Food and Beverage Companies Feel the Impact of Coronavirus

Feb. 25, 2020
McCormick and PepsiCo have operations in Wuhan; Coca-Cola, Tyson, General Mills, Mondelez and Unilever also expect financial or operational problems.

This illustration, created at the Centers for Disease Control and Prevention (CDC), reveals ultrastructural morphology exhibited by coronaviruses. Note the spikes that adorn the outer surface of the virus, which impart the look of a corona surrounding the virion, when viewed electron microscopically. A novel coronavirus, named Severe Acute Respiratory Syndrome coronavirus 2 (SARS-CoV-2), was identified as the cause of an outbreak of respiratory illness first detected in Wuhan, China in 2019. The illness caused by this virus has been named coronavirus disease 2019 (COVID-19). CREDIT: Alissa Eckert, MS, Dan Higgins, MAM

As the coronavirus spreads and takes its toll on worldwide stock markets, a handful of American food companies also are feeling the impact of this worldwide crisis. Several have plants in China, and McCormick Co. and PepsiCo have plants right in Wuhan, the epicenter of the outbreak.

McCormick's chairman and president/CEO Lawrence Kurzius acknowledged the company has three plants in China: consumer and flavor solutions (industrial ingredients) operations in Guangzhou and Shanghai and a consumer products plant in Wuhan. As of last week's Consumer Analyst Group of New York (CAGNY) meeting, the Guangzhou and Shanghai facilities were back online after being closed for weeks, but Wuhan remained closed.

"We are closely following the direction of the Chinese Government in Wuhan," a McCormick spokesperson told Food Processing. "Our facilities remain closed pending approval to reopen."

PepsiCo's annual reports list a snacks plant in Wuhan, as well as a research center somewhere in China. The company's media relations team did not respond in time for this report. But just this week, the company announced an agreement to acquire a Chinese snacks company, Be & Cheery, apparently in Hangzhou, for $705 million.

Coca-Cola Co. published a news release about the expected impact from COVID-19 on its first quarter 2020 results. It's "currently estimating an approximate 2- to 3-point impact to unit case volume, 1- to 2-point impact to organic revenue and 1- to 2-penny impact to earnings per share for the first quarter.

"These updates are based on current estimates. The situation with COVID-19 – or coronavirus – continues to evolve, and the company expects to provide more information during its next earnings call in April."

The company noted it's following all government guidelines, donating to organizations that are working to support patients and contain the virus and implementing precautionary measures to protect employees in China, "which includes providing face masks and hand sanitizers; installing temperature screening in offices and manufacturing facilities; and setting up health monitoring mechanisms across the Coca-Cola system in China."

China ranks as the third-largest market in the world for Coca-Cola Co.

China's also a big market for Tyson Foods. The company has extensive operations there, and its Cobb subsidiary has an operation in the province of Hubei, the province Wuhan is in. "We’re closely monitoring news of coronavirus," a spokesman told Food Processing. "We are actively assessing what this outbreak may mean for our global business and preparing for the possibility of any impact. In China, we have been working with the government and we have successfully re-started all of our operations."

Fears that the COVID-19 virus might be worse than anticipated prompted a major sell-off in stocks on Feb. 24. The Dow Jones Industrial Average dropped more than 1,000 points, or 3.6%, just its third 1,000-point drop in its history. All the major indexes were down more than 3%.

There were a couple of comments at last week's CAGNY meeting relating to the coronavirus' effect on business.

General Mills' Chairman and CEO Jeff Harmening said half of its company-owned Haagen-Dazs scoop shops in China were closed. According to its annual report, General Mills has four plants in China: Guangzhou, Nanuing, Sanki (Beijing) and Shanghai.

Mondelez, which usually enjoys increased snack and candy sales during Chinese new year (Jan. 25), now expects lower sales, said Chairman and CEO Dirk Van de Put. While shipments to retailers have resumed, many of the shops have not reopened. Mondelez in 2018 undertook an extensive modernization of a tech center in Suzhou.

Unilever's CFO Graeme Pitkethly summed it best: "Right now, China is a big question mark."

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