3 Food Execs on Preparing for the Next Wave of Challenges
In the midst of the COVID-19 pandemic, the food industry has been a bright spot in the U.S. economy. Nonetheless, whether you’re a manufacturer or distributor, there have been a lot of challenges to overcome, including keeping employees safe, supply chain management and the channel mix.
I recently spoke with three executives to discuss how the industry continues to adapt as the crisis has evolved, and why communication—both internally and with industry peers—is essential:
- Christopher Atayan, CEO of AMCON Distributing Co., an Omaha, Nebraska-based wholesale distributor of food and tobacco products, primarily serving convenience-stores in 33 states. AMCON also has a number of retail health food stores.
- John Soules, CEO of John Soules Foods, a Tyler, Texas-based protein processor of marinated, fully cooked and breaded products serving the foodservice, industrial and retail channels.
- Dennis Straub, President of AmeriQual Group, an Evansville, Indiana-based processor and distributor of shelf-stable foods sold through a variety of channels, including government sales to FEMA, DHS and USDA among other agencies.
Following is a summary of our conversation.
Companies across the food industry have had to shift on a dime. And there’s already evidence that the initial industry shifts—from foodservice to retail, for example—are entering another transition phase.
After AMCON initially saw a boost in convenience store sales, Atayan said business is returning to normal levels. “Our biggest concern is the stability of our customer base,” he said. “They’re small businesses and we’re essentially keeping them afloat through the product we’re shipping. We’re carefully monitoring their activities. Some of the ones we service are tobacco outfits—they’re not deemed essential service, so we’re working with them to get some other food products in there.”
Soules also noted that the retail business has eased off after the initial spike, as consumers’ shelves are already stocked and grocery stores adopt social distancing practices. As for John Soules Foods’ other business lines, it’s been a mixed bag.
“The broadline distributor business is off around 60% and asking for additional terms,” he said. “Business is down and they’re asking for an additional 30 to 45 days over and above what they currently have. That’s been a strain. The school business is off at least 80%. The national account business is off as well. Our industrial business, which tends to go to retail, is up quite a bit. It’s been an interesting time. Our customers are basically either begging for more product or begging for more time to pay.”
AmeriQual, which counts agencies such as the Department of Defense and the Federal Emergency Management Agency among its government customers, often supplies food for disaster relief efforts. But Straub said in the case of the current emergency, the types of products in demand have changed.
“A majority of what we’ve done in the past has been associated with hurricanes and natural disasters where there’s a tremendous need for food to be consumed because millions of people are without power or food,” he said. “In this instance, we’re finding there’s a tremendous amount of desired purchases for product that is not being consumed in the near or immediate term. In this case because almost no one is consuming these meals, everybody wants long-term, shelf-stable product. We’re not getting interest from FEMA, we’re getting it from the states, public utilities, universities—and they’re just buying and holding. It’s unique: everybody wants something, but they want a long shelf life and they don’t want to consume it.”
Meeting customer demand means managing a labor force through a crisis. Distributing products means a lot of drivers working a lot of hours. That means companies have to be careful about making sure employees aren’t overworked and that they stay healthy.
“We have a game plan for our larger facilities for how we’d handle a positive,” Straub said of AmeriQual. “We have a plan, but we cannot predict the employee reaction.”
That’s why for all the executives, communication is essential. Both internally and with their industry peers and stakeholders.
“We’ve had the benefit of speaking with eight or 10 other companies, some customers and some partners, and we’ve shared quite a bit,” Straub said. “We didn’t offer sick pay in the past, but we’ve changed that policy. We’ve gone way above what we’ve ever done from a standpoint of appreciation bonuses, and we’re trying to tie those appreciation bonuses to support local businesses in each of our communities. We are communicating weekly on why we are essential. We try to tell our employees that they are twice as essential, because the Department of Defense is relying on us, but we’re also in the food industry, which is critical.”
John Soules Foods provided employees with a letter to carry in their vehicles declaring that they work for an essential business. But social distancing within the facilities remains a challenge. “We’re trying to change some of the equipment and conveyors, widen some things to create some separation,” Soules said. “So far attendance been pretty good. There’s not any blind panic going on, but constant communication is something we have to do.”
All three executives spoke of the increase in quality employee applicants they’ve been seeing, which is a welcome change as they’ve been challenged in the past with finding high-quality skilled workers, especially in maintenance and engineering roles.
Six months ago, John Soules Foods met with a public relations firm specializing in crisis management. That turned out to be fortuitous: as they were debating whether to retain their services, the pandemic began to take its toll in the U.S.
“As soon as this kicked in we decided we better hire them,” Soules said. “They’ve really helped a lot in helping us navigate through some of the what-ifs. We’ve already got press releases prepared if we do have a positive. It’s a matter of when, not if.”
COVID-19 immediately left the food industry—like so many others—scrambling to find a way to not just survive this pandemic’s impact, but to maintain their sustainability and continue with growth plans. Straub said AmeriQual began the year looking to create a long-term strategic plan that included “transformational projects” for the next two or three years. Now, it’s a day-to-day fight to keep things humming.
“You’re preparing for what’s going to happen if you get a positive in your facility,” Straub said. “Is that someone who can be easily quarantined? How do you address it? And with the changes in the market, it’s something I have never experienced as far as the uncertainty. I think over the next two months, we’re in for a lot more changes and challenges, because I believe it’s a matter of time before all of our facilities at some point will have a positive, and our ability to manage through this given the large orders is just going to be hand-to-hand combat every day, and I think it’s going to be this way for the next 60 days at least.”
And while it appears that COVID-19 will be a long-term challenge with likely long-term consequences and new norms, the executives also realize that long-term planning has to continue.
“On April 1, we closed a big deal that we’d been working on for a long time,” Atayan said. “We’re full steam ahead. When you’re servicing the convenience store industry, whereas grocery is very stable, there’s constant chaos in the convenience channel. This is obviously a bigger chaos than some of the other ones we’ve dealt with, but we’ve had to deal with things before. You’ve got to really be focused on building your enterprise. We’re looking for warehouses, we’re looking for people. We have to be careful and measured in everything we’re doing, but we also have to keep moving forward, otherwise somebody is going to catch you.”
Market Executive & Managing Director, Food, Consumer and Agribusiness Group
Erica T. Kuhlmann is a Managing Director and Market Executive of BMO Commercial Bank's Food, Consumer and Agribusiness Group. The Food, Consumer and…(..)View Full Profile >
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