Times of crisis and challenge are always difficult for food manufacturers, but they also provide opportunities for companies to innovate.
Pivoting quickly allows them to position themselves to best respond to crises like the coronavirus. It’s a quality that’s essential to current performance, and also to how well they’ll do when the crisis has passed.
“Consumers recognize and reward companies that are able to exemplify this kind of nimble response,” according to experts at Corbion. “We’re already beginning to see some recognition for brands who have been able to reconfigure their manufacturing processes to create hand sanitizer or face masks, for example, or retail stores that are using their pharmacy drive-through windows as purchase points for their top-selling items.”
Those are creative solutions that consumers appreciate and will remember about those companies long after the coronavirus is over.
Corbion’s experts also believe that there’s a real opportunity for larger food manufacturers to improve their brand equity by acting as suppliers for smaller companies who may be struggling during this crisis.
“In some places, we’ve even seen restaurants and bars acting as makeshift grocers, by selling their foodservice supplies directly to consumers. With that being said, there will undoubtedly be consolidation in the food space as a result of this situation.”
Smaller businesses, they add, have been hit hard by the effects of the pandemic, and many may end up being acquired by larger companies. To further exacerbate matters, Corbion anticipates that it will be more challenging for new food manufacturers to enter the market, as funding for these types of ventures will be harder to secure.
Even in the midst of change, bakers and manufacturers continue to remain focused on the quality and safety of their products, said Ryan Will, a baking professional with AIB International.
“As consumers seek out foods that are familiar and provide comfort, bakers and manufacturers may be able to engage a population who had previously opted for other more specialty items,” Will said.
Robb MacKie, President & CEO of the American Bakers Association feels bakers have a tremendous opportunity during this time to tout the health benefits of grains and how baked goods deliver that.
“On ABA’s Bake to the Future podcast, Cyrille Filott of Rabobank left that as a key takeaway of how consumers will react to baked goods post-pandemic,” MacKie said.
Bakery Equipment Manufacturers and Allieds (BEMA), meanwhile, is seeing excellent communication channels develop between bakers and suppliers as a result of the pandemic, said BEMA’s president and CEO, Kerwin Brown.
“Members can’t be on site, but they are using every other communication form to stay connected and meet the needs of their customers,” he said. “This is a real sense of ‘we are in this together.’ Our members are talking daily to their customers, seeing how they can help.”
Members are also adapting to virtual support and troubleshooting solutions, he added. BEMA has heard, for instance, of a number of virtual start-ups and FAT’s being created.
“This also depends on the customers – some plant staff are so busy that they’re really hard to connect with but do when they need something – that’s happening at all hours. Then some more corporate, engineering staff have some time, working from home.”
In the meat industry, meanwhile, consumers are being introduced to a lot of great products and companies they may not have looked at before, said Chris Young, executive director of the American Association of Meat Processors.
“The small processors that we represent have seen an incredible surge in business during this time, and upwards of 40% or more of the customers coming into the establishments are new,” he said. “This means increased business now and an opportunity for them to show the variety of products and customer service they can provide.”
Short-term challenges
In the next three to six months, Young said he believes there will be a lot of pressure on the meat industry to provide enough products to meet the demand of consumers at retail as well as the need to refill the supply chain once the restaurants and other establishments reopen.
“This will not be easy because we don’t know if there will be enough animals available to meet the demand,” Young said. “With large plants closing down there is no place to take animals that were scheduled for slaughter, and in some cases they are being euthanized.”
Tom Super, senior vice president of communications for the National Chicken Council, said a surge in retail alone won’t be enough to make up for lost business in other channels in the short run.
“A 30% average increase in grocery sales won’t be enough to offset the loss of most of the foodservice market, where consumers typically spend 50% of their food income.”
In the baking world, Corbion’s experts said that while it’s hard to predict many of the far-reaching impacts on the food industry, it’s certain that some businesses will be forever changed.
“The restaurant industry in particular will be forced to find a new normal after dealing with an enormous reduction in customer traffic. Others, like food manufacturers, will be impacted with supply chain issues caused by regions most affected by the coronavirus.”
As that occurs, it will become more challenging for manufacturers to source raw materials and finished goods. In countries where the pandemic is finally receding, the availability of certain materials will change frequently. A byproduct of all this uncertainty, according to Corbion, is that manufacturers are struggling to create accurate product forecasts that accommodate changing consumer demands.
“One example of this is the shortage of packaged yeast in the United States, where increased consumer demand was created by the sudden interest in baking bread at home. Without some kind of previous shopping history to base their predictions on, yeast manufacturers and manufacturers of many food products will struggle in the short term as they adapt to these new and unique consumer demands.”
In the short term, said Eric Richard, education coordinator for the International Dairy Deli Bakery Association (IDDBA), it’s been a “tale of two segments.” On the one hand, center-store sales have done very well, with bread sales up 60-80% some weeks compared to the same weeks the year before.
Instore bakery, sales, are another matter.
“Sales were down significantly, down 25% one week, 20% another. I think there are several factors at play. A lot of instore bakeries are closed, or they have limited staffing or hours.”
And, he added, instore bakery products don’t have near the shelf life center-store products do. And If people are only stocking up once or twice a week, they’re a lot less likely to buy more perishable foods.
MacKie shared it has been a tale of two segments for ABA Members as well, with those selling primarily into foodservice being in much different spot than those primarily selling into retail. The ladder of which have seen huge sales in Q1 and Q2 of 2020.
“We will need to be careful not to burn out the employees who work in those facilities and to consistently and constantly reward them for their amazing work,” MacKie said.
After speaking with several foodservice bakers, many of whom have had layoffs and furloughs, their first half of the year will be rough, MacKie added.
“We could expect pent-up demand for foodservice – which could hopefully help these Members rebound from an unprecedented and sudden slowdown in business.”
Staffing challenges
With bakeries and manufacturing facilities following government guidelines, which has limited the number of workers in kitchens and on production floors, product availability has been affected.
But as Bernadette Haas, director of operations for the Retail Bakers of America, said, with retail bakers, it’s been less a case of a single product and more about consumer retention.
“Right now our bakeries are debating on whether or not they keep their doors open, keep their staff working, and keep the customers coming.”
Retail bakers all over the country have had to pivot the way they do business, Haas added. Most are down 50-60% in sales, and with that cut, they have had to make tough decisions about their staff.
“As small business owners, I think our retail bakers are great at overcoming the odds and still producing quality products for customers, but they may have reduced what is in the cases based on staff available, ingredients available and customers coming in.”
With increased demand for products at retail and the possible addition of new or temporary manufacturing workers, there is a challenge in continuing to meet and exceed the quality and safety demands of consumers, Will said.
“That’s why training your frontline workers, even if they’re temporary, in the processes and procedures used to produce your products, is essential. Our team of baking and food safety professionals can offer that training virtually and through on-site consulting, depending on the needs of the client.”
On the meat side, turkey processors have been able to keep plants operating while also taking critical steps to ensure the health and wellbeing of workers, said Beth Breeding, vice president of communications and marketing for the National Turkey Federation.
“Additionally, the industry is making adjustments to repurpose products originally intended for foodservice for use in the retail space,” she said.
Consumers should still be able to access a wide variety of turkey products across the fresh meat case, deli and frozen aisles, Breeding added.
“While we’ve seen a significant uptick in demand for ground products since mid-March, they are still widely available in most markets. If you can’t find the turkey product you normally purchase, use this as a time to give different turkey products, such as a whole turkey or bone-in turkey breast, a try.”
Q&A
Will there be, or are you already seeing, an increase in demand for alternative protein products given potential limitations of meat supply?
Corbion: We don’t believe there will be a shortage of meat supply domestically, but cost will continue to act as the primary rationale for consumers purchase habits. Consumers will trade down from steak to hamburger, or from beef to chicken as their financial situation merits. In reviewing the sales data around alternative proteins, we have seen increased sales of these products, but it’s a fraction of the growth seen within animal protein products. Further, meat alternatives will experience some growing pains as manufacturers cope with the availability of raw materials, relatively high production costs and the challenge of achieving the right taste.
Young, AAMP: I think that is a possibility, but as I look at store shelves during this time, the meat shelves are nearly empty and the alternative proteins are still sitting there. Ground beef seems to be one of the big items, but they seem to be buying anything that is available.
Super, NCC: I don’t have any hard data to support this, but anecdotally I don’t think so. I’ve seen the pictures of the meat case and the store shelves, and in my own grocery store during the peak “panic buy” time in March, of an empty meat case with a shelf full of plant based products sitting right next to it. The consumers who bought plant-based products before COVID-19 will continue, but I don’t think this situation is converting anyone.
Breeding, NTF: If anything, I think we are seeing something of the opposite. A recent report on consumer trends predicted a temporary reversal of trends like plant-based proteins and a return to foods that consumers consider to be “tried and true.” Familiarity is everything right now, and consumers trust in those familiar products to feed their families.
Will there be a stable ‘rediscovery’ of the center of store?
Haas, RBA: Yes! I believe there will be, and I think our retail bakers will come out of this shinning. This awful pandemic has shown just how strong our bakers are and we couldn’t me more proud of our industry for coming together to help each other.
Will, AIB: With new opportunities now for consumers to try products that they may not have enjoyed before, they’ll notice the quality and maybe discover some new flavors or textures. This new exposure and a positive experience may keep them coming back in the future.
MacKie, ABA: People have fallen in love with baked goods again and while I don’t think we can expect that to last, we can expect that emotional connection to carry over. I think people will remember how our Members products helped carry them through this crisis, whether for basic nourishment or as a special treat. I also think the boom in home baking will help our industry in that people will realize the quality of our Members’ products is very hard to recreate.
Corbion: Based on the data, it appears the center of the store is already seeing a resurgence. Consumers are buying items in bulk and stocking up at home in response to supply uncertainty at the store. The performance of the economy may very well predict whether the center aisles continue to see the kind of rediscovery they’re experiencing now. A conservative outlook is that many consumers will likely need time to recover financially from hardships caused by the pandemic. That slower recovery time means that consumers will likely continue to eat at home while they get back on their feet. Many of the products and ingredients they need to cook are often found within the center of the store. This represents a really unique opportunity for food manufacturers to develop appealing products in the next 18-24 months that can gain a foothold with consumers.
What type of food products are consumers looking for now and what do you think this will look like post-pandemic?
Corbion: Right now, consumers are making fewer trips to the store and trying to purchase enough to get them through 2-4 weeks. This means that items with a longer shelf life and those they can freeze or store are a priority for these shoppers. We also know that during times of crisis, people want comfort foods like chocolate and ice cream. Baking at home has become a way to relieve stress, and creating a family favorite normally reserved for holidays or special occasions offers them some comfort and security. The evidence of this trend is apparent in the baking aisle, where items like flour, sugar and yeast are all sold out. With so many consumers cooking their meals at home, food items that provide some reduction in meal preparation time are key. Items that are ready-to-eat, like pre-cooked or pre-marinated meats, are popular choices right now. Post-pandemic, we think there could be a very slow return to normalcy. People may not resume the fast pace of their lives for some time, especially when it comes to meals. Where some meal occasions were conducted against the clock, it’s possible that going forward, consumers won’t be eager to return to these practices, having rediscovered the joy of eating at their leisure. Cooking at home will likely continue in the interim as consumers slowly return to work and recover financially from the impacts of the pandemic. We also expect a resurgence in healthy eating, with increased purchases of produce and items with perceived health benefits. Consumers will seek out those foods that can help them be at their healthiest in order to fight off the specter of illness. Lastly, smaller package sizes or items with sturdier packaging are likely to remain popular in the future, appealing to safety conscious consumers.
Will, AIB: Consumers right now are looking for foods and ingredients that are familiar and comfortable. Once they’re able to get out and regularly shop grocery aisles again, I think you’ll see consumers trying new and different varieties of baked goods, breaking from what may have been weeks or months of a familiar and sometimes stagnant routine.
Brown, BEMA: I love it that bread is in such demand. Home baking is probably at an all-time high. It is hard to find yeast and baking flour in stores. Bread aisles are needing to be restocked at an incredible rate. Americans have rediscovered the sandwich. Also the sweet goods and snacks are up. People reach for something they love to eat in a time like this and they are not as worried about the latest fad diet. Was just thinking, the new fad is eat more bread, sweet goods and other grain-based products because we love them. Also, there is so much more family time. Time to be at home for lunch and dinner, with family and bread is an essential part of that family meal time.
Haas, RBA: Everyone needs sweets during this time and holidays are still happening. So if a bakery is still open, they are offering goods for the holidays and some grocery staples like fresh bread.
What are your biggest concerns for the food industry during the pandemic? Post-pandemic?
Richard, IDDBA: Going back to normal with no hang ups. There are a still a lot of restrictions potentially looming for us, like limiting the number of people in store, transportation, supply chain issues. If manufacturers have to shut down, like Smithfield did, that could happen to bakery as well. But that would probably be more short-term.
Corbion: Right now, we’re very concerned for the health and safety of frontline food industry workers like grocery store clerks and food delivery drivers. Many retailers are struggling to keep items on the shelf as people are panic buying, putting a strain on supply chains. Food manufacturers and retailers alike have been challenged with predicting their supply needs during this turbulent time. After the pandemic, it’s hard to predict the fate of trends like the clean-label movement, or natural and organic foods. Will food manufacturers return to these formulations, or will they move back to their less costly, conventional counterparts? And the future of innovation, new product launches and research and development are, in many ways, also in question.
MacKie, ABA: The biggest concern has been and will be keeping our workforce safe, healthy, and praised for their critical role in our food supply system. Our Members have gone above and beyond safety measures to ensure this happens. Many of our Members are also creating bonus programs to help these employees financially. At ABA, we are fiercely advocating not only for high-priority access to PPE for these employees but also for government-guaranteed tax relief for workers who are on the frontline.
The most important thing is how quickly the economy bounces back from depression era levels of unemployment. That is why we are pushing Congress and the Administration to pass a broad, pro-growth recovery package that halts all but essential new regulations, reduces taxes further, and spurs hiring and innovation.
Haas, RBA: The comeback worries me because it’s a huge unknown. We don’t know when our Retail Bakeries will be at full capacity again and I think that is what’s so stressful to all of us. We can learn to pivot when we need to, but figuring out what our new normal will be is difficult. As the national association for Retail Bakers, the Retail Bakers of America wants to be a guiding resource for our industry and not having those exact answers is tough. We will however be there every step of the way to support our Retail Bakers!
Super, NCC: The biggest concern is the availability of labor in the plants. That won’t change during the pandemic or post-pandemic.
Young, AAMP: During the pandemic is what I stated earlier and that is meeting the demand on consumers while trying to mitigate the risk to our employees and keep them healthy. Post pandemic it will be continuing to meet the demand and finding enough workers to meet that demand. Finding employees who want to work in the industry has always been a struggle and hiring will continue to be a challenge moving forward.
Brown, BEMA: How slow the recovery will be for the plants and sectors that were/are being hit so hard. Restaurants are such an vital part of the US economy and lifestyle and we need them back. I am overall positive because people adapt and I believe innovation will be at an all-time high. Capitalism and ingenuity thrive in challenging times and I can’t wait to see how the baking industry emerges from this. It has brought up a great point that people in the industry are talking about – For the most part, bakery is thriving and that is a great story to tell as a career choice.
Additional insights from the roundtable:
Will:
“With consumers currently eating at home more often and craving staple products, manufacturers are focusing their resources to meet that demand. That means they may be shifting to produce more sliced white and wheat bread, and fewer specialty products. It’s important that manufacturers think through their supply chain’s ability to meet that shift in production, as well as what’s being done with specialty ingredients, in both the short- and long-term.”
“With new opportunities now for consumers to try products that they may not have enjoyed before, they’ll notice the quality and maybe discover some new flavors or textures. This new exposure and a positive experience may keep them coming back in the future.”
Brown:
“I think the biggest issue with keeping the shelves stocked is plants shutting down because of a case or multiple cases. Then there’s a two-week shutdown, then starting back up is a real issue. Shipping also has to remain open, truck and rail. The BEMA members are doing everything possible to meet the demands of their customers. It has been amazing to see how creative people are.”
“Foodservice has really been hit hard. Some plants are running at 10 – 20% of their pre-Corona capacity. People are being furloughed, and I believe plants will be shut down if this continues. On the other hand, the bread, bun, snack, pizza and sweet goods sectors are running at full capacity.”
Young:
“The biggest demand right now is workers. Trying to get product out while trying to mitigate the risk to their employees. Consumer demand has been really high and there is a lot of pressure on the industry to deliver, and it is difficult to find the balance of working enough hours to produce the needed products and keeping your staff healthy and not run down.”
Super:
“I think you will see more variety in cuts that would typically be destined for foodservice or frozen. Think wings and leg quarters. It might take a little while longer to stock the meat case, but product will be available.”
“I think one opportunity down the road a little is to have consumers think back to this time and ask themselves, ‘Why was chicken the first thing gone? Why was it in such demand? Why would I wait in a long line to buy it?’ Maybe the ‘affordable/versatile/healthy’ adage really is true.
Breeding:
“The food supply chain is safe, resilient and strong. Consumers should continue to have confidence in the food supply chain – from farmers all the way to the grocery store.”
“The federal government addressed one of the biggest issues by designating food and agriculture workers as part of the nation’s ‘critical infrastructure’ during this crisis. Given the vital role these workers play in the production process, protecting their health and safety remains a top priority.”
“In response to stay-at-home orders and restaurant closures, more families are cooking at home right now, and they’re looking for products they can transform into easy, delicious meals. In the turkey category, we’ve seen a significant increase in ground turkey sales at retail – up more than 34% year-over-year for the week ending April 12.”
Haas:
“I think consumers are truly looking to support local businesses, and bakeries will benefit from that. Also, our bakeries have had to get creative on ways to communicate with their customers. A lot of social media asking for support and showing the favorite customers exactly what they are doing to stay open.”
“So many of our retailers have already closed their doors and are laying off staff. What will be hard in the coming months is how do they come back from this. How do they ramp up with staff, supplies, and orders?”
Richard:
“Retailers that, in the past, online and delivery may have been overlooked, they’re certainly aware of it now, and they’re really feeling the effects. Online ordering of baked goods could become more common. Online will get more and more looks. If retailers can show that online is viable, they’ll get a whole lot of play post-pandemic. Online is going to be an absolute necessity.”
“I think the instore bakery will recover. Instore bread stores continue to be good. Donuts, cakes, the things you tend to buy for events, that’s what’s getting slammed, no one has the desire to buy a cake. Rolls and bread are still moving, just not at same level.”
“Now that people are forced to do meal prep, they may have this awakening about cooking at home. People will be able to be more creative, and they might have a newfound appreciation for cooking at home.”