Country market update in view of the Corona crisis

In view of the impact of the Coronavirus COVID-19 crisis on the Food Supply Chain, our consultants have prepared a report to share their personal observations in their respective markets. The attached document shares an impression of their perception of the situation.

We acknowledge this report is far from complete and is a snap shot at the time of writing. It however may allow you to obtain a quick assessment of the situation in 9 different EU countries and the impact on the Food Supply Chain.

Italy (Paolo Palomba and Stefano Ghetti)

Italy, as it unfortunately has appeared is ahead of all other European countries. It took at least two weeks of continuous information (similar to war bulletins), communication, campaigns and increasingly stringent government decrees (including police checks), to create awareness and disciplined behaviour by citizens for the seriousness of the situation.

In the meantime measures were defined by means of 3 Decrees by the President of the Council of Ministers (DPCM) issued within ten days. These have put an absolute ban on all gatherings and other social closeness. Even interpersonal contacts between two people are recommended to be avoided.

Today one can leave his home only for strict occasional needs such as grocery and drug shopping, health issues or serious reasons of work. This ruling excludes doctors, health care professionals and workers in crucial sectors. Visiting or running a store is one of the few risk activities allowed outside the home. The owner or manager of the store is responsible to provide safe conditions to everybody.

Last Tuesday a discussion was started among retailers and the government to reduce opening hours of supermarkets and to sell exclusively food and detergents (all other non-food products to be prohibited).

About 98% of all Italians receive information about the health situation at least once a day, 86% even more than once. Whilst two weeks ago only 17% of the population said they were concerned about the situation, it turned to 25% a week ago. Now it is 58%.

The restrictive measures by the DPCM of 9th March were adhered and considered appropriate by 58% of the Italian population. Only 5% consider the measures exaggerated.
Of all interviewed 73% consider the measures taken so far by other countries to be too mild.

The Italians seem to trust their institutions and from our surveys it appeared that people have a good civic sense and are willing to make a sacrifice. This counts for both their social lives and for making an effort for the greater cause (e.g. work).

The official quarantine has a significant impact on consumer adoption of other measures to prevent contamination. To name a few examples: washing hands are having been in a crowded area or public place (90% vs. 11% last week), avoiding public and crowded places (88% vs. 32% last week), avoid travel (72% vs. 37% last week), avoid use of public transport (69% vs 31% last week), use of disinfectants (65% vs. 17% last week) and cover your mouth with a handkerchief while coughing or sneezing (65% vs. 18% last week). Although on the rise, the use of mouth towels is still limited to less than 1 in 4 Italians (24% vs. 9% last week).

Of the respondents 40% said they had reduced the frequency of visits to the supermarket (vs. 26% last week). For grocery stores this was 38% (vs 25% last week) and for local markets 63% (vs. 36% last week). At the same time shoppers seem to stock-up (28% vs. 12% last week). On-line shopping exploded, especially in-home delivery + 82,3%.

We see three main reasons that have led to the strongly increased sales in recent weeks:
Irrational effect of hoarding products as an irrational response to uncertainty (shelf stable basic categories such as pasta, rice, tomato preserves, tuna, flour, etc.) triggered by each time a new announcement of restrictions was made.
Prevention and health effect resulting in an increase of sales in the personal care category and pharmaceuticals. Also vitamin products and dietary supplements demonstrated a general increase (+17.1%) as well as fresh/ready-to-eat fruit (+10.1%).
The reduction of out-of-home food consumption due to the closure of restaurants, bars, school and business and sport canteens. Food in out-of-home in Italy account for 37% of total food consumption.

Portugal (by Robertus Lombert)

Schools closed as of this Monday, restaurants are only allowed to use one-third of their capacity (i.e. capacity of 90: only 30 persons are allowed in). Only a limited number of people are allowed to enter hypermarkets and supermarkets at one time. Working from home is strongly recommended. Many companies have closed their offices and require their employees to work from home. More and more stores are closed and shopping centers allow the store-owners only limited opening hours.

As schools are closed, parents have to take care of their children. In families with children under 12 years of age, one of the parents is allowed to stay at home and entitled to receive two-third of their income. On-third to be paid by the government and one-third by the employer.

The border with Spain is practically closed, only 9 posts are let open to transport of goods.

Retailers have reduced their opening hours and shoppers stand in line to enter the store. In general people seem to prepare themselves to stay at home for a longer period of time and the hoarding of products is common. As a result some items are out-of-stock, notably at the end of the day. Most employees wear protection such as gloves and masks.

The APEC (Portuguese Retailer Organization) assures there will be no lack of goods in the stores. Temporarily some products may be out of stock but there will be no lack of food.
On-line demand has spiked. However, as sales via the internet in Portugal is still relatively small, retailers lack the capacity to respond. Home deliverers do not enter the home but
simply leave the goods at the doorstep. Payments are settled as much as possible on-line, in some cases on-line deliveries can not be paid in cash anymore.

Retailer Auchan has an on-line queue and limits the time to buy on-line to 30 minutes for each shopper. Pingo Doce has announced that due to high volumes ordered on-line they are unable to deliver within one day.

United Kingdom (by Richard Harrow)

The measures taken by the UK Government are changing almost daily. Yesterday we moved into a position where they recommended that people stop going to bars, restaurants and theaters. Since then lots of theaters have announced they will close.

We are looking to people over 70 going into self-isolation for up to 12 weeks. If a member of the family shows symptoms, then self-isolation for 14 days for all family members.
Schools are not closed yet, this is because this would put a strain on parents who may work in social care, hospitals etc. We think however they may move to bring the Easter Holidays forward.

Government have encouraged those that can work from home to do so. Pictures of London in the rush hours showed Waterloo station deserted. At the BFFF (British Frozen Food Federation) we have moved to home working for the whole team from today.

Food sales have rocketed with volumes above Christmas trading. One retailer told me their sales last week were 29% above plan. Today they said sales on track to be nearly 45% above plan. Supermarkets now putting limits on some products how many a customer can buy on one visit. On-line retail is struggling with booking slots for home delivery. Stories have it that people cannot get slots for 3 weeks.

Ocado is struggling because they hold less stock than a traditional retailer, so have sent out a plea to their suppliers to prioritise them. Key categories that have been hit are toilet rolls, canned goods and dried pasta.

Frozen Food has also seen a jump and sales of freezers has jumped by up to 200%.
12 retailers issued an open letter to consumers saying no food shortages, empty shelves are due to consumers panic buying. BFFF (British Frozen Food Federation) has just

launched a platform to connect out-of-home manufactures with retailers.

CEO’s of the major retailers now talking directly with the Government and discussion around suspending competition laws so they can work together. Issue with stocks is most retailers have reduced stock levels in stores and distribution centres. This means new stock needs to come in from manufacturing. This is taking time.

Retailers now putting in place limits on how many of an item a consumer can buy on one visit. One distribution company told me at Christmas they employ 20% more staff to cope with the volume, they run RDC’s for a retailer. This means in the short term they are struggling to get stock out to stores, for every 3 cases sold in store they can only replenish 2.

At the moment we are not seeing any impact in terms of production although some companies are now concerned about getting raw materials from companies on shut down.

Restaurants, bars and cafes are really concerned over the next few weeks.

Non-food may already have been impacted by the situation in China due to earlier issues. Combination of factories not working, ports closed and containers out of position. Soap and hand sanitiser now is in short supply. Strong advertising campaign to encourage hand washing.

France (Remy Medina)

A €45Bn in government funds will be made available to support companies and their employees. Payment of social and tax charges are allowed to be postponed.

Last Monday a general meeting by all CEO’s in French retailers was organised to reassure the availability of products urging people to refrain from hoarding. Originally measures were taken to restrict the number of shoppers into the store at the same time and let them in gradually to avoid a rush and even fights in the stores. This has now been abandoned to avoid people queuing outside. Some stores open during the night for replenishment and retailer employees are asked to cancel their holiday to assist.

Special opening hours are offered to the elderly so that they can shop at ease and with less risk of close contact. Franprix and Monoprix offer free delivery to the elderly for a basket of €30 containing all the necessary products (€40 for organic basket and €45 including Gourmet products).

Promotions and large volume discounts are limited as this would put the supply chain under even further pressure. On-line ordering and deliveries as well as click-and-collect orders have doubled.

The ANIA (Association Nationale des Industries Alimentaires) has urged their members to focus on production of the 20% of the products that generate 80% of their volume. Players

in the food supply chain are appointed as a priority sector in the economy. Therefore, employees are excluded from restrictions to move and are allowed to freely travel to and from work. Food safety remains at the heart of food production and no additional measurements are required from producers. Manufacturers are obliged to apply strict employee safety procedures and to sharpen cleaning procedures.

Ireland (Malachy O’Connor)

All St Patricks Day parades were cancelled, schools and creches closed since last Thursday and gatherings of more than 100 people are banned.

Social distancing guidelines were introduced but are difficult for pub owners to enforce. As a result all pubs were forced to close since Monday, creating 50,000 unemployed to add to 20,000 creche workers and 70,000 other retail staff. Government has not introduced a fully enforced lockdown (as per Italy and Spain) but most non-grocery and pharmacy outlets are voluntarily closing (drapery stores, hotels, cafes etc). ‘Retail Excellence Ireland’ anticipate a further 200,000 unemployed by the weekend. Government will need to take further measures to protect both employers and employees.
People are advised to work from home if possible and keep 2 meter distance in public. Effectively each family is in hibernation and limiting unnecessary contact. A significant increase is expected as testing is ramped up but the national effort is being put into ‘flattening the curve’.
Stocking up has been happening since weekend of 28/29 February with retailers noticing uplifts on canned and dry goods and sanitisers. The announcement last Thursday of school closures immediately prompted panic buying with most shops almost completely emptied on Thursday, Friday and Saturday. Retailers ordering massive quantities from supply base across the range. Retailers have been initially slow to communicate reassurances that we will not run short of food. People do not trust the politicians and need to hear the message from other sources.

As of today, Supermarkets are announcing opening hours to allow elderly and family carers to shop without big crowds. For example, Lidl have announced 9-11am every day. Tesco announced Monday, Wednesday and Friday before 09:00am. Tesco are the main on-line grocer in Ireland and slots are maximised.

Spain (Luis Sobreroca)

The state of alert was declared on Saturday 14 March to address the health emergency caused by the Coronavirus COVID-19. It concerns the entire national territory and was declared for a period 15 days by a royal decree. It can and most likely will be extended. The competent authority for the state of alert shall be the Spanish Government.

Since yesterday all country borders were closed and only Spanish people are allowed to enter as well as trucks.

Citizens are only allowed to travel on public roads to purchase food, pharmaceuticals or basic necessities. Also travel to the workplace, professional business or to assist the elderly, minors, persons with disabilities or particularly vulnerable persons.

Public transport is not closed but operates less frequent (50% less) in order to reduce movement of people.

Only food retailers, press sellers, tobacco, and pharmacies are allowed to remain open. All other shops are closed. The authorities in charge must ensure a continued supply of food: both production and distribution.

Major retailers such as Mercadona, Carrefour, Dia and Lidl have announced new timetables in order to limit the capacity of their shops and require shoppers to keep a safe distance. In some cases cashiers are protected by methacrylate screens and wear vinyl gloves.

Some large operators will seek to compensate the loss of sales by activating the on-line sales channel. Companies such as El Corte Inglés, Media Markt, Fnac, as well as those who dominate the textile business, have announced they will continue to provide this service despite the fact their physical stores remain closed.

Spanish households have begun to change their buying behavior following the COVID-19 crisis, based on the study of shopping and consumption habits presented by consumer panel consultancy Kantar.

In week of 24 February to 1 March there was a sharp increase of large consumption spending of FMCGs (+113%) compared to the weekly average of the previous two months. Following the announcement of extraordinary measures on 10 March consumption increased by 154% and soared to 180% on 11 March. The increase in consumption is seen across all distribution channels.

Sales in hypermarkets and supermarkets soared to 160% compared to daily average.
In proximity stores it even went up to 190%.

Belgium (Tony de Bock)

In Belgium, the government ruled restaurants, cafés and schools to close as of last Saturday. Shops selling electronics, white goods, clothing, sportswear and other non food are allowed to remain open from Monday to Friday. Nevertheless, many decided to stay closed. So far 30,000 companies have applied for technical unemployment, it concerns approximately 300,000 employees.

Over the past few days there has been a massive influx to the food stores, resulting in empty shelves. As of today, Delhaize only allows a maximum of 150 shoppers in the store at the same time. Between 8am and 9am, they specifically cater for 65+ customers. Colruyt has sent 1,000 employees from the head office to the stores to assist. In addition students are asked to help. On-line sales have been temporarily stopped due to excessive demand.

Aldi only allows a maximum of 50 shoppers at the same time in most of their stores.
There is a concern that the supply of raw materials and packaging from abroad may run short. In some cases it appears difficult to find technicians to come in in view of the call to keep a distance and avoid groups.

The expectation is that we will go to a total lock down later this week. In order to avoid anxiety it is important to keep the medical and food sectors going.

Germany (by Ulrich Helm)

The country is closed. All activities are disconnected. People should stay at home and traveling within Germany and to abroad is prohibited.

All stores are closed and only supermarkets, pharmacies and drugstores are allowed to remain open. Schools, universities, kindergartens, cinemas, theaters and the like are closed. The same holds true for bars, clubs, discos and sport parks.

Many consumers have hoarded everyday products resulting in out-of-stocks for shelf stable food, toilet paper, soaps and disinfectants in some of the stores. However, manufacturers and retailers have guaranteed a continued supply of all necessary products. There are considerably less people in the streets and cities and there is little traffic, less trains and busses.

The Netherlands (Koen de Jong and André Michel)

With a rare directly televised speech Prime minister Marc Rutte addressed his citizens on Monday. He urged for togetherness in these difficult times and warned that the situation will get worse before it will improve. The Dutch government seeks to achieve a controlled expansion of the disease to ‘flatten the curve’.

Schools, universities, restaurants, cafés, sport canteens and the like must be kept closed. People should refrain from traveling and be physical social contact restricted to a minimum. The new buzz word is ‘social abstinence’.

In view of the Corona crisis many companies including retailer Albert Heijn work in 2 team- shifts. It is all-hands-on-deck to secure an uninterrupted and smooth food supply. Head office staff as well as former employees are occasionally involved in working in the stores.

Many categories have been temporarily out-of-stock due to excessive demand. Deliveries to the stores simply could not match the volumes sold to hoarding shoppers. Retailers stress there is plenty on stock and therefore no need for hoarding. The supply of fresh fruit and vegetables to the stores is favored over sweets and snacks. This may be the reason why the crisps category was completely sold out in my local Albert Heijn store.

Reduced opening hours are not considered as trucks can only unload if the store is open. Also a restriction of the volume of product a shopper is allowed to buy is not an option. This to avoid cashiers having to enter discussions with shoppers. Usually bananas is the number one fruit item sold, strangely enough it is now kiwis.

Last Friday Jumbo’s daily turnover was 65% higher than usual, even higher than the week prior to Christmas.

On-line food retailer PicNic explains on its website that due to excessive demand delivery delays may occur. Groceries will are no longer be carried into the homes but be put in front of the door whilst the deliverer keeps a 1.5m distance. Return bottles will be no longer be accepted.