Q & A on How COVID-19 is Impacting Food and Agriculture Trends
Written by Andrew Kaiser, Partner, and Jackie Merrill, Senior Manager, Moss Adams; Pablo Valentine, Hershner Hunter
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What direct-to-consumer tactics are clients implementing for the virtual world? Similarly, what strategies are clients using to engage customers?
Jackie & Andy: We work with companies at all levels of production from farm to fork and all points between. From our view, the strategies for each level are different because it depends on who the end customer is. For retail-driven companies, a main focus has been improving clients’ experience on their website as well as online shopping and ordering.
We’ve seen companies on the wholesale and producer side have less impact to their overall sales. If anything they’ve seen an uptick in demand for groceries and other food products as consumer trends have shifted toward in-home consumption. For them it’s about keeping up with demand and adapting to change.
Across the board, companies are trying to figure out how to keep up with demand while keeping their teams safe and socially distanced. They might not be able to use the same level of workforce they could before.
Pablo: On the retail side, many food companies are struggling to pay workers or rent, unless they were already designed to have significant revenue through takeout. That has only gotten worse as Paycheck Protection Program (PPP) funds have been exhausted.
On the other side, producers are as busy as ever. We haven’t seen producers go direct-to-consumer if they weren’t already, but the distribution channels and how they’re reaching consumers has changed. In particular, producers that supplied restaurants or institutional customers that rely on in-person consumption—for example, a university cafeteria—have been able to distribute more products to grocery stores.
Have clients launched new products during COVID? What strategies were considered or implemented?
Jackie & Andy: Many companies are focusing on keeping up with demand for their current products. Some in the restaurant industry have compacted their menu options. Industry-wide trends that are happening in the marketplace are continuing as companies keep a close eye on what consumers purchase. For example, many of the beverage companies are producing hard seltzers, and recently Coca-Cola announced they’re considering entering that market.
Pablo: Many companies are emphasizing their core products with slight variations as they adjust to increased distribution. As we’ve all seen, restaurants are pivoting to accommodate more takeout, and distilleries moved to producing hand sanitizers. In addition, many breweries started to distribute more cans, presumably because they couldn’t sell enough volume through kegs.
Many companies experienced supply chain, sourcing, and raw material issues. What are the biggest challenges your clients faced and how have they adapted?
Jackie & Andy: In the last few months we’ve heard of sourcing issues, especially in the packaging of products. Some manufacturers have had to adapt their product packaging. As a consumer, I’ve seen the same products in different packages, which is often due to supply chain constraints. Some of the supply chain issues aren’t even material-related—it’s an issue of being able to manufacture them in a safe, socially distanced environment.
Some companies are having record sales, but due to COVID-19, they’ve had to decrease their headcount to provide a safe work environment. This causes further delays in the orders being produced. Due to the high demand for some products, producers are attempting to source more for next year.
Pablo: Food supply seems strong. Many food producers seem worried about supply chain issues arising, even though I haven’t heard about significant disruptions. There are talks about potential shortages for certain plastic containers, aluminum, and bananas due to an emerging disease—not COVID—but it’s unclear at this point if these issues will materialize.
How have the challenges of this year impacted innovation, and what new ideas are being considered?
Jackie & Andy: The social distance requirements provide an opportunity for companies to think about what equipment they could put in place that would help the production cycle and keep people safe. Many companies are looking at their production cycle and supply constraints and adapting. Companies are considering opportunities for vertically or horizontally integrating to help grow and diversify.
Pablo: Companies are looking harder at expenses and using this as an opportunity to streamline. On the other hand, we’ve also seen some major expenditures. Many clients—in and out of the food industry—are looking at real estate acquisitions because they have cash, prices for commercial buildings are still competitive, and interest rates are low—particularly for Small Business Association (SBA) loans. There’s also been an uptick in merger and acquisition activity with companies trying to benefit from this low-interest-rate environment to expand or get into new markets.
What consumer buying habits do you think will remain after the pandemic?
Jackie & Andy: As we’re seeing, people are slow to fill restaurants the same way they did before COVID-19, and it seems likely this will continue awhile. It also seems likely takeout will
continue to be a trend. In addition, consumers are growing produce when they can rather than purchasing it. Particularly in our region, consumers care about where their food comes from, and the local fresh market stands have been popular throughout the pandemic. With more people cooking, it seems likely these will continue to be popular.
Pablo: Outdoor seating seems likely to continue as that’s been popular, although we’ll see what happens as the weather changes. In addition, I suspect masks will become more common in public during allergy and flu seasons.
Andrew Kaiser, Partner, Moss Adams
Jackie Merrill, Senior Manager, Moss Adams
Pablo Valentine, Partner, Hershner Hunter, LLP
Assurance, tax, and consulting offered through Moss Adams LLP. Investment advisory services offered through Moss Adams Wealth Advisors LLC. Investment banking offered through Moss Adams Capital LLC.
Jackie & Andy: We work with companies at all levels of production from farm to fork and all points between. From our view, the strategies for each level are different because it depends on who the end customer is. For retail-driven companies, a main focus has been improving clients’ experience on their website as well as online shopping and ordering.
We’ve seen companies on the wholesale and producer side have less impact to their overall sales. If anything they’ve seen an uptick in demand for groceries and other food products as consumer trends have shifted toward in-home consumption. For them it’s about keeping up with demand and adapting to change.
Across the board, companies are trying to figure out how to keep up with demand while keeping their teams safe and socially distanced. They might not be able to use the same level of workforce they could before.
Pablo: On the retail side, many food companies are struggling to pay workers or rent, unless they were already designed to have significant revenue through takeout. That has only gotten worse as Paycheck Protection Program (PPP) funds have been exhausted.
On the other side, producers are as busy as ever. We haven’t seen producers go direct-to-consumer if they weren’t already, but the distribution channels and how they’re reaching consumers has changed. In particular, producers that supplied restaurants or institutional customers that rely on in-person consumption—for example, a university cafeteria—have been able to distribute more products to grocery stores.
Have clients launched new products during COVID? What strategies were considered or implemented?
Jackie & Andy: Many companies are focusing on keeping up with demand for their current products. Some in the restaurant industry have compacted their menu options. Industry-wide trends that are happening in the marketplace are continuing as companies keep a close eye on what consumers purchase. For example, many of the beverage companies are producing hard seltzers, and recently Coca-Cola announced they’re considering entering that market.
Pablo: Many companies are emphasizing their core products with slight variations as they adjust to increased distribution. As we’ve all seen, restaurants are pivoting to accommodate more takeout, and distilleries moved to producing hand sanitizers. In addition, many breweries started to distribute more cans, presumably because they couldn’t sell enough volume through kegs.
Many companies experienced supply chain, sourcing, and raw material issues. What are the biggest challenges your clients faced and how have they adapted?
Jackie & Andy: In the last few months we’ve heard of sourcing issues, especially in the packaging of products. Some manufacturers have had to adapt their product packaging. As a consumer, I’ve seen the same products in different packages, which is often due to supply chain constraints. Some of the supply chain issues aren’t even material-related—it’s an issue of being able to manufacture them in a safe, socially distanced environment.
Some companies are having record sales, but due to COVID-19, they’ve had to decrease their headcount to provide a safe work environment. This causes further delays in the orders being produced. Due to the high demand for some products, producers are attempting to source more for next year.
Pablo: Food supply seems strong. Many food producers seem worried about supply chain issues arising, even though I haven’t heard about significant disruptions. There are talks about potential shortages for certain plastic containers, aluminum, and bananas due to an emerging disease—not COVID—but it’s unclear at this point if these issues will materialize.
How have the challenges of this year impacted innovation, and what new ideas are being considered?
Jackie & Andy: The social distance requirements provide an opportunity for companies to think about what equipment they could put in place that would help the production cycle and keep people safe. Many companies are looking at their production cycle and supply constraints and adapting. Companies are considering opportunities for vertically or horizontally integrating to help grow and diversify.
Pablo: Companies are looking harder at expenses and using this as an opportunity to streamline. On the other hand, we’ve also seen some major expenditures. Many clients—in and out of the food industry—are looking at real estate acquisitions because they have cash, prices for commercial buildings are still competitive, and interest rates are low—particularly for Small Business Association (SBA) loans. There’s also been an uptick in merger and acquisition activity with companies trying to benefit from this low-interest-rate environment to expand or get into new markets.
What consumer buying habits do you think will remain after the pandemic?
Jackie & Andy: As we’re seeing, people are slow to fill restaurants the same way they did before COVID-19, and it seems likely this will continue awhile. It also seems likely takeout will
continue to be a trend. In addition, consumers are growing produce when they can rather than purchasing it. Particularly in our region, consumers care about where their food comes from, and the local fresh market stands have been popular throughout the pandemic. With more people cooking, it seems likely these will continue to be popular.
Pablo: Outdoor seating seems likely to continue as that’s been popular, although we’ll see what happens as the weather changes. In addition, I suspect masks will become more common in public during allergy and flu seasons.
Andrew Kaiser, Partner, Moss Adams
Jackie Merrill, Senior Manager, Moss Adams
Pablo Valentine, Partner, Hershner Hunter, LLP
Assurance, tax, and consulting offered through Moss Adams LLP. Investment advisory services offered through Moss Adams Wealth Advisors LLC. Investment banking offered through Moss Adams Capital LLC.
