Covid-19 Pandemic — Impact on Food and Agriculture
Consumer shopping patterns and preferences are changing due to the Covid-19 pandemic; some producers have seen increased consumer demand for certain products, while others have had to sell products due to excess capacity. The pandemic has brought great stimulation to the organic food market, and the uncertainty of the epidemic will also affect everyone in the entire supply chain from the grower to the retail side.
According to data from various sources, during the global Covid-19 pandemic, there has been a “significant increase” in the sales of organic food, with individual growth figures even exceeding 40%! Isn’t this surprising? ? Maybe you also contributed to this gorgeous data unknowingly. Why did the organic food industry get the “assist” of the virus? And, will this growth and earnings continue in the midst of a downturn?
Gorgeous sales figures
Online retailers in various countries have reported “no top, only higher” sales growth figures. In the U.S., a major consumer of organic food, Whole Foods Market has begun limiting the number of customers it can shop online due to unprecedented demand.
According to the “Organic Produce Network OPN” data in the United States, sales growth has exceeded that of ordinary agricultural products over the same period.
Meanwhile, the UK organic food industry reports that organic food is growing significantly faster than the overall retail sector and outperforming traditional agri-food products. Sales of organic tea, coffee and baking ingredients have increased significantly, as have organic wines, beef and butter, among others.
Abel & Cole, which has been in organic food retailing in the UK for 30 years, reported a 25% increase in its sales orders and had to stop taking in new customers.
In France, some organic grocery stores have grown by more than 40%;
In India, online organic retailer “Nourish Organic” saw a 30% increase in sales in March;
In China, during the epidemic, more people are eating at home, and sales of organic food have increased by 30%-40%.
According to a report by market research firm Ecovia Intelligence, sales of organic food around the world have surged during the current pandemic, with online retail seeing the highest growth. Brick-and-mortar stores are also benefiting from increased demand for organic food as they stay open during the pandemic. Not only are existing customers spending more, but they are also attracting more new customers.
The driving force behind the surge in sales
What’s driving the rise in demand for organic and sustainable food? In short, COVID-19 is raising awareness among consumers about the relationship between nutrition and health, and looking for healthier options to boost immunity, such as buying more organic and healthy foods.
Data provided by food intelligence platform Tastewise shows that searches for food keywords containing “immunity” increased by 27% between February 2019 and March 2020. Consumer interest in agri-food products including kombucha, bitter gourd and others has surged since the pandemic.
Currently, as consumers take a closer look at their health and consider how to feed themselves and their families during the pandemic, organic products may be more appealing. Current buying patterns and data suggest that consumers have a strong appetite for organic food. In the U.S. alone, a whopping 84% of people buy organic food occasionally, and 45% of those buy it regularly. According to Natural Grocers, the top three reasons consumers buy organic food are avoiding pesticides, avoiding GMOs, and believing that organic products are more nutritious.
The fact that consumers may be eating at home every day creates new opportunities for organic products to enter the grocery basket. Household food consumption could increase by as much as 50% due to the pandemic, representing billions of dollars in sales, and before the pandemic, food consumption in households was steadily declining.
In addition, many consumers prefer to support locally grown agri-food products due to food security concerns during the global pandemic. Local food supply chains are relatively simpler and more transparent, are more likely to be trusted by local consumers, and they tend to feature “organic” features.
It’s also important to note that consumers are willing to pay more when they buy food for the purpose of boosting immunity, or improving overall health and preventing disease. Product premiums are not an issue for these consumers, so this may explain why organic sales have performed so well during the pandemic.
Supply and demand pressure for organic products
While growing demand is good news for organic agri-food retailers, the problems that the pandemic has created for global supply chains are becoming more apparent. Mercaris, a market data platform for organic produce, also recently laid out how the pandemic will affect the organic industry, including the significant risks it faces.
From the upstream planting production side, producers of organic grains and other foods have largely not been under direct downward pressure from the pandemic, as most crops have been planted and farmers have largely received what they need for the season. required agricultural materials and inputs. However, the upstream organic agri-food industry may eventually run into problems.
Judging from the outbreak of infections in the agri-food industry, meat processing plants are high-risk sites, prompting many factories to close and quarantine, which may reduce the demand for organic feed grains. The organic agri-food industry could be even more disruptive from the closure of meat complexes.
Taking the United States as an example, according to the Mercaris report: From 2016/17 to 2018/19, conventional feed corn use accounted for 36% to 38% of the domestic supply in the United States, while organic feed corn use accounted for to 51% to 62%.
For soybeans, the difference was even more pronounced. During the same period, the use of conventional feed soybeans accounted for 20% to 21%, while the use of organic feed soybeans was as high as 77% to 86%, an average of nearly 60% higher than the conventional market. Therefore, the proportion of organic feed grains is very high, and once the demand drops, the impact will extend and reverse organic meat products, causing serious shortages.
In addition, in order to mitigate the spread of the virus, organic grain storage, milling and oil extraction facilities will also reduce production capacity or even limit supply. Europe and the United States depend on Asia, Latin America and Africa for organic raw materials, and blockades and quarantines in any country will affect the entire food chain. For example, India, which has been supplying organic tea, herbs, spices and related ingredients, introduced emergency measures in March to halt the processing and export of related food products.
Logistics port closures and global currency fluctuations will also weigh, and even reshape, organic commodity markets.
Can organic growth continue?
The pandemic has brought the importance of health and nutrition to the center, but will consumer enthusiasm for organic foods fade in the face of the foreseeable global economic downturn and uncertainty?
In terms of consumer behavior, behavioral habits that have been changed during the COVID-19 crisis will generally be maintained by consumers. The benefits and advantages of organic food will also benefit consumers in the “post-coronavirus era.” Organic food is usually the most popular category in fresh e-commerce, but the pandemic has also made most people accept the form of buying food online, so consumers who buy organic food should continue in the “post-coronavirus era”.
Ecovia Intelligence’s report is equally optimistic that demand for organic and sustainable food will remain strong after consumer health concerns subside, just as previous food and health crises, such as mad cow disease in 2000, in Europe Organic sales increased; and after SARS, organic momentum continued to grow in Asia.
However, the organic product market is not without risk; if consumer incomes decline, layoffs continue, and a prolonged economic recession, consumers will have less purchasing power for quality products. To cut spending, consumers are forced to opt for lower-priced conventional agricultural products.
Declining consumer incomes and a protracted economic downturn can be considered the biggest long-term influencers on the organic food industry. The Mercaris report pointed out that the upcoming recession is significantly different from the 2008 economic crisis: the 2008 recession was caused by global macroeconomic factors, while the current recession is caused by the pandemic and working from home.
Second, the immediate magnitude of the current recession is unprecedented, and there are few benchmarks against which to adequately compare. If the pandemic can be brought under control quickly and quarantine bans lifted, the economic impact may be manageable.
The coronavirus is a social, political and economic event unparalleled in modern times. No one can make certain specific predictions about the outlook for the industry. The epidemic has the potential to affect trade, labor, consumer demand and the overall global economy, and its knock-on effects will be extensive and long-term. Monitoring risks, developing long-term sustainability plans, and understanding how much uncertainty there is will be critical to navigating the market in the coming year.
Looking ahead, COVID-19 is likely to impact the organic product market into 2021 and beyond. Intermittent disruptions in organic livestock production are expected to continue, but may not cause major market shocks. In addition, the ability and efficiency of countries to import and export organic food will be hindered by the possibility of prolonged port closures.
Ecovia Intelligence forecasts that global organic sales reached $100 billion in 2018 and could exceed $150 billion over the next five years as the outbreak of the new crown pandemic is changing the way consumers shop and eat.