Grant Thornton report shows food industry innovating and adapting in light of Covid-19

Reporter

Reporter:

Reporter

Grant Thornton report shows food industry innovating and adapting in light of Covid-19

Padraig Ryan Director in Grant Thornton’s Business Consulting team

In a survey conducted by Grant Thornton’s Agri-Food team in May 2020 it was found that one in three food businesses have already sought to alter their route to market.

35 per cent of businesses have leveraged new technologies and 30 per cent have sought new service providers or customers.

Nearly half of all businesses surveyed have examined their business strategy and almost one quarter of businesses have already pivoted their business model.

The food industry has been pushed into a ‘sink or swim’ scenario. The pandemic has generated many challenges, from protecting human health, to adjusting and adapting to the shift in the marketplace from food service to retail. However, opportunities have also arisen across the sector.

The overarching positive impact of Covid-19 on the food industry has related to the adoption of technology across all stakeholders. Over a third of respondents identified the increased use of technology as a positive impact from the Covid-19 pandemic. While the short-term benefits of this are already being realised, it is also felt that businesses will continue to benefit in the medium and long term.

For almost 20% of survey respondents the market outlook has improved as a result of Covid-19. Interestingly, of the 20% who indicated more market optimism, 70% had forecast a decline in revenue for 2020. For these businesses, although revenue is declining, they still feel that Covid-19 will have a positive impact. There may be many factors contributing to this viewpoint. Renegotiated terms of business may provide a greater long-term opportunity, changing consumer behaviours may result in increased product demand, business model agility may create new customers and leveraging technology may yield efficiencies for some businesses.

Launching the report Padraig Ryan Director in Grant Thornton’s Business Consulting team noted “The food industry has shown great resilience to recover from initial Covid-19 shockwaves. Almost instantaneously customer demands and business operations changed to meet global and national market changes. Unsurprisingly the industry has placed a real focus on curtailing costs and driving increased revenues, and where possible increased margins. Logistics and supply chain costs have risen significantly during this period. The industry has sought to offset new additional expenses by reviewing financial and commercial arrangements and implementing cost cutting and lean measures within their businesses. These practices are coinciding with a focus on capitalising on new consumer behaviours and market opportunities to grow revenue.”

Implementing such changes under normal circumstances would take months or years of design, stakeholder engagement, planning and implementation. However, under these unprecedented circumstances food businesses have delivered large scale change to their businesses in a matter of weeks. The motivator for this change has been survival. Going forward, businesses need to assess their strategic options to determine what changes should be retained and how elements of the organisation may need to pivot back as society returns to normal.

Managing the transition back to business as usual will bring a new set of challenges but encouragement can be taken from the resilience the industry has shown. The ingenuity of some businesses during this period indicate that from these challenges new opportunities will be seized. The industry has a long-standing history of rebounding from crises and applying the learnings to strengthen its offering. The findings indicate that while, for many, there are challenging times ahead, the industry is well equipped to navigate these challenges.