Food And Beverage Industry Case Solution
COVID19 has impacted almost all the countries throughout the world. It has had a direct impact on people’s health and till today millions of people are suffering from this contagious virus throughout the globe. Alongside human health; COVID19 has also impacted the overall economy and industrial growth. The economy has faced a huge decline in the supply of some products and has contributed to the demand for others forcing companies and factories being shut down. Because of social distancing and traveling restrictions; hospitality sector has been devastatingly affected along with the food processing, education and fashion industries.
Among all the impacted industries food and beverage industry also lies. It is the industry that fulfills daily consumer needs and it used to be an-always growing industry. In the European Union;the food and beverage industry is 75% of the bio-economic turnover (Simon & Antje, 2019). In India,the food industry contributes almost 40% of the overall Indian economy. In most of the countries; food industry contributes more to the economy and due to the pandemic, it has suffered huge losses, which has significantly affected the overall economy. Due to all these effects on the food and beverage industry; certain measures are required to be taken so that the food industry could continue growing at the phase which it did in pre-Covid period. The disruptions in the distributions and operations due to the lockdown, has made the industry suffer as due to a decrease in supply; the production has significantly decreased. Consumers are also now more concerned about safe and healthy products.
COVID19 Impact on the Food and Beverage Industry
COVID has impacted almost all the industries in the world. The food and beverage industry has also been impacted. As this pandemic-doesn’t seem to be vanishing soon; the companies are coming up with different strategies to tackle it. The major problems which the food and beverage sector has faced are:as the sector is the most essential for daily life;it has to remain open and increase the production level, but most of the plants are shut down because employees don’t want to show up due to the safety concerns for themselves and their families and they also want to work from home which is unusual in beverage industry.(laughman, 2020)See appendix A. Along with that,another major concern was the expiry, as several stores were closed which had higher inventory consisting of the company’s products so the chances of products getting expired was much higher. The restaurants were also closed and had the stock, in addition to which the sales of the products has also declined as restaurants used to be the bulk buyers of food products, which are now closed because of lock-down regulations. Due to the decreased sales; the cash flows declined and the companies had to face losses and problem-sin meeting operations of the business, such as: paying salaries to the employees, factory expenses, interest charges for the loan, and utility bills. Another major concern factor for the pandemic is that the distributions has also declined because due to a decline in sales; some retailers have temporarily shut down their businesses and also bulk buyers, such as: restaurants, are closed. The consumers’ preference has also shifted to homemade food and due to the the offices and other businesses being shut down; the order placed at restaurants have also declined. People have started to work from home and they prefer eating at home.( Telukdarie, Munsamy, & Mohlala, 2020).
Along with all these short-term impacts on the industry; there are some long-term impacts of Covid as well, which tend to affect the industry even after the pandemic. One of such impacts is the return on investments. Companies are incurring losses due to which their production have also decreased but the cost and investments remain fixed, which has has decreased the profitability for the overall industry and the employees’ layoff is also expected. The industry will take a long time to regain its position and to recover from the losses which it has incurred, in order to maintain its return on investment. Another impact of this pandemic is on the supply chain relations. As the companies used to give trade promotions based on sales; the promotions have reduced due to low profitability which in turn affects the relation of the companies with wholesalers and retailers. Due to the supply chain relation issues, there is an expectation of another issue taking place, which is of building a new network of wholesalers, and a complete restructuring of asupply chain is difficult for the companies.(sarkar, paul, chowdhury, & moktadir, 2020). Another long-term issue that companies could face is GDP, as the contribution of the industry towards GDP of the affected countries would be of significant consideration. As the sales volume for the industry has declined;it will affect the GDP. Consumers are less likely to consume cold beverages because of the COVID, which will also impact the economy.
Strategies Companies Adopted
The strategies that companies can apply in order to minimize the Covid-19’s impacts and to reduce the concerns of the employees regarding being contaminated by the virus and having their families contaminated through them, is that the companies should aggressively promote hand washing and sanitizing-continuously and they should also rearrange seating arrangements according to the rules of precautionary 6 feet distancing from on another, alongside which the companies should also make it compulsory for the employees to wear masks. Besides these precautionary methods; the companies should also lay off the staff which is not needed in the companies due to the mimimum profitability of the companies. Some companies have also conducted meetings with their employees and have come to the consensual decisions of reducing the employee’s salaries, as it is a much better step than laying off half of the workforce in such uncertain situations.(magazines, 2020)See appendix B. For the expiry issue; the companies have adopted the first in first out (FIFO) method. Certain targets are required to be met before other products are delivered. Companies are also checking warehouses randomly to see whether the previous products are sold or not, also the products are sent somewhere else if the expiry is nearby so that the stock clears. Previously, the retailers used to place newer products in front and their new products were sold earlier so now the companies have started product rotation method in which either the products are kept in front which are older or if a specific store has low traffic; the product is then sent to high traffic areas. This step not only saves from the expiry but also contributes positively to the return on investments. Retailer relationships are maintained by giving short-term incentives, which are not much costly for their organization and will somehow help in selling products, which in turn will increase the companies’ cash flows an they will be able to meet operations, such as: utility bills, rent, and salaries. By maintaining the distributors’ relations; the companies can omit the risk of lower sales and the need for building new relationships. Due to the pandemic; some companies have also shifted their focus towards online orders and delivery, which is beneficial because people feel safe in ordering online and dining at home……………………….
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