How COVID-19 restrictions impacted China's food industry

Logistics has become a serious headache, while other channels of distribution have emerged in the last 2 months.

Posted on Jun 22 ,12:01

How COVID-19 restrictions impacted China's food industry

The new lockdown policy applied in China, along with ‘zero-covid’ commitment from local and central authorities, has impacted the food industry. According to a Bord Bia report, these are the main developments in the Chinese food market:

- Logistics has become a serious headache for most importers to China. Though Shanghai port, the largest in the world, is reportedly operating at close to full capacity this week, a significant backlog of shipments has built up over the last two months. These will take several weeks to clear.

Inland logistics is where the most significant challenges lie. During lockdowns, truck drivers struggled to enter and leave affected provinces, and many drivers were caught in lockdowns themselves. This caused a severe shortage in truck drivers – up to nine out of ten drivers in Shanghai at its peak (Pilkington & Rechtschaffen, 2022).

Only a relatively small range of essential food and drink suppliers were able to operate normally during lockdowns. Many smaller operators in locked-down areas have had no access to their warehouses, and so substantial stocks remain untouched.

- A new channel that burst into mainstream during the lockdown is the ‘group buy’. Facing logistical constraints across the city, retailers and individual suppliers turned to offering bulk orders to residential compounds, whereby residents placed one large order and then divided the goods amongst themselves. Almost every residential compound in Shanghai now has its own WeChat group chat, where residents can suggest brands and club together to place orders.

With group buying neighbourhood WeChat groups now firmly established, it will be interesting to observe to how this channel evolves beyond lockdowns. For now, it has created a viable channel for direct-to-consumer bulk orders.

- Retail sales, China’s main gauge of consumer activity, slumped 11.1% nationally year on year in April. While retail sales declined overall, staple foods registered a 10% growth. Across China, the population has been stockpiling essential food and drink, fearful they may become the ‘next Shanghai’. Food prices in Shanghai during lockdown were heavily inflated, contributing to this increase.

- China’s catering sector revenues fell 24% in April 2022 vs April 2021. This hit comes as Shanghai restaurants have either been shut or operating delivery only since early May. As of early May, Beijing banned ‘dining in’ in restaurants in the country’s capital. Meanwhile, across other regions of the country, while incomes are stable, consumer confidence is falling (Mintel, 2022). People are becoming more cautious about participating in out-of-home activities and appear to be saving more.

Despite the reopening, most restaurants in Shanghai are presently only permitted to take online orders and offer take-away meals. When China emerged from its initial lockdown in 2020, foodservice revenues took ten months to fully recover. With the more infectious Omicron variant, disruptions may be more frequent, and recovery this time may take longer.

- With food designated as an essential product, large food manufacturers have been able to continue operating through a “closed-loop system”.
Large companies are looking to build resilience into their supply chain, with plans to hold additional stock, and distribute it to multiple warehouses across the country, thereby minimising disruption to national sales in the event of a lockdown in any one location.

 NEWSLETTER - Stay informed with the latest news!


Similar articles


Netherlands: Food prices up by over 11 percent in June

It is rare for food prices to rise so sharply. The last time prices rose by more than 10 percent ...

Read more Read more

US broiler exports set records in 2022

Broiler exports for the first six months of 2022 were 1,890,807 metric tons, up 6.7 percent from ...

Read more Read more

Spain: The pig sector maintains its strenght in the international markets

Thus, of the 20 countries to which Spain exports the largest volume of pork, 18 of them have grow...

Read more Read more
Websolutions by Angular Software and SpiderClass