How food businesses are coping with COVID-19: Findings from recent IFPRI policy seminar
The COVID-19 pandemic has significantly impacted the world’s economy, food systems, public health, and nutrition. There is growing concern that this global health crisis could morph into a food crisis, putting hundreds of millions of people at a risk of hunger. A June 30 IFPRI virtual event explored how food businesses are functioning during the pandemic and what might happen in its aftermath.
Food supply chains are principally composed of private businesses, which have been hit hard by the global recession triggered by the pandemic and control measures. “Everybody in the system is hurt,” said IFPRI Director General Johan Swinnen. “On one hand, consumers are hurt because of loss in purchasing power and higher market prices, and on the other, farmers are suffering due to lower prices and local surpluses resulting in food waste.” Food supply chains have been disrupted in many developing countries where agriculture and food production are labor intensive and value chains are poorly integrated. But developed countries have also had supply chain problems, as fruits and vegetable producers have faced labor shortages during harvesting and processing, and meat processing plants have closed due to COVID-19 outbreaks among workers. Fostering entrepreneurship and innovation is central to building more resilient value chains. In Nigeria, ColdHubs, a social enterprise that runs solar-powered storage and transportation facilities, is adjusting its operations to ensure small-scale farmers and traders can continue marketing their fruits and vegetables. As the government closed markets, Coldhubs moved its storage units closer to producing areas and created new sales points with social distancing rules. The cold chain helps to reduce food loss and waste and improve farmer incomes. “COVID has exposed the inefficiency of food supply chains and brought it to the forefront,” said Coldhubs CEO Nnaemeka Ikegwuonu, said, adding that the private sector, public sector, civil society, academia and international organizations interested in food must work together to address these problems. “The role of digital, e-commerce and infrastructure is significant in bringing them all together,” he said. The multinational consumer goods company Unilever faced its own set of pandemic challenges, according to its Executive Vice-President of Global Foods Robbert de Vreede. It shut down non-essential production facilities, reopening them only after ensuring adequate social distancing, hygiene, and worker health care could be maintained. Food production operations faced labor shortages caused in part by fears of contracting COVID-19, disruptions in transportation and logistics. Consumers hoarded some products and avoided others over fear of disease transmission. In response, Unilever focused on securing adequate supplies of its top 35% most essential products. “With changing consumer behavior and rising demand for healthier foods, building a resilient and affordable food system is more critical than ever,” de Vreede said. Research by Food Industry Asia (FIA), PwC, and Oxford Economics on the impact of COVID-19 on food security and prices in Asia highlights the dependence of food supply chains on labor. “Food supply chains in Asia have been remarkably resilient despite government restrictions, lockdowns and border closures … However, on the demand side, the same issues of panic buying, food restrictions and reduced consumer confidence, and spending power are observed,” said FIA Policy Director Steven Bartholomeusz. In Africa, South Asia and much of the rest of Asia, small- and medium-sized enterprises (SMEs) are at the heart of food systems, operating an estimated 80% of food supply chains. In both regions, “SMEs have been affected by the pandemic more than large companies—they are hit by mobility restrictions of workers and clients, drops in demand, and input shortages,” said Thomas Reardon, Professor of Agricultural, Food and Resource Economics at Michigan State University. Reardon and Bartholomeusz agreed that smallholders heavily depend on the operating conditions of millions of SMEs downstream in the supply chain. The pandemic is also sparking innovations that will likely continue. For instance, Swiggy, a food delivery app for SME restaurants in India, has facilitated a surge in online commerce and connected smallholders with SMEs in food processing, distribution and home-delivery services. Most innovation and entrepreneurship in food systems originates in the private sector, but also requires a “symbiotic role of governments, which should facilitate ‘green lanes’ for food supplies in international trade, domestic distribution, input supplies and mobility of food supply chain workers,” said IFPRI Markets, Trade, and Institutions Division Director Rob Vos. Moreover, public-private collaboration will help to ensure increased food safety and access to food during pandemics and other shocks. We should view the reactions to the current crisis as a lesson for addressing the longstanding challenges food systems already faced, Vos said, and aim to “catalyze entrepreneurship and innovation in food systems for more inclusive, healthy and sustainable outcomes.” Swati Malhotra is a Communications Specialist with IFPRI's Markets, Trade, and Institutions Division.