Food service industry in Asia to suffer due to coronavirus outbreak
The coronavirus outbreak in China and the spreading of the virus across the Asia is already creating waves of uncertainty on the global meat/food market, with some of the main meat suppliers of China such as Australia, New Zealand, the USA, Canada or Argentina warning about the delay in shipments due to the quarantine measures adopted in China and other Asina countries.
"1) Freight disruption: A sharp drop in both international and domestic flights and services has already occurred. This may impact the distribution of the relatively small, but high value, chilled air-freight beef trade to China. Road and rail freight will also be affected, particularly into and out of areas in lockdown, impacting domestic meat supply chains.
2) Drop-in out-of-home and discretionary consumption, especially food service channels: As long as fear of virus contagion is apparent, people will refrain from any non-essential outdoor activities, including eating out, visiting others’ homes for meals and discretionary shopping. There will be a significant flow-on effect on foot traffic through hotel food service, restaurants, cafes and bars. Catering and other food services associated with leisure venues and conferences will also be affected, from the commodity to the premium sectors of the market.
3) Online retail with home delivery seeing growth: With many restaurants closed, consumers are preparing more meals at home. Large cities such as Shanghai and Beijing have seen demand for online grocery retail surge as consumers try to avoid going out to shops. A number of retailers are reporting increased orders for fresh meat but have been challenged by supply chain disruptions and staff shortages due to the extended holiday. Retailers are hoping supply chains and staffing will improve from February 10, when more businesses are due to re-open", said Meat and Livestock Australia (MLA), in a recent market report.
At the same time, the consultancy platform Beef To China foresees a disruption in meat imports in the following weeks or months, based on the worries expressed by major meat exporters in Argentina. "According to an analysis by relevant parties in Argentina, commercial activity will be restored to a certain degree, as most areas of China plan to resume work on the 10th of this month. But, under the epidemic situation, it is expected that the importation of meat in China could be affected. Also, some Argentine analysts think that the Argentine meat market will also face a complex situation in the immediate future, as the Chinese market is affected", wrote Beef To China in a recent post on LinkedIn.
A short-term impact is predicted also by Rabobank analysts, with waves that are going to spread to Singapore, Thailand, and Vietnam as well. "Food service players could face challenges such as supply disruptions and lack of personnel. Players will also have to consider strategic changes in the way they operate if they want to retain clients and secure long-term growth," said the bank.
In response to the outbreak of the coronavirus, food service operators like Starbucks, McDonald’s, Yum China, and Hai Di Lao hotpot have temporarily closed some of their stores in China. This will affect revenues in Q1. Operators may also be confronted with supply chain disruptions and a shortage of labor once they reopen, as staff members may have difficulties returning to their jobs. Reduced tourist arrivals are expected to affect food service in Southeast Asia. Tourist arrivals across Southeast Asia are expected to decline in the first quarter due to both outbound travel restrictions from China and visa restrictions imposed by destination markets on arrival from coronavirus-affected areas.
"China’s industries, including F&A, are bearing the immediate brunt of the coronavirus outbreak. The overall impact – which is most severe for foodservice and on-trade channels – could be more serious and longer-lasting if the virus is not contained within Q1 2020. Disruptions are being experienced across the entire F&A supply chain. The actual degree and associated projections of the virus’s impact are difficult to quantify, as the situation remains fluid. The impact on the rest of Asia will largely occur via the reduction of food & beverage spending by Chinese if local transmission of the virus is kept under check. However, quick and effective containment of the virus could lead to a rapid bounce-back," said the report.
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