The coronavirus, or COVID-19, is now a central talking point and is, first and foremost, a significant threat to public health globally. The World Health Organisation refers to COVID-19 as ‘public enemy number one’, with the virus rapidly spreading worldwide. Aside from the obvious impact on public health, COVID-19’s impact on the global economy and supply chains is massive.
How did the virus affect the food and drink industry, prior to its spread to the UK?
The outbreak of COVID-19 coincided with Chinese New Year and, in an attempt to contain the outbreak in China, the holiday period was extended. This meant that there were delays in employees returning to work, which has consequently impeded production within various sectors, including food and drink. Travel restrictions in China and mandatory quarantining contributed further to understaffing and delays.
Additionally, the imposition of port restrictions has also contributed to disruption, with the free flow of goods to and from China being significantly impacted due to COVID-19. Within the UK, businesses are highly dependent upon China. One industry source commented that “we are too dependent on China in a multiplicity of areas ranging from packaging to vitamins… I think the food supply chain will already be coming under strain.”
COVID-19 in the UK
Now that COVID-19 has spread throughout the UK, understaffing is likely to have a significant impact on the food and drink sector. It has been anticipated that 20% of the UK workforce could be absent from work due to COVID-19 at any one time. Businesses in this sector require to take significant precautions to limit contamination by ensuring that those who are unwell and/or have symptoms are not involved in food production and preparation. However, it is important to note that there is no concrete evidence, as yet, that COVID-19 can be transmitted through food.
COVID-19 has also led to the cancellation of multiple events within the industry until at least the summer, from the Foodex show in Birmingham to the Spirit of Speyside Whisky Festival on Speyside, both of which will not take place until 2021.
Stockpiling of various products has been a further consequence, with one third of consumers panic-buying goods such as pasta, flour and sugar. Consequently, supermarkets have been required to introduce restrictive measures to combat this trend.
COVID-19 has already hit those in the alcoholic drinks and restaurant industries. The company Anheuser-Busch In Bev, which owns beer brands such as Budweiser, Stella Artois and Corona beer, has reported that COVID-19 has significantly contributed to its worst quarter in a decade. This is partially caused by the lack of people socialising in public due to self-isolating and mandatory social distancing. According to Chef’s Pencil, a ‘culinary trends’ website, there has also been a reported decline in interest in Italian and Chinese cuisine (the countries most affected by the outbreak) by 24% and 33% respectively (full case study available here).
What can your business do to minimise disruption?
Unfortunately, disruption is inevitable. However, your business must consider what can be done to mitigate any losses. If it has not already done so, your business should urgently consider how COVID-19 might impact your supply chain – in terms of whether it is, firstly, able to meet its obligations in terms of supply demands of those further on the chain and, secondly, whether it is likely to face claims from those earlier in the chain looking for relief.
If you want to strengthen your business’s immune system against COVID-19, some helpful steps to take are as follows:
- look at contracts which your business has and, in particular, consider the clauses relating to grounds for termination and penalties in the event of non-performance
- consider which contracts are the most important to your business and prioritise these
- be aware of ‘force majeure’ clauses which may provide relief to suppliers, depending on the exact wording of the clause, and be aware of which law governs the contract as the interpretation of such clauses will depend on the legal system governing the contract
- if your business has dealt with similar events previously, consider how it dealt with the situation and critically assess how the response could have been improved
- ensure that you take steps to mitigate losses where possible
Contact our legal advisers
MacRoberts' specialist Food & Drink team can assist you with any queries you may have on the impact of COVID-19 on your particular business, so please do not hesitate to contact us if you wish to discuss your particular circumstances.