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Impact of COVID-19 on the food and beverage sector

The world is facing a very big problem all are locked in their own house in the last 2 months. We all are aware of the crises of COVID 19 the government is assure us to open all the essential services but at the ground level, the company faces a huge challenge to follow the current manufacturing practices to help them assurance consistent quality of food commodities.

The supply chain is a big factor or challenging to the supply of food and highly perishable item like the dairy product a smooth flow.

Effect of COVID 19 on the industry:

Food and beverage face very big challenges to provide raw material to the company the transport system is collapsing due to that the raw material is not reached to the proper place at the exact price. The manufacturing company faces a very big challenge to the time of output. And we all understand the closing of bar and restaurant, there is also trickle-down effect impacting on the business associated with these establishments.

The revenue decline in the company:

The revenue of the food and beverage company is declining by 10% to 20%. The hotel and its market performance have been much worse than previously in 2003.

Some of the leading brand stores are closed for example:

  • Domino’s Pizza
  • Burger King
  • KFC Corp.
  • Subway Restaurant.
  • Coca-Cola.

The purchasing power of the client:

After the announcement of the lockdown consumer running to the store for the panic buying, the product scarcity is increased in the market. And after the continuation of the lockdown, the company start to cut their employee salary between 30% to 40% of consumers. The behavior of consumer spending changes they only purchase on basic such as food, household supplies, and personal care item, as well as medicine.

Food processing:

No impact on the processing of the food expects domestic poultry industry and export like tea, rice, meat, and seafood, etc. due to the demand contraction and fake propaganda of the poultry firm (egg, chicken) is highly impacted.

E-commerce company:

Online e-commerce company food and grocery platform are heavily impacted due to the unclear policy restriction and shortage of vehicles. E-commerce app should be encouraged to help the rapid development of delivery personal to avoid buying and restrict movement in the street.

Impact of COVID-19 on the oil sector

Globally with nearly 2.5 million people who have infected and 0.17 million have died due to novel coronavirus (SARS-CoV 2), economic activities have restricted across the globe.

Nearly every sector of the global economy has been impacted badly due to the pandemic. The global economy is going to shrink by up to 1 percent in 2020 and contraction will be further if adequate fiscal responses are not taken, UN said. This will create great distress in the economy and it is the start of the recession. This type of unprecedented issue has never faced by mankind in history. The oil sector is no exception!

 

The story so far:

The oil sector is in the midst of two crisis that is creating an unprecedented situation that could last well into 2021-Drastic fall in oil prices and impact caused by COVID 19.

First, in the early March at a meeting in headquarters of OPEC in Vienna, Russia and OPEC failed to agree on oil production cuts. So, Saudi Arabia initiated a price war by increasing oil supply. This led to the filling up of all oil storage of the world's capacity. Although Russia and Saudi Arabia ended the price war by signing a landmark production-cut deal on the 12th of April, the situation is no better. OPEC + and Saudi Arabia have greatly increased the supply of oil resulting in a steep fall in oil prices.

Second, COVID-19 has caused demand destruction that is expected to result in about 3-5 million barrels per day by the end of 2020. Gasoline demand has fallen by about 1 million barrels per day and global jet fuel has been reduced by about 0.5 barrels per day as a result of demand-side shock caused by a novel coronavirus. Precautionary measures to prevent the spread of the virus, including lockdowns and restrictions on economic activities, have resulted in industrial slowdowns and travel bans, which have brought economies around the world to a standstill. All this leads to a sharp drop in oil demand.

 

Prognosis:

Due to the double shock in this unprecedented situation, the global recession in 2020 is expected to contract the demand for oil for the first time after the global recession of 2009. The oil sector will be changed forever due to the unprecedented decline in oil. As for natural gas, the onset of a recession will affect demand, although not as much as oil.

Companies are in a lot of trouble because they are unable to make money. Some companies such as Chesapeake Energy (CHK) and Oasis Petroleum (OAS) will certainly go bankrupt as they have incurred huge debt, which is facing maturity and are unable to generate cash flow to make even their interest payments.

 

It is estimated that more than 1 million workers will lose their jobs in 2020. This accounts for about 21% reduction in the global oilfield service (OFS) industry. Out of 21℅ job cuts, 13 % are linked to oil price collapse while 8% are linked directly to the virus.

Since the situation is very uncertain, it would be difficult to assess the full impact of the virus. But, certainly, the combined effects of the oil-price war and COVID-19 have already affected the price and trade of crude oil. Falling crude prices have already caused a considerable crisis in the upstream sector among investors. A few analysts are expecting in a pessimistic view that some of the oil-exporting nations would go bankrupt. But this theory now seems irrational, at least to me.

 

Need for government intervention:

The global oil industry is already in a state of turmoil. COVID-19 certainly pushed the oil industry to the edge. For the oil industry to exist, Operations will need support from the respective government institution in its country of operation or origin. Oil Companies can use their cash reserves to tide over the current situation in the short run. But to remain efficient in the long-term, the capital-intensive upstream sector will have to struggle seriously. Government institutions should intervene in the current pathetic situation, this is very high time. Policymakers should look after the oil industry as a revival of the oil industry whose key to reviving the economy.

COVID 19 Global Impact

COVID-19 pandemic has affected the whole world to its worst situation. Each and every country is facing some or other economic problems. This outbreak is increasing day by day very quickly and all the countries are having lots of burdens to face at a single time. How fast the cases of coronavirus are increasing can just be estimated by a few examples such as 46% in Europe and 39% increase in the US in the past 7 days. Various types of approaches and initiatives were taken by the governments of various countries such as social distancing, travel restrictions, testing and tracing, effective use of personal protective equipment, etc.

In some countries’ healthcare capacities are less as compared to the increased number of cases and those are mostly referred to be in stage 4, which is considered to be the worst stage as stated in the local response matrix below. Working on these dynamics might really turn the future of the countries.

Getting back to work would not be that easier for at-least next 2-3 years, everyone would need to take all precautions to go back to work safely. Because if it started once again, then there might be chances of a huge crisis in the world. Even restarting of the rise of economies would need a lot of studies like, how it can be done and especially from which region it can be started, where the number f cases have reduced and also having good healthcare facilities. Removing the lockdown from the whole country at a single point would only result in the increasing transmissions. Rather it has to be done region-wise so that the people can start working in a few regions and can contribute to the nation’s economy.

To win this COVID-19 war seems very tough as even if the situations get better and people start their routine life without any precautions, then the table might turn again which will lead to a disaster once more in the whole world.

Is it really that the next normal stage could emerge from Asia only, the continent from where it all started, the outbreak? Few of the countries of Asia had already taken the precautions and redesigned the policies to make the safer place out there before corona arrives in the country. Due to this the companies who have now started working from the small scale of employees will only be responsible to shape the next normal world, with the help of 4 defined dimensions: Rethinking social contracts, Defining the future of work and consumption, Mobilizing resources at speed and scale, Moving from globalization to regionalization.

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