The unprecedented COVID-19 outbreak is not only a health crisis; it’s also impacting business models and the food, beverage and agribusiness (FBA) sector has also been affected. In this article, we outline the key developments in six key areas to help your FBA sector business manage this rapidly changing environment.
For further information on COVID-19’s impacts on the FBA sector, please see our April 2020 Blakes Bulletin: Keeping People Fed During a Pandemic, which provides guidance on six key factors that have impacted the FBA sector.
1. CHANGES IN CONSUMER DEMAND
Across Canada, dairy farmers are experiencing dramatically reduced sales. This excess product can be largely attributed to substantial purchasers of dairy products such as restaurants, coffee shops, schools, and hotels no longer operating due to the COVID-19 outbreak, as well as limits on essential items at the retail level. The FBA sector is proactively looking for solutions to avoid food waste where possible, such as rerouting excess product to food banks. However, drastic discrepancies in supply and demand have resulted in farmers being forced to dump excess milk.
Increased time at home continues to shift consumer preferences. Consumers are heeding advice to stay home, minimizing grocery trips and stocking up when they do go shopping. Restaurants are reacting to this demand shift by offering grocery staples as well as ready-made meals. With more food being prepared at home, there is a demand shift towards basics, which can jeopardize sellers and producers that specialize in more luxury food items. For example, fishermen looking to sell Canadian seafood, a premium product that is typically marketed to restaurants and shipped overseas, are anticipating challenges moving their products. Some seafood suppliers that previously served restaurants are trying to shift to a direct-to-consumer model. The shift towards direct-to-consumer business models will be discussed further under Supply Chain.
2. GOVERNMENT RESPONSE TO COVID-19 CHALLENGES
The Ontario government is launching a web portal to connect workers with employers to fill positions in the agri-food sector. The aim of the new tool is to fill important jobs across the food supply chain to ensure food continues to be provided to Ontarians throughout the COVID-19 crisis. The portal provides access to job recruitment websites, retailers hiring in the food industry, and training resources. The web portal can be accessed at www.Ontario.ca/AgFoodJobs.
Measures seeking to improve access to food for vulnerable Canadians may also impact FBA sector businesses. The federal government is investing C$100-million into organizations that address food insecurity, such as food banks, to help such organizations purchase food and other necessities. In Alberta, new funding is being provided to organizations to help provide food assistance for vulnerable students and families while students are no longer able to attend in-person classes. These investments may provide opportunities for FBA sector businesses looking to redirect food supply previously destined for restaurants, schools, and other non-operational businesses.
3. LABOUR SUPPLY ISSUES
The anticipated challenges relating to bringing temporary foreign workers to Canada continue to be top-of-mind for food producers. The government previously confirmed that temporary foreign workers would be allowed to enter the country, and that all arriving workers would be required to self-isolate for 14 days. The federal government also published guidelines for employers hiring temporary foreign workers, including requirements to provide regular pay and benefits for the self-isolation period, monitoring and reporting requirements relating to employee health, and several rules relating to employer-provided accommodations. Farmers and food processors have been understandably concerned about whether these workers will arrive, and their safety once they do arrive. On April 13, 2020, the federal government announced a C$50-million investment to assist farmers and food processors manage the costs associated with mandatory quarantine rules for temporary foreign workers. This relief is intended to provide employers with C$1,500 per worker and will hopefully ease some of the costs borne by employers in maintaining the workforce required to protect the food supply.
4. SUPPLY CHAIN
All levels of the FBA sector are collaborating to address persistent challenges arising as a result of COVID-19. Food distribution companies traditionally set up to supply businesses that are currently experiencing decreased demand are shifting to provide transportation and warehousing assistance to grocers that are under pressure to move product into stores. Accordingly, food service distributors are shifting some of their excess food product and labour supply to retail distribution channels.
In our April 2020 bulletin we anticipated that companies operating in the FBA sector may implement supply chain changes as a result of COVID-19. Some FBA sector businesses have already reported that they are taking steps to shorten their supply chain, such as employing more direct-to-store shipments or moving to a direct-to-consumer model. The Ontario Federation of Agriculture has published guidance for those selling agricultural products to market their products through direct sales during COVID-19, suggesting use of direct farm gate sales, online sales, and partnerships with other local businesses or restaurants. Farmers markets, a traditional direct-to-consumer option, are generally able to remain open as an essential service, however several markets are still implementing virtual offerings in addition to brick and mortar operations in light of COVID-19. Other existing forms of direct-to-consumer food sales such as meal kits and produce baskets may also experience new entrants and increased consumer interest.
5. INTERNATIONAL TRADE
In our last update, we outlined the status of trade restrictions on food products resulting from COVID-19 concerns. Since then, Vietnam has announced plans to walk back their previous ban on new rice export contracts and instead implement a limit on the volume of exports for April and May. Several other recent developments will restrict the international flow of food products, with Russia limiting its grain exports through June, Ukraine banning buckwheat exports, Cambodia banning rice exports, and rice traders in India restricting the signing of new export contracts due to COVID-19 related labour shortages and other disruptions.
Restrictive export polices may impact the global prices of these staples, which can particularly disturb food security for lower income food importing countries. Canada is one of several countries that has committed to keep the flow of its food exports open. FBA sector businesses should consequently anticipate continued demand for staple products both inside and outside Canada’s borders.
6. SAFETY MEASURES
Health authorities state that COVID-19 is not being transmitted through food. We previously reported that the Canadian Food Inspection Agency (CFIA) was suspending low-risk activities in light of COVID-19, and recent announcements provide further guidance on the CFIA priorities during the outbreak. The CFIA has indicated that manufactured food importers will generally not experience delays or disruptions by reason of not having a Safe Food for Canadians Regulations licence, and domestic manufacturers will be able to operate while they apply for a licence. The CFIA is also suspending labelling requirements that have no impact on food safety, for food that was packaged prior to April 6, 2020 and for 90 days thereafter. Guidance outlining the CFIA’s position on specific requirements is available here.
As the COVID-19 outbreak progresses, FBA sector businesses are becoming increasingly concerned with food and employee safety. The CFIA is encouraging food processors to enhance regular cleaning and sanitation efforts within their facilities and to follow public health measures if an employee develops COVID-19 symptoms. In April 2020, one of the largest American pork processing plants announced its closure until further notice after confirmation that over 200 employees tested positive for COVID-19.
A large Ontario-based poultry processing plant has also recently suspended operations in response to three employee COVID-19 cases. The plant is investigating the incident and deep cleaning the facility during the shutdown as well as implementing social distance measures and staggered breaks. This swift closure and immediate action to resume operations demonstrates the importance of being prepared for an outbreak in order to prioritize employee safety and minimize operational impacts.
TAKEAWAYS
We have seen the challenges and trends stemming from COVID-19 evolve and at every step, the FBA sector has adapted to the changing reality. We will continue to monitor the situation to provide you with up-to-date information for your business needs.
For further information, please contact any member of our Food, Beverage & Agribusiness group.
Please visit our COVID-19 Resource Centre to learn more about how COVID-19 may impact your business.
For further information on COVID-19’s impacts on the FBA sector, please see our April 2020 Blakes Bulletin: Keeping People Fed During a Pandemic, which provides guidance on six key factors that have impacted the FBA sector.
1. CHANGES IN CONSUMER DEMAND
Across Canada, dairy farmers are experiencing dramatically reduced sales. This excess product can be largely attributed to substantial purchasers of dairy products such as restaurants, coffee shops, schools, and hotels no longer operating due to the COVID-19 outbreak, as well as limits on essential items at the retail level. The FBA sector is proactively looking for solutions to avoid food waste where possible, such as rerouting excess product to food banks. However, drastic discrepancies in supply and demand have resulted in farmers being forced to dump excess milk.
Increased time at home continues to shift consumer preferences. Consumers are heeding advice to stay home, minimizing grocery trips and stocking up when they do go shopping. Restaurants are reacting to this demand shift by offering grocery staples as well as ready-made meals. With more food being prepared at home, there is a demand shift towards basics, which can jeopardize sellers and producers that specialize in more luxury food items. For example, fishermen looking to sell Canadian seafood, a premium product that is typically marketed to restaurants and shipped overseas, are anticipating challenges moving their products. Some seafood suppliers that previously served restaurants are trying to shift to a direct-to-consumer model. The shift towards direct-to-consumer business models will be discussed further under Supply Chain.
2. GOVERNMENT RESPONSE TO COVID-19 CHALLENGES
The Ontario government is launching a web portal to connect workers with employers to fill positions in the agri-food sector. The aim of the new tool is to fill important jobs across the food supply chain to ensure food continues to be provided to Ontarians throughout the COVID-19 crisis. The portal provides access to job recruitment websites, retailers hiring in the food industry, and training resources. The web portal can be accessed at www.Ontario.ca/AgFoodJobs.
Measures seeking to improve access to food for vulnerable Canadians may also impact FBA sector businesses. The federal government is investing C$100-million into organizations that address food insecurity, such as food banks, to help such organizations purchase food and other necessities. In Alberta, new funding is being provided to organizations to help provide food assistance for vulnerable students and families while students are no longer able to attend in-person classes. These investments may provide opportunities for FBA sector businesses looking to redirect food supply previously destined for restaurants, schools, and other non-operational businesses.
3. LABOUR SUPPLY ISSUES
The anticipated challenges relating to bringing temporary foreign workers to Canada continue to be top-of-mind for food producers. The government previously confirmed that temporary foreign workers would be allowed to enter the country, and that all arriving workers would be required to self-isolate for 14 days. The federal government also published guidelines for employers hiring temporary foreign workers, including requirements to provide regular pay and benefits for the self-isolation period, monitoring and reporting requirements relating to employee health, and several rules relating to employer-provided accommodations. Farmers and food processors have been understandably concerned about whether these workers will arrive, and their safety once they do arrive. On April 13, 2020, the federal government announced a C$50-million investment to assist farmers and food processors manage the costs associated with mandatory quarantine rules for temporary foreign workers. This relief is intended to provide employers with C$1,500 per worker and will hopefully ease some of the costs borne by employers in maintaining the workforce required to protect the food supply.
4. SUPPLY CHAIN
All levels of the FBA sector are collaborating to address persistent challenges arising as a result of COVID-19. Food distribution companies traditionally set up to supply businesses that are currently experiencing decreased demand are shifting to provide transportation and warehousing assistance to grocers that are under pressure to move product into stores. Accordingly, food service distributors are shifting some of their excess food product and labour supply to retail distribution channels.
In our April 2020 bulletin we anticipated that companies operating in the FBA sector may implement supply chain changes as a result of COVID-19. Some FBA sector businesses have already reported that they are taking steps to shorten their supply chain, such as employing more direct-to-store shipments or moving to a direct-to-consumer model. The Ontario Federation of Agriculture has published guidance for those selling agricultural products to market their products through direct sales during COVID-19, suggesting use of direct farm gate sales, online sales, and partnerships with other local businesses or restaurants. Farmers markets, a traditional direct-to-consumer option, are generally able to remain open as an essential service, however several markets are still implementing virtual offerings in addition to brick and mortar operations in light of COVID-19. Other existing forms of direct-to-consumer food sales such as meal kits and produce baskets may also experience new entrants and increased consumer interest.
5. INTERNATIONAL TRADE
In our last update, we outlined the status of trade restrictions on food products resulting from COVID-19 concerns. Since then, Vietnam has announced plans to walk back their previous ban on new rice export contracts and instead implement a limit on the volume of exports for April and May. Several other recent developments will restrict the international flow of food products, with Russia limiting its grain exports through June, Ukraine banning buckwheat exports, Cambodia banning rice exports, and rice traders in India restricting the signing of new export contracts due to COVID-19 related labour shortages and other disruptions.
Restrictive export polices may impact the global prices of these staples, which can particularly disturb food security for lower income food importing countries. Canada is one of several countries that has committed to keep the flow of its food exports open. FBA sector businesses should consequently anticipate continued demand for staple products both inside and outside Canada’s borders.
6. SAFETY MEASURES
Health authorities state that COVID-19 is not being transmitted through food. We previously reported that the Canadian Food Inspection Agency (CFIA) was suspending low-risk activities in light of COVID-19, and recent announcements provide further guidance on the CFIA priorities during the outbreak. The CFIA has indicated that manufactured food importers will generally not experience delays or disruptions by reason of not having a Safe Food for Canadians Regulations licence, and domestic manufacturers will be able to operate while they apply for a licence. The CFIA is also suspending labelling requirements that have no impact on food safety, for food that was packaged prior to April 6, 2020 and for 90 days thereafter. Guidance outlining the CFIA’s position on specific requirements is available here.
As the COVID-19 outbreak progresses, FBA sector businesses are becoming increasingly concerned with food and employee safety. The CFIA is encouraging food processors to enhance regular cleaning and sanitation efforts within their facilities and to follow public health measures if an employee develops COVID-19 symptoms. In April 2020, one of the largest American pork processing plants announced its closure until further notice after confirmation that over 200 employees tested positive for COVID-19.
A large Ontario-based poultry processing plant has also recently suspended operations in response to three employee COVID-19 cases. The plant is investigating the incident and deep cleaning the facility during the shutdown as well as implementing social distance measures and staggered breaks. This swift closure and immediate action to resume operations demonstrates the importance of being prepared for an outbreak in order to prioritize employee safety and minimize operational impacts.
TAKEAWAYS
We have seen the challenges and trends stemming from COVID-19 evolve and at every step, the FBA sector has adapted to the changing reality. We will continue to monitor the situation to provide you with up-to-date information for your business needs.
For further information, please contact any member of our Food, Beverage & Agribusiness group.
Please visit our COVID-19 Resource Centre to learn more about how COVID-19 may impact your business.
Blakes and Blakes Business Class communications are intended for informational purposes only and do not constitute legal advice or an opinion on any issue. We would be pleased to provide additional details or advice about specific situations if desired.
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