How Covid 19 threatens the restaurant supply chain at every link

The Covid 19 pandemic is a real onion of a problem for the hospitality industry. As the most urgent issue of the moment is peeled away, more potential issues are already there to face us.

Last week, as many businesses were just beginning to get their heads around loans, delivery, safety, and the government’s worker retention scheme, eyes turned to a fresh crisis: the restaurant supply chain is at breaking-point at almost every link - meaning that the hoped-for “bounce-back” after the virus is finally defeated might not be easy.

The situation

11 billion meals are prepared by the UK hospitality industry each year. With the government closing these businesses down on the 20th of March, almost all of them immediately stopped sending orders to their suppliers, or massively reduced their orders to service the trickle of takeaway orders they are receiving.

This abrupt change has sent shockwaves down the supply-chain, hitting wholesalers, importers, farmers, and fisheries in turn. 

Wholesalers

Many wholesalers and restaurant suppliers have been scrambling to pivot to a straight-to-consumer home-delivery model over the past week or so. However, the infrastructure, demand, and labour force required to sell food in this way all take time to build, and a large portion of the food currently in warehouses cannot be distributed directly to consumers.

Trade body The Federation of Wholesale Distributors, which has 600 members including Booker, Bestway, Brakes, and Costco says that £20m of food with less than three months shelf life is now lying in warehouses unwanted. It cannot be sold to consumers because it is in large packs without the correct labelling of country of origin, nutritional and allergen information.

As well as the issue of unsold stock, wholesalers are dealing with customers who are unable, or unwilling, to pay their bills. JD Wetherspoons, for example, initially announced that it would not pay outstanding amounts to any of its suppliers until their pubs re-open, but backtracked today after receiving criticism. However, many other businesses are holding back on payments until government help with wages arrives, leaving suppliers in the lurch.

Most wholesalers without significant cash reserves will be faced with a choice:

Either take advantage of the government’s Business Interruption Loan Scheme

Or pass their troubles on to those further down the line, by refusing to pay importers and producers. 

The first option, government loans, is troublesome. Even if businesses are eligible for the scheme, they probably don’t want to take on much debt under the current situation of uncertainty. Indeed, some small business owners have reacted angrily to the scheme - calling it a “trap” and accusing the government of designing it to prop up the economy, rather than to actually help businesses.

The second option, refusing to pay importers and producers, only passes the buck down the chain to industries facing their own unique set of challenges.

Importers

Half of the UK’s food comes from overseas. Generally, importers are having little trouble getting food over the channel, with the trade in goods continuing to operate over otherwise sealed borders. The government has also classed logistics workers as essential, putting them in the same category as NHS workers and giving them preferential access to coronavirus testing kits and childcare. Importers will generally find it easier than other businesses in the supply chain to switch to supplying the overrun supermarkets. 

However, there are some issues to be seriously concerned about.

Andrew Jackson, managing director of Marrfish, a seafood wholesaler based in Hertfordshire, says that certain trade routes are being disrupted: “We’ve had lorry drivers stopped at borders, given temperature checks, and blocked from crossing,” He said. “The fish in the back of the truck has had to sit there for days, going rotten.”

Marrfish is particularly badly hit by the pandemic: “Over a period of three days, we lost all of our customers,” said Jackson, “But we had chillers full of fresh fish, fish coming in from Iceland, Norway and Turkey still. All perishable. We made a decision to cut fish off the bone and freeze all of it in vacuum packs to offer for home delivery.” 

Most of Marrfish’s customers have refused to pay money owed to them for the time being, but Marrfish have already paid for the fish - they buy it directly from markets and vessels. 

Quick thinking means Marrfish are now selling fish boxes for home delivery, but the learning curve is steep - they set up their online shop on Thursday 19th, and started selling on Friday 20th. Getting out the message through their customer network and Facebook ads allowed them to shift up to 70 boxes a day a week later. Impressive, but Jackson says they will still be losing thousands of pounds a week even if the delivery business really takes off, and that they are in real danger of going under. 

man with box

A Marrfish employee packing boxes for home delivery

Fish is a food that most Brits very rarely cook at home: “A lot of people don’t know what to do with fish,” says Jackson. “It’s slimy and in the supermarket they are only accustomed to a few farmed species. We are trying to sell a product and also trying to educate. It’s not like a pork sausage.” Right now the boxes that Marrfish are selling to consumers consist of familiar species: salmon, seabass, and bream. But most of the fish in the freezers are less familiar species: stonebass, swordfish, turbot, john dory, whiting, and halibut. They expect these to be much harder to sell. 

Other importers also specialise in supplying foods that are not usually stocked in supermarkets. For example, importers of international ingredients such as Asian food importers. These businesses are especially vulnerable, and with demand gone, many simply won’t be there when restaurants and wholesalers start ordering again. Chinese restaurants were the earliest in the UK to be hit by Covid-19, and may, unfortunately, also be affected long after the outbreak has subsided, this time by lack of supply.

Producers

Farms face a very different problem to most other businesses - a lack of labour. At around this time of year, almost a million seasonal workers usually arrive in the UK, France, and Germany from abroad to bring in harvests of fruit and vegetables, many from Eastern Europe. With most borders closed, these essential workers simply cannot arrive. Reports are already surfacing of French farmers discarding fields of ripe asparagus because of a lack of labour to harvest it.

Without a land army responding to calls to “dig for victory”, crops may rot in fields, affecting supplies of food, and pushing farm businesses over the edge. No wonder then, that farms have begun chartering planes to rush in workers from Bulgaria - the only country where workers can be found which hasn’t yet closed its borders. Industry bodies are calling on the government to urgently charter more planes to fill the 90,000 vacancies. 

David Herdman, farmer and chairman of Muller Milk Group Farmer Board, the body which represents farmers to Muller (Britain’s largest producer of dairy products), says that the government needs to do more to help farms to feed the nation; in a similar way to how it has asked the public to help the NHS. “It would be criminal to let crops rot in the fields.” He says, “There are a lot of people now out of work - the government should be encouraging those people to fill the shortfall on farms.” 

However, he also warns that those workers would have big shoes to fill: “It's a cliche, but Eastern Europeans have got a great work ethic - they’re keen to get on and do as much as they can.”

Herdman also warns that some farms in the dairy sector will be pushed over the edge by the pandemic. Demand for milk from foodservice businesses has dropped off a cliff, meaning those farms which usually supply them have seen prices drop. Logistics issues have also led to price increases on animal feed. “Due to a pre-existing oversupply,” he says, “Most dairy farmers have already been losing money on every litre of milk for over 12 months: they are already saddled with as much debt as they can get, and this latest drop in price will mean many will be forced to throw in the towel by Autumn.”

More globally, the UN’s Food and Agriculture Organisation says that labour movement restrictions may lead to food shortages and price increases, as they did during the African Ebola outbreak in 2014. Beyond labour issues, the FAO says: “Restrictions on movement are curbing farmers’ access to markets to buy inputs and sell products. Fresh produce is accumulating at farms, resulting in food loss”. 

The fishing industry also faces a struggle - as already mentioned, many British consumers are unaccustomed to cooking fish at home and have little desire to start - preferring to leave the slimy bits to chefs. Fishermen are still fishing, but prices have dropped. “Because the volume is so small, many logistics companies have stopped transporting fish as it’s not worth their time.” said Andrew Jackson, of Marrfish. 

According to Jackson, the British public will have to change their tastes if international supply lines suffer further disruptions, something he thinks is very likely. “If everyone cooked fish, and was familiar with all the British species on offer, we could feed ourselves without imports,” He says, “But it’s not our culture to do that. The people of this country do not eat the species of fish we produce. 70% of what we eat is imported and 70% of what we produce is exported. People are going to have to eat root vegetables and meat and fish grown and slaughtered in this country.”

Conclusion

If businesses in the supply chain go under, restaurants will find sourcing ingredients much more difficult when they are eventually allowed to continue trading. Some changes might be permanent - if producers are forced to shut down or switch to producing other crops. Some other supply chains may take a long time to get going again. 

Given that the industry is relying on a surge of pent-up demand to bring it out of dire straits when the virus is gone, it would be disastrous for many restaurants, cafes, and pubs if they couldn’t source food to sell.

The government needs to take swift action to prevent farm labour shortages and to keep all businesses in the supply chain alive. 

The restaurant industry can do its part by helping to promote the new home-delivery offerings started by erstwhile suppliers - the email lists and Instagram followings you’ve built up over the years could be a lifeline. They might also need advice on promoting their offerings through Facebook ads - it’s a great time to get in touch and offer expertise in this area if you have it - the gesture won’t be forgotten.

As individuals, we can also do our bit to keep these businesses going. Rather than further crowding the overstretched supermarkets, we can order from the new delivery businesses popping up, run by restaurant suppliers, farmers, and fishermen. We can also try to support our local businesses by buying beautiful locally grown seasonal ingredients for the next few months.

If you know of any great new home delivery services please post a link in the comments and let's get sharing!

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Dara Javan

Written by Dara Javan