereafter, we expect a gradual improvement with consumption returning to normal levels towards the end of fiscal 2020.”

Meanwhile, food service in China is seeing new opportunities as more citizens are inclined to stay at home. China Xiangtai Food, a company primarily engaged in pork processing, has launched online ordering service to communities in Chongqing, China where residents have limited outdoor access to food purchase due to the implemented epidemic control regulations following the spread of COVID-19.

“We are excited to work with CSSG to launch an online order and delivery service. It is a good start for us to serve five communities managed by CSSG and benefit over 70,000 residents,” comments Zeshu Dai, Chairwoman and CEO of China Xiangtai Food. “We hope to leverage the platform and deliver our products to more communities and help more people in the epidemic.”

By Benjamin Ferrer