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Is China a benchmark for the food industry in times of covid-19 crisis?

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The dimension of the Chinese market and the timing of the first shocks are different from what is happening now in the rest of the world.

Posted on Mar 27 ,13:37

Is China a benchmark for the food industry in times of covid-19 crisis?

At the same time, China may and may not offer and example of how the food industry could deal with an epidemic crisis. The differences between the Chinese market and the rest of the world are significant. First of all, China's coronavirus outbreak was announced and confirmed just before the Chinese New Year's Holiday, a period when most of the consumers have already stockpiled food, considering the unbalance creat in the market by the ASF crisis.
China is also the largest meat market in the world, accounting for 30% of the global meat trade in 2019, and most of the acquisitions are made through governmental companies that are building stocks of frozen meat to be released in the market to ease the prices from time time, especially on pork.
Besides that, the lockdown of Wuhan, followed by several other cities, was one that happened almost over the night and not gradually as it happens right now in most of the countries confronted with the epidemic.

Still, in the foodservice sector, e-commerce and retail there are some valuable lessons to be learned regarding the consumption habits for those consumers that are forced to remain in their homes.

The foodservice sector has seen a drop of 43% in sales during the lockdown period. Retail sales have jumped 9.7% but let's not forget that 11 major cities in China have been under a total lockdown, limiting an increase in sales for retailers in those areas.
At the same time, China has one of the fastest growing online grocery markets in the world so a switch from classic retail to e-commerce was not surprising. What is most interesting in this sector is the new categories of clients appeared in online. "Enforced isolation caused online sales to expand beyond their typical demographic. According to retail giant Alibaba, grocery orders placed by users aged over 50 were four times their usual volume during Chinese New Year. Miss Fresh, a platform specializing in fresh produce, reported a rise in users aged 40+ of 237%" said a recent analysis issued by AHDB.

At the same time, analysts from Meat and Livestock Australia have shared their vision about how the Chinese scenario of covid-19 crisis developed. Here it is:

"First stages: Shock and reaction

Panic purchasing of all red meat segments (from hot loose, chilled & frozen packaged to canned and meat ready-meals) for stock-up, prioritising volume purchasing of familiar staple cuts for traditional day-to-day dishes, which in China tends to be more bone-in cuts for wet slow-cooking rather than steak cuts for pan frying.
Sudden panic-buying disrupts meat retail inventories and supply. Many wet markets start to close with retailers focusing on boosting supply of staple cuts.
Consumer purchasing focuses on availability with less price sensitivity.
Consumers begin avoiding eating with large family and social groups and avoid eating out at restaurants, with some increase in take-away and delivery food services.
Higher-end foodservice outlets mostly shut down, with some excess meat supply diverted to retail. Some mid- and lower-end outlets adjust operations to meet higher demand for drive-through, take-away and home delivery services.

Middle stages: Lockdown and adaptation

Supply and logistics:

Air-freight drops with travel bans and reduced passenger flights, causing supply disruption into some channels. Port activity slows and refrigerated containers build up, hindering supply of imports and re-circulation of refrigerated containers back into the global market. Travel bans and labour shortages disrupt product delivery to retail and foodservice channels.
Expansion of non-contact distribution services (online, home delivery, click-&-collect) by some grocery retailers and foodservice operators challenged by labour shortage and transport bans.

Consumer changes:

Consumers shift to mostly scratch-cooking of familiar dishes at home with fresh produce and meat, interspersed with occasional prepared foods, meal delivery and home-cooking experimentation for variety and enjoyment. Cooking and eating become a particularly important element of lock-down home life and spending on fresh grocery increases.
Higher priority placed on hygiene and dietary nutrition for health and immunity and, hence, greater consumption of red meat for its perceived high nutritional value. Stronger demand for safe, high quality meat, benefiting premium suppliers like Australia.
Greater use of contactless service offerings for fresh grocery delivery.
Shift from purchasing hot, loose meat to chilled, packaged meat, particularly from local modern smaller-format grocery stores.

Retail and foodservice:

Shift in offline grocery retail traffic as hours are amended, with some growth in local smaller-format grocery retail and most wet markets close. Greater emphasis on hygiene and packaging of popular staple cuts.
Operational adjustments made to meet higher demand for hygienic front-gate delivery of packaged fresh produce and meat.
As eating-out shuts down, consumers explore other options for variety and home-cooking relief, turning to ‘contactless’ online meal services for front door delivery, drive-through and take-away. Hotel food services mostly closed, with room service only where open.

Final Stages: Gradual return to a new normal

Supply and logistics:

Lack of travel and tourism still limiting air freight. Port back-logs begin to clear and lifting of domestic travel and work bans facilitate resumption of meat processing and distribution to retail and foodservice.
Businesses review their strategies for supply chain digitization, diversification and inventory management with a greater focus on risk management.

Consumer changes:

Consumer demand begins to return to normal and discretionary spending increases, as interest in novelty and variety re-emerges.
Sustained prioritisation of safety, hygiene, trust and transparency, with higher demand for chilled, packaged meat products from modern retail stores.
Resumption of some occasional eating out to satisfy pent-up demand.

Retail and foodservice:

Restaurants begin to open, mid- and lower-end more quickly than higher-end, with hotel foodservice slower to resume as people continue to avoid unnecessary travel.
Retailers begin to provide a wider range of chilled packaged meat product assortment to meet higher consumer need for trust and higher quality semi-prepared product, as consumers maintain a higher commitment to home cooking and eating. Sustained expansion of contactless delivery services and further development of omni-channel merging of retail and foodservice offers initially driven by consumer demand during lockdown."

 

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