The Coronavirus Impact on the Food and Beverage Industry

July 6, 2020
In our inaugural podcast episode, host Erin Hallstrom talks to Food Processing’s Dave Fusaro and Pan Demetrakakes about one of the most important topics impacting food and beverage manufacturers right now: coronavirus.

In our inaugural podcast episode, host Erin Hallstrom talks to Food Processing’s Dave Fusaro and Pan Demetrakakes about one of the most important topics impacting food and beverage manufacturers right now: coronavirus. We talk about the devastating impacts the virus is having on the industry. Dave walks us through how processors are adapting to serve the ‘at home’ consumer and we contemplate what the future of food processing looks like and how automation might play a role. Listen to the podcast or read the transcript below. 


Erin Hallstrom: Welcome to Food For Thought, a Food Processing podcast that takes you behind the headlines of the food and beverage industry. I'm your host, Erin Hallstrom. With me today are Food Processing editor in chief, Dave Fusaro and senior editor, Pan Demetrakakes. Let’s get started.

What a time to be in the food and beverage industry. We've got a worldwide pandemic that's impacting people's health, the labor market, the economy, the supply chain, and more recently, societal issues have taken a more prominent role in how brands respond to their consumers. Let's first talk about COVID. We've covered the coronavirus a lot in the magazine and the website, but there's obviously so much more of this virus we don't know. Tell me, both of you, what effect do you think the pandemic is having on the food and beverage industry so far?

Pan Demetrakakes: Well, the biggest and most obvious and most terrible effect is that its workers are getting sick and dying. According to the latest figures by the Food and Environment Reporting Network, there have been more than 30,000 meat and poultry plant workers who have suffered COVID-19 and more than 3,000 workers in other sorts of food processing plants. And the death toll has gone to more than 100 for meat plant workers and a dozen for workers in other kinds of food plants.

And those are just the cases that we know about. Like everything else about COVID, those numbers are probably resulting in under-reporting. And that obviously has a devastating and horrible effect on the industry because people are literally afraid to come to work. According to one poll I saw this morning, some 40% of food industry executives say that their staff is openly fearful of returning to work and getting sick.

Something like that has to affect morale. It has to affect absenteeism and it's just going to have a bad effect on efficiency in general. And not to mention that the industry in some cases is getting something of a black eye, especially when it comes to meat and poultry. There have been instances where meat plants have been the center of infection for their cities, their counties, even entire chunks of states.

And, you know, this is an industry that had been kind of sketchy in terms of how it was viewed with, you know, how it treats its workers. This isn't doing it any favor. So, yes, it's a big mess and it's obviously something that has devastated the food industry in particular as much as it has the country and the world as a whole and there's just no getting around that.

EH: Yeah. Definitely. Dave, what are your thoughts on this?

Dave Fusaro: Well, consumer behavior has been interesting to say the least and well-chronicled, too. But I think the million-dollar question, the $500 billion question is whether this is merely temporary behavior and shoppers will go right back to their previous habits when this is all over, or if this will become the new way of shopping. Now, there are a couple of...this...this is in my last sentence. This behavior in general meant cooking at home, and for most people that meant simplicity. Comfort foods and tried and true staples, frozen foods, and things that could be cooked quickly and easily because, after all, you got your kids home and they're running all over the place, too. Nothing too exotic or too complicated to make.

Now, once the stress of this situation and even some supply chain shortages are over, will shoppers continue to buy boxed macaroni and cheese and ice cream or will they go back to trying exotic, ethnic foods and other complex dishes that require a lot of ingredients and a lot of prep time?

EH: You talked about, Dave, in your comment about the new way or new ways of looking or thinking of things. And I'm wondering what new methods or technologies do you think food and beverage companies have maybe been more ready to accept as a result of COVID and some of the new, you know, best practices around workplace spacing issues or what have you.

DF: I don't want to step on our plant operations specialist's toes on this, but automation...I'm sure he's going to mention it. So I'll get off that topic relatively quickly. I think this might be a nice push for more automation, taking people out of, you know, at least the linework. But also I think some architecture and engineering firms that is talking very excitedly about new designs for food plants that work in more distance between workers and more sanitation steps. And this is for both new plants and to retrofit the existing ones. Pan? Expand.

PD: If it's okay with you, Erin, I'd kind of like to turn that question around or turn it inside out or whatever, and talk about a technology that is or was being abandoned as a result of the COVID crisis, and that is automatic ordering. Grocery stores, especially the big chains, years ago worked out these terrific automatic ordering and replenishment systems that depended on algorithms that in turn were fed by shopper data. So, it was very easy, at least in theory, to see what was about to run out, what was selling well, and be able to order directly from the distributor or even the manufacturer in some cases.

However, when COVID struck, people's buying patterns completely changed. I won't go into detail on that because it's kind of a familiar story, but the point is that the automatic ordering and replenishment algorithms no longer worked. So, grocery store managers, regional managers, etc., their wholesalers, they had to actually do their jobs the old-fashioned way. Get out, see what people are ordering, and then try to negotiate replenishments. And because the demand was so distorted with certain products going way up in popularity and others down, it was a challenge for the manufacturers to try to keep up with those changes in demand and actually make more of the products that all of a sudden people wanted more of.

So, as I understand it, the industry kind of backed away at least temporarily from the automatic ordering mindset. And to tell you the truth, I'm not sure to what extent that's going to stick, but considering how much disruption there was and how much there would likely to be in the event of a similar situation in the future, heaven forbid, they'll probably want to keep that extra flexibility in their back pocket, so to speak. So, we might see an evolution of how things move along the supply chain from manufacturer to retailer to allow more flexibility and be able to accommodate situations like this better.

EH: Right. It almost sounds like that adage of, "Everything old is new again."

PD: It kind of is. You've got guys darting around with clipboards instead of just pressing a few buttons on the keyboard.

EH: I think everyone's heard of we're flattening the curve, we're doing, you know, once the data gets to a point where the new normal becomes normal, what effects do you both think are likely to linger on post-pandemic?

DF: Well, for me, I think what I mentioned earlier about consumer behavior, you know, will it go back to the way people were shopping pre-pandemic or, you know, will this have a permanent effect on going back to comfort foods and simple things and more meal preparation at home?

Now the other thing is, I think it'll be interesting to see if any of these new direct-to-consumer efforts succeed. Several processors are trying that approach in newer and bigger ways. Frito-Lay is giving it a really big try. And just today it was announced that Constellation Brands, the liquor company bought Empathy Wines, and in part because Empathy has a good direct-to-consumer wine-selling effort. And we talked earlier, Pan talked earlier about the meat industry getting a black eye.

People talk about, you know, will cruise ships ever fully recover? Will the airlines ever fully recover? I worry that the meat industry might never fully recover. I mean, they're doing great now because of the whole comfort food situation, but meat companies were first looked at as heroes, I think, for keeping the supply of hamburgers and pork chops, you know, coming into the grocery stores but then they became hotspots for the COVID virus, and people started hearing about how horrible it is to work in those cold, damp, crowded conditions in those plants.

And then as the plants shut down, farm animals were being euthanized because they couldn't be slaughtered in time. Farmers were dumping milk, couldn't be processed. And add to that long-running stories about animal cruelty and farm animals' contribution to global warming and other environmental concerns and how inefficient animals are at producing a pound of protein. And I think many people might take this as an opportunity to say, "Well, the meat industry really is kind of archaic. Maybe we don't need so much dependence on meat and maybe there will be a movement toward plant proteins."

EH: Definitely. Pan, what do you think? What are your thoughts?

PD: When it comes to lingering effects, I'd like to expand a little bit on what I said before about the supply chain because one thing the pandemic has bared is its flexibility all across the supply chain including the part from farmer to processor, as well as processor down the line.

Dave mentioned farmers being forced to dump milk, and the reason that happened was because the dairy supply chain was set up to funnel a great deal of America's dairy output to restaurants and institutions like schools. Think of half-pints of milk for kids' lunches, think of all the cheese that gets used for pizza and cheeseburgers, and so on. The demand for that dropped way down, and while the retail demand went up, the supply chain was just so rigid in terms of packaging and just in terms of what they were set up to make and for whom that farmers had to dump milk simply because there was nobody around to process it.

So, in the future, I like to think that the flexibility, any flexibility that the supply chain has gained as a result of the pandemic will be retained so that the next time something like this happens, switching between channels like retail and foodservice will be a lot easier. And that requires or would require a lot of changes all along the line in terms of more versatile equipment, more automation, and very likely, looser regulations in terms of packaging and what has to be done to make a package suitable for one channel or another. So, I really think that, or actually it's more like a hope that the supply chain flexibility that is being forced on the industry by this crisis, that they'll find a way to retain it for the future.

EH: It definitely sounds like we're going to have a lot to cover in terms of innovation and new ideas for the coming months and years on the pages of Food Processing Magazine and the website.Before we sign off on this, our first episode, Dave, Pan, is there anything, any upcoming projects you'd like to plug so we'll let our audience know about?

DF: I do. I want to plug the upcoming Green Plant of the Year. It's an annual project we've been doing for probably at least 10 years. I can give you all the specifications, but I think you get what it is. A sustainable plant. It has to be new or, whatever renovations were done on it, less than three years old. So, there's a long list of considerations but I think you get the point. Just email me at [email protected].

EH: Pan, do you have anything?

PD: Well, I am starting to work on our entrepreneurs coverage for the September issue. So, if you are a food processor who is, you know, if you are a food entrepreneur or if you know of one who you think would be a good candidate, then shoot me an email at [email protected].

EH: Thank you both for joining me today. And for everyone else listening out there, thank you so much for being a part of our first episode. 

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