Transformation could be coming, and quick.
The novel coronavirus has changed the way we purchase and consume food essentially overnight. As a result of COVID-19, the $300 billion U.S. foodservice industry has seen a sales decline of 60 to 90 percent, while grocery shopping has increased exponentially as people across the country are consuming and cooking all their meals at home. COVID-19 has undeniably accelerated the growth of online grocery shopping across all age demographics, with 50 percent of all American consumers projected to have tried online grocery by the end of 2020, according to Business Insider Intelligence.
The abrupt shock to what was otherwise a predictive and lean food supply chain system resulted in empty grocery store shelves and food banks in dire need as retail channel suppliers could not keep up with consumer demand. All the while, farmers and producers who rely on commercial customers such as restaurants, hospitals and schools to purchase their products are dumping milk, killing livestock, and destroying crops as a result of foodservice customers being closed or operating at reduced capacity. Because of social distancing and governmental orders, restaurants have a surplus of raw materials and have begun selling their products directly to consumers. Qualified drivers and workers at plants and farms have become ill, causing shutdowns, strikes, and shortages. Due to restrictions on travel and immigration, farms are no longer able to have open access to seasonal immigrant employees.
At the core of this dilemma are the two food supply chain systems within our overall supply chain: the foodservice supply chain and the retail and grocery supply chain. These two chains have historically worked simultaneously, but completely independent of one another. Because of the differences between the two in areas such as food labeling requirements, packaging, consumer needs and preferences, rerouting products and shifting to retail has proven to be a challenging undertaking. Moreover, our entire food supply chain is reliant on a complex infrastructure where all consumers rely on distant producers, centralized plants, and food transportation systems.
To demonstrate how interconnected and dependent we are as a country, a research team at the University of Illinois conducted a study to show how food flows between counties in the U.S. In 2019, there were 9.5 million links between all counties on a map of the U.S., with each link representing transportation of all food commodities, along transit routes such as roads or railways. The coronavirus has completely disrupted this interconnected infrastructure as well as core geographical areas that receive and ship a majority of our nation’s food. As a result, we are feeling a rippling effect across our entire food supply chain system.
What the coronavirus pandemic has revealed is that our U.S. food supply chain system needs adjustments, improvements and innovation in order to be truly resilient and adaptable when something like a global pandemic disrupts our otherwise normal food spending and consumption. Embracing flexibility over rigidity, transparency over holding back “proprietary” data from competitors, localized over centralized, and diversification over consolidation can build a stronger food supply ecosystem and create opportunities to rethink how and where to produce, supply and distribute raw materials. With such dramatic changes in our food system, many are already adapting quickly, and realizing the opportunities and possibilities that come with disruption.
For example, many farmers are beginning to eliminate the middleman in order to deliver boxes of fresh produce, meat, dairy and eggs directly to consumers. From a marketing perspective, such direct to consumer sales result in increased food safety and security since the food travels less and never sets foot in a crowded grocery store.
In South Florida, Organic Grown Direct is currently the only area organic produce home delivery service that is also a farm and allows customers to customize deliveries based on seasonal availability. As a result of COVID-19, Organic Grown Direct, and other local and regional farmers have seen a spike in community supported agriculture (CSA) shares by pivoting to direct to consumer deliveries and pickups. By supporting and purchasing through local and regional food systems, we can reduce our dependence on interstate travel and food can move quickly from farm to table. Indoor and vertical agriculture is another way to address the challenges, risks and costs associated with traditional farming and distribution. Hydroponic farms, community gardens, and farms located within shipping containers are just some ways to mitigate risk and increase access to nearby, fresh produce without having to rely on interstate travel or international trade.
Most recently, entrepreneurs and innovators are creating new technologies designed to make our food system more digital, flexible, and efficient. Choco, founded in 2018 out of Berlin, is a company that combines mobile commerce and messaging into a single online platform to enable restaurant owners and food suppliers to conduct all orders and communications online. According to Venturebeat.com, the company is now valued at more than $200 million after raising $30.2 million in a recent round of funding. Through Choco’s mobile app, restaurants can order from multiple suppliers and can receive notifications and order confirmations via the app without ever having to pick up a phone. Fieldcraft, an online ingredient marketplace, is another online platform that “simplifies the sourcing experience and connects buyers and suppliers at every stage of the value chain from grower to processor, manufacturer to brand,” according to its website.
Through such accelerated emerging digital tools and technology, we are faced with a unique opportunity to turn a global pandemic into a catalyst for creative pathways toward potentially transforming how our food supply chain functions in a post-COVID-19 world.
Morgan Geller is a partner and the franchise and distribution practice leader of AXS LAW Group. The Miami Beach native is a published author and speaker sought after by many national franchise and legal organizations including the International Franchise Association’s Legal Symposium in Washington, D.C., where she spoke last year. In 2019 and 2020, Geller was named a “Legal Eagle” by. Franchise Times, an honor awarded to the top franchise attorneys in the United States.