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COVID-19-Food-Industry

COVID-19

Friday Round-up (5/8/20): Supply Chain Flexibility and Blended Sales Channels During COVID-19


Every week FoodLogiQ will be aggregating the latest updates and resources for food businesses navigating the coronavirus disease 2019 (COVID-19) pandemic. Learn how the industry is adapting to protect and feed consumers while building resilience in the face of global crisis.

The COVID-19 pandemic has transformed the food consumer overnight, leading to paradigmatic shifts in models for creating and selling food products. Divisions within the industry have subsequently begun to blur as restaurants, grocers, distributors and manufacturers borrow from one another to diversify sales channels and modulate margins.

The blending of food industry sales channels is not an entirely new concept, but as the COVID-19 crisis carries on, many forms of blending have only accelerated throughout the supply chain. Restaurants are evolving to become more like retailers and exploring new product offerings like meal kits; CPG companies, particularly smaller, local brands, are ramping up their web presence and direct to consumer strategies, and distributors are taking on gaps in retail grocery to redirect products from dine-in directly to consumers who want fresh produce, but fear in-store shopping experiences. 

Restaurants have undergone the most extreme transformation, as they look to both generate new streams of revenue and find creative ways to sell food while social distancing is in place. Some brands have adopted a grocer model and offer provisional items along with take-out. Subway alone has 1,450 locations participating in their new retail program, Subway Grocery. With these offerings, restaurants are able to offer added value and convenience to the process of getting delivery or picking up a take-out meal—why not grab a few essentials while getting your favorite dish? Packaged versions of favorite menu items, or the creation of meal kits altogether, is exposing many restaurants to the possibilities of creating lines of branded packaged goods. Moving forward, these new streams of revenue may become a core tenet of the restaurant business, along with the standardization of delivery, curb-side and take-out options.

As safety concerns take center stage and grocery stocking remains unpredictable, more consumers are going online and shopping direct. For some, this means going directly to CPG brands where there is a high level of loyalty and trust. Gourmet specialty brands like Van Leeuwen and Laird Superfood have benefited the most from this shift in retail behavior. By creating a direct-to-consumer offering, brands can customize messaging and encourage repeat sales by providing free shipping and loyalty programs.

CPGs are not the only ones who are relying more heavily on direct sales channels. With restaurants no longer accepting the same volume of product, farmers have found themselves with an excess of produce. Companies like Barn2Door are enabling farmers to take advantage of the fact that in the U.S., 1 in 3 Americans have ordered food online in the last month. According to the MIT Technology Review, some growers in China have gone from selling 10% of their produce online to 90%, with social media live-streaming become a central piece of their sales and marketing strategy. Across the board, having existing digital infrastructure has been a determining factor for whether many organizations were able to pivot quickly in response to a shifting industry.

COVID-19 has similarly strained foodservice distributors as they try to balance both ends of the supply chain. Tasked with finding new buyers for products that were once sold to restaurant clients, distributors have had to come up with creative ways to store or sell the excess inventory. Utilizing freezer space to store food for large customers, and repackaging food into smaller consumer units has been employed by some. For other distributors, creating produce boxes to sell direct to consumers has been an important sales channel that may persist long term. Joint-distributor models have also emerged to help fill in the gaps. 

As the industry works to rebalance supply and demand, these hybrid concepts are beginning to take form. To be fully viable, however, a more fluid, transparent supply chain is needed. While all of these new models may not live on beyond the crisis, food industry sales channel blending is bringing resilience and important redundancies to the food supply chain.

Resources

Please view FoodLogiQ's COVID-19 Food Industry Resource Center for industry-specific updates, resources and information.

If your business is in need of operational guidance for navigating the COVID-19 pandemic, download our E-Book to learn how FoodLogiQ Customers are minimizing risks. And don’t miss our upcoming webinar on how to build stronger relationships with your supply chain partners; Register for the demo, Strengthening Your Supplier Relationships in the New Normal

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Posted by Julie Brown on May 8, 2020 3:29:33 PM