What Should Food And Beverage Company Do During Crisis?

Trường Lăng

April 9, 2020


What Should Food And Beverage Company Do During Crisis?

Trường Lăng

April 9, 2020

The pandemic, in fact, has made all industries get stuck. Food and beverage are one of the sectors that are affected severely by the Coronavirus pandemic. Customers avoid eating out due to the fear of crowds. Moreover, according to the Vietnamese government policies, restaurants and bars have to close since the first of April. Never has the food and beverage sector experienced such a huge loss in profits before. Hence, what should food and beverage companies do during the Coronavirus crisis? The article will provide you with insights into consumer behaviour and suggested management strategies through some food and beverage companies in Vietnam.

Food and beverage industry knockdown during the Coronavirus pandemic

Food and beverage businesses worldwide

The Coronavirus pandemic has influenced on the governmental level, manufacturing and finance. 

Governmental level

How do countries and regions in the world respond to the outbreak regarding food and beverage industry? On March 18, the US Food and Drug Administration has declared that it will be suspending domestic inspections. The organization will suspend most foreign inspections of food, as well as medicine and medical devices, as a precaution against the spread of the Coronavirus. 
Food Industry Asia (FIA) and the Asian Food and Beverage Alliance (AFBA) have called all countries in the region to provide sufficient food to overcome the global health crisis amid the increasing number of nationwide lockdowns and border restrictions. In particular, the two agencies are jointly calling upon governments to ensure the unhindered production and supply of food and beverages.  Being fear of the food shortage possible in Asia, Matt Kovac, FIA executive director, advised all governments to keep their countries’ food production at full capacity where possible and to remain open for food and beverage supply. 

Workforce and Manufacturing Impacts

The pandemic also has negative impacts on workforce and manufacturing. Some countries have called on retired or idle workers to join in manufacturing. The chairman of leading UK food producer called on hospitality staffs who have lost their jobs due to the Corovirus outbreak to contribute to the national food production in the hardship. Furthermore, European countries are encountering the shortage of facial masks and dry hand sanitizer. As a result, distilleries and breweries are converted to places producing these two items. Beverage factories including Tito’s Vodka, Brown-Foreman, Pernode Ricard USA and beer producers such as Anheuser-Busch are standing up to join in the sanitizer game
Food and beverage industry also face a scarcity of ingredients and food supply disruption due to the Coronavirus pandemic. Typically, the pandemic has disrupted Coca-Cola supply chain and artificial sweeteners from China could be in shorter supply if the outbreak continues to spread. 
Quote about food and beverage and supply chain
Encountering the possibility of a shortage of food supply, food retailers are focused on ensuring local sourcing to overcome the risk of cross-regional transportation bans. Besides, food manufacturers with facilities in other countries have begun working with local suppliers to keep product moving. Companies also come up with solutions to keep the operation as well as to protect workers. These solutions are to minimize contracts with workers, to limit the number of workers going in and going out facilities, to provide screening employee’s temperature. The minimization of working contracts may increase the number of unemployed workers. 

Financial impacts

Regarding to financial impacts, the pandemic has negative and neutral impacts on companies on food and beverage sectors. It seems that canned food becomes preferential. Consumers tend to gather canned food and not to choose fresh goods, all in anticipation of staying at home and avoiding contacting with others. Additionally, well-financed companies relied on local ingredients may be positioned better in the situation. 
Regarding to giant companies using exported ingredients, the revenue is certainly affected. Coca-Cola is a typical example. The company estimated that its case volume could decline by 2 to 3 percentage points, organic revenue by 1 to 2 percentage points, and first-quarter earnings-per-share by 1 to 2 cents. Although total monthly revenue is dropped, companies have to implement financial support to employees to ensure the minimum aid during the pandemic. Since March 20, Atlantic Natural Foods has given a $100/ personal supplement allowance every two weeks to assist with purchasing essential goods. 
That is the food and beverage industry worldwide, how’s about Vietnam?

Workforce and Manufacturing Impacts

Production and exporting enterprises suffer from long-term impacts. Old contracts are likely to be terminated while potential contracts are pending due to the declining purchasing power in Vietnam and other countries.

Financial impacts

Some categories in food and beverage can take benefits during the pandemic, but the others do not. Food and beverage sector suffers from the declining tendency of real estate during the Coronavirus epidemic. Some restaurants have to stop because of the high cost of ground rent, which usually accounts for 25 – 30% of the revenue. Now, the revenue drops and owners find it hard to cover such a high operating cost, then the shutdown, to some small restaurants, is just a matter of time. Furthermore, SMEs in food and beverage are affected immediately when the pandemic becomes serious globally. If there are no positive signs from the Ministry of Health, big corporations in food and beverage have to scale down the business and trim down human resources. 

According to Nielsen Vietnam, 51% of retailers (in 356 F&B retailers in Vietnam) have indicated that COVID-19 has negative impacts on sales, which reduced 3% in the first two months of 2020. 
Impacts of Coronavirus crisis in food and beverage business in Vietnam
Despite the general downside in food and beverage, some product categories are predicted to take benefits as consumer’s behaviour changes. According to Mr. Nguyễn Lâm Viên, chairman of Vinamit, said that essential food and functional food will have high demand. Foods that are good for health are predicted to increase considerably to 30% because when people stay at home, they would like to buy organic foods that are healthy and improve the immune system. It can be said that consumer’s behaviour has changed a lot during the COVID-19.
How do consumers react to the current situation? Let’s move the next part.

Vietnamese consumer’s behaviour in food and beverage industry during the Coronavirus pandemic

According to a survey conducted by Nielsen Vietnam on how COVID-19 changed consumer’s behaviour, Vietnamese customers’ attitude toward shopping and eating out has shifted. In particular, 

  • 45% of consumers stocked food at home
  • 50% of consumers reduced their frequency of going to supermarket or convenience stores
  • 25% increased their time of shopping online
  • 25% reduced out-of-home consumption occasions

Impacts on shopping and outdoor activities during Coronavirus outbreak
As people have a tendency of stocking food at home (when the positive cases of COVID-19 increased), processed foods become preferential. The ratio of instant noodles bought by Vietnamese buyers increased 67%, followed by frozen food (40%) and sterilized sausage (19%).  
To get deeper insight, Kanta, a famous market research in the UK, has provided key points in the relationship between Vietnamese customers and F&B sector. Vietnamese consumers in four major urban cities including Hanoi, Ho Chi Minh City, Da Nang, and Can Tho tend to stock three categories of food:

  • People spend more on personal and family hygiene products to remain clean and kill germs.
  • People eat at home more, then convenience foods and cooking aids surge during the outbreak.
  • Immune-boosting and nutrition products, especially for the elderly and kids are bought more, in which milk powder and yogurt are favored. 

Nevertheless, people avoid celebratory occasions due to the spread of Coronavirus. Vendor bars are forced to close to restrict the number of crowds, then either alcohol drinks or non-alcohol drinks are experiencing a sharp decline. 

Strategies for food and beverage companies during the pandemic

Pour money in marketing and shift to take-away with creative ideas

Communicate with customers about COVID-19 on social media

Taking advantage of social media to communicate and engage with customers is a must-thing for marking during the temporarily close due to the pandemic. Restaurants and coffee shops use social media as the main channel to update the situation and promote new programs in the pandemic.

Don Chicken, a restaurant chain about fried chicken from Korea, encourages customers to stay at home (follow the guideline of the government) and not worry about your meals because Don will take care of you. The hashtag #stayathome and the title of the picture motivate customers a lot. It is also a time for restaurants to boost the take-away and shipping service.
Moreover, Lotteria in Vietnam has the same notification on its channel. Lotteria only serves takeaway since March 26. Customers who want to a delicious meal from Lotteria, just pick up their phones and order via GrabFood. 

Being one of the most popular coffee shops in Vietnam, Cộng Cafe follows the trend #stayathome and encourage people to stay healthy during the pandemic. 

Cộng cafe also engages with Cộng lovers by creating an interesting game. If you share your stories about your social distancing on Instagram’s story with hashtag #congonha and tag @congcaphe, Cộng cafe will give 5 gifts for lucky participants each week. The game starts from March 31 to April 30. This is such a great game to connect the community. 

Offer bulk service with lucrative vouchers/ discounts

Gogi House, a restaurant chain from Japan, offers decent grilled meals for a whole family although you do not come to the restaurant. The restaurant offers combos of seasoned pork belly, beef…with attractive prices for 1 person or 4 people. Besides, you can hire a grill kitchen if you do not have one. Free ship is available for the bill is over 200,000 VND and the location is under 3km. 

The Coffee House sells packages of coffee bean and ground coffee with a meaning note: the price for each package that customers pay will be extracted to donate for doctors who are working hard at the frontline to fight against the evil virus. Moreover, The Coffee House also offers discounts for drinks and combos of one drink and one cake such as 30% off for Mochiato or entering discount codes to pay only 19,000 VND for any kind of cake until the middle of April. 

How’s about human resource management strategies?

Here is how Starbucks does. Starting April 6, Starbucks employees can tap their pool of therapy sessions and meet with a counselor in person via video chats. Staffs can also have unlimited access to health-care apps through Lyra Health Inc. The company was planning its new mental-heal benefits before the Coronavirus outbreak but said it would help relieve the anxiety of employees. 
You can also have an overview of the influence of COVID-19 on the global economy and the Vietnamese economy.
In a nutshell, companies should adapt their plan appropriately during the pandemic to maintain the operation as well as ensure allowance and health for employees. Food and beverage sector is affected directly as the revenue, in general, declines. However, businesses should prepare in advance, and find out temporary solutions to trigger the consumer’s willingness to your product or service via marketing or story from your brand. For instance, creating meaningful campaigns on social media to engage customers as well as deliver positive messages in the community (Cộng cafe) or offering attractive discounts during the social distance (Gogi House, Don chicken, Lotteria). Being positive is the first invisible solution for you guys.

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