BY: ANNA CAMPBELL
I have been reading and listening to a number of reports and podcasts on the impact of Covid-19 on food supply and buying patterns and I attempt here to summarise what I have learned.
It is interesting to note that many of these trends were identified before Covid-19, but the pandemic has shifted the dial in terms of the pace of change. We are likely to see many of these shifts sustained in the Covid-19 recovery and beyond.
In the United States, Covid-19 has increased the dominance of the large food players such as Walmart and Amazon (who own Whole Foods). Small grocery chains and independents, prior to Covid-19, made up 40% of the grocery sector – this is rapidly shrinking.
Workers within the large chains are negotiating higher pay and in general, profit margins on grocery products are decreasing. This will make it harder for small players to compete, especially without the benefits of robotics and artificial intelligence systems.
The most efficient grocery exemplar internationally would have to be British company Ocado, where their entire food supply system is roboticised except for the delivery person – the only human in the chain. For more on this, listen to an excellent panel discussion led by Professor Damien McLoughlin, University College Dublin: “The Post-COVID Consumer: A Remaking of the Market?” https://www.alltech.com/futurefarm#hubspot.
There has been a massive shift in consumer buying behaviour from bricks and mortar to online. Prior to Covid-19 in the United States, less than 4% of groceries were bought online. In the first two weeks of March, one third of US consumers bought food online, with 47% claiming it was the first time that they had done so.
The biggest casualty in all of this has been the hospitality sector. In New Zealand, local cafes opening in the next few weeks will tread water at best. If we want to keep our local food entrepreneurs afloat, we need to support them for a lot longer than a few weeks, it will be incredibly difficult for many to recover from what will effectively be many months of low/no income and fixed costs.
There is a rally call to buy local and we will where we can – but is that possible for all of us and for all of our food? An interesting analysis was published in Nature Food (Kinnunen et al.) where they examined staple crops from around the world (wheat, barley, rye, rice, corn, millet, sorghum, cassava and pulses).
They showed that 27% of the world’s population could get their temperate cereal grains within a radius of less than 100 kilometres.
The share was 22% for tropical cereals, 28% for rice and 27% for pulses. In the case of maize and tropical roots, the proportion was only 11-16%. In this context, for most people in the world living solely on “buying local” is not possible.
We have seen this played out in NZ in staple wheat production. We have had a good growing year for wheat and are coping well with the 500% increased demand by New Zealanders www.farmersweekly.co.nz/section/arable/view/demand-good-for-kiwi-grains. Yet with much of our prime cropping land replaced by dairy production in the past two decades, we produce enough wheat only for the South Island.
Much of the wheat consumed in the North Island is imported from Australia and unless transport costs from south to north are reduced, this is unlikely to change.
On the global scene there are reports that the United Kingdom, Russia and others are holding back grain to keep for their own supply, helping to push grain prices to season highs. “Buying local” for our full food basket is incredibly complex and costly and there are some serious economic and social considerations which need to be assessed for most products.
What we are buying is shifting – we are going back to the basics and as we move into our own kitchens, we are cooking what we were brought up with in terms of culture, flavours and ingredients. On top of that we want to do what we can to be in optimal health, should we contract Covid-19.
The relationship of food and health is on the rise – in the words of Ian Proudfood, KPMG’s global head of agribusiness, “consumers are seeking lifestyle solutions to build immunity and minimise risk of contagion” and we should expect “functional and nutraceutical foods to go stratospheric.”
I have said for a long time, that NZ food companies need to be innovating more in this area – I believe this so strongly I think I will still be ranting in my grave. Let Covid-19 be the catalyst for some big moves in this space from NZ food companies and researchers.
Finally, governments will look to greater protectionism of their own food supplies and we expect to see significant shifts in food trade volumes and patterns. There are examples of food supply disruption in nearly every traded food type.
There is a fantastic commentary in Nature, by Máximo Torero, FAO’s chief economist, calling for a global approach to food security.
He cites many food disruption examples – in India, farmers are feeding strawberries to cows because they cannot transport the fruit to markets in cities; in Peru, producers are dumping tonnes of white cocoa into landfill because the restaurants and hotels that would normally buy it are closed; and in the US and Canada, farmers have had to pour milk away for the same reason.
For NZ, as food exporters, it is increasingly obvious that geopolitics will play a major role in food trade. Relationships between heavyweights, US and China are deteriorating. As the US calls for a WHO review of China’s response to Covid-19 and Australia and others join the charge, I wonder what this will mean for the politics of food trade. China is critical for our economy.
Our country’s leadership during the pandemic has been recognised internationally. We have the opportunity to move the focus from how NZ is dealing with Covid-19 to what is a better model for food supply in the world. Let’s not be afraid to step up.
• Anna Campbell is managing director of AbacusBio, a Dunedin based agri-technology company.