Industry Insights · 14min read

What Will Food Supply Chains Look Like Post-COVID-19?

Join us as we explore some of the ways in which the pandemic has changed the European food supply chain.

2020 will go down in history as the year the planet stood still, and industries around the world got turned upside down. While some sectors of the food industry came to an abrupt halt, others were forced to grapple with unprecedented volumes and circumstances. In the following article, we take a closer look at some of the key challenges the food industry has grappled with, including:

• A rise in short-term protectionism; a shift toward long-term regionalism

• Removal of single-source-dependencies 

• Increased resilience via contingency plans

• Digitalisation of logistics solutions, inspections & events

• Better hygiene in processing plants & incentives for seasonal workers

Read on to learn what changes these challenges are bringing about in our supply chains.

 

A Rise in Short-Term Protectionism. A Shift Toward Long-Term Regionalism. 

As the pandemic unfolded, we saw a surge in protectionism across the globe while governments scrambled to secure their food stocks with trade restrictions and export reductions. The vulnerability of the EU, which imports around 50% of its food supply, was laid bare as a result. But the EU has remained steadfast in its core messaging, “The EU’s unified economic area without internal borders is the bedrock of our prosperity, social security and cohesion.” Many expect regional customs unions, such as the EU Single Market and African Continental Free Trade Area (AfCFTA), to come out of this period stronger and more united. The pandemic has exposed the fragility of globalisation and served as a reminder of the dangers of protectionism. Thus, the long-term benefits and heightened security of regional trade liberalisation and openness are more apparent than ever before. Ultimately, the expectation is also that the EU will work to transition to decrease its dependency on imports and shift its focus to growing and sourcing more locally in the long-run. 

 

Removal of Single-Source-Dependencies 

If we were asked to highlight one threat that supply chains across all industries have grappled with, it would be the reliance on single-source dependencies. These possess the potential to be detrimental to the survival of businesses and industries in times of crisis. Thus diversifying supply chains and ensuring a selection of suppliers are emerging as critical tools for the promotion of stability. For food ingredients—an industry which has long-been heavily price-driven—experts are now reiterating that increased supply chain diversification will result in a shift towards healthier competition and more security. In turn, we expect this expansion to tie back into the shift toward regionalism. Carlos Cordon, Professor of Strategy and Supply Chain Management, reiterates this on IMD.org, “To eliminate single-source dependencies, and to establish a flexible and adaptable supply chain, product integrators, sub-system suppliers and component suppliers will source, assemble and deliver from their own backyards.” This also touches on the point of the general transition toward a more agile food system in which end-to-end visibility is proving to be the way forward.

 

Increased Resilience via Contingency Plans

At the beginning of the outbreak, panic-buying in supermarkets triggered by fears of food shortages caused some British supermarkets to devise ‘Feed the nation’ contingency plans. These included scaling back the range of foodstuffs, and instead shifting production and stocking back to staples. While efforts such as these did play a crucial role in minimising disruptions in the food supply chain, their reactive nature meant that time and money was still lost in the period before their implementation. The pandemic has proven to be a wake-up call for businesses and governments alike, and the importance of developing and continually revising contingency plans is inescapable. 

In the new Farm-to-Fork strategy, the Commission commits to the introduction of new risk assessment and management measures that will include a food crisis response mechanism. Likewise, the Commission has been forced to question and reassess its prioritisation of reserves—the pandemic has proven that the EU’s 90-day oil stocks are far less critical to consumers’ survival in times of crisis than the 43-day cereal stocks. The revelation that the EU only stores approximately 12% of its annual cereal consumption, while the US maintains 25% and China 75%, revealed this vulnerability of Member States even further. Similarly, in the business world, experts expect to see a stark increase in the development of so-called ‘scenario-planning strategies’ which will work to mitigate the effects of different types of crises, such as natural disasters, pandemics, or conflicts, on supply chains by leveraging new technologies.

 

Digitalisation of Logistics Solutions, Inspections & Events

It’s no surprise that digitalisation has, once again, proven to be the key to overcoming bottlenecks and is carving the way forward along every point of the supply chain. Indeed, the extent of technology’s role in coping with the challenges imposed on supply chains throughout this pandemic has been vast and widespread. One such example from the logistics sector was the global shift from Bills of Lading, which require the protrusion of the original proof of payment, to Sea Waybills, which are electronic by nature and only require the presentation of an identification document for the goods to be released from the respective port. In Europe’s organic certification sphere, on the other hand, IFOAM EU Director, Eduardo Cuoco, highlighted that the physical restrictions imposed by the lockdowns led some certification bodies to shift their processes to online inspections and develop new e-tools. And while the bulk of the event and convention industry took a massive blow from the cancellation of large-scale gatherings, numerous actors revamped their events entirely and redesigned them for the virtual sphere in an attempt to continue to create spaces for knowledge transfer, networking, and business acquisition. 

Ultimately, businesses and sectors which were previously notoriously non-digital have been flung into the deep end and forced to swim. How many of these initiatives will become the ‘new norm’ remains to be seen.

 

Better Hygiene in Processing Plants & Incentives for Seasonal Workers

During the pandemic, the meat industry came under fire in several nations, including Germany, the Netherlands, the United States, Ireland, and Canada, after Covid-19 clusters emerged in a series of processing plants. The widespread unethical practices and unsavoury working conditions, which include overcrowded workplaces and tightly packed communal housing, have not exactly been a well-kept secret in recent years. Nevertheless, it took a string of Covid-19 outbreaks to really shine a spotlight on the dire working conditions that some food industry labourers, particularly in the cheap meat sector, are still exposed to. With public pressure mounting, some local governments were finally forced to take action and introduce measures to ensure the increased protection of workers’ health down the line. Throughout the entire food and agriculture industry companies have proceeded to ramp up their health and hygiene policies in an effort to contain the virus and protect their workers, and with it, their businesses, down the line. Thus, we expect these new measures to be maintained as the new norm well into the future.

In spring 2020, closed borders and thus resulting labour shortages painted a dire picture for actors in the agriculture industry who are heavily reliant on seasonal workers. Hence, the Commission’s classification of ‘seasonal workers’, whose responsibilities include harvesting, planting, and tending to crops, as ‘critical workers’ was well-received. Further measures introduced by the Commission include increased plans to guarantee that workers’ rights are upheld and faster and simpler access to visas for foreigners. Likewise, some Member States, such as France and Germany, launched innovative initiatives to recruit seasonal workers locally by offering unemployed workers short-term employment on farms. As the initiatives as mentioned above provide benefits and security to agriculture businesses and workers alike, we hope that these are upheld and expanded further in the years to come.

For more information on how the pandemic unfolded in the food industry, check out our Covid-19 Updates page where we compiled the most important industry news from March - July 2020.

Imagery: (1) Federico Respini, (2) Lasma Artmane, (3) Polina Rytova, (4) Jonas Smith, and (5) Zoe Schaeffer via unsplash.com