The new coronavirus will have an enduring disruptive impact on supply chains as consumers revert to the one large, weekly shop typical around a decade ago and stockpile essentials, the head of Kerry Group, said on Thursday.
One of the world's largest makers of food ingredients, with 150 manufacturing facilities across the world, Ireland's Kerry Group said stockpiling of long-life products had broken a well-established link between purchasing and consumption, making planning by producers challenging.
"From an industry perspective the knock-on effects of all these dynamics are profound. The robustness of supply chains is clearly being tested," Chief Executive Edmond Scanlon told the company's annual general meeting.
Overall, consumption patterns are returning to those seen 10 or 15 years ago when people tended to do one large weekly shop at a local supermarket, Scanlon said.
"Trips are much more functional and deliberate. People are sticking to shopping lists with a very noticeable decrease in impulse purchases," he said.
Kerry reported group revenue up 3.4% in the first three months of the year, and said the impact in the second quarter would be "much more significant." The company withdrew its earnings guidance for the full year because of the uncertainty.
Sales volumes in Kerry's core taste and nutrition business were up 1.2% in the quarter compared to an estimated increase of 4% without any coronavirus restrictions.
Sales volumes in Kerry's consumer food business, which includes the brands Dairygold butter and Richmond sausages, declined by 4.8% in the first quarter.
In a sign of normality returning, Scanlon said Kerry's ingredients business in China, where many coronavirus restrictions on movements have been eased, had returned to 2019 levels after falling 30% in the first quarter.
But he said there would be significant volatility ahead with pressure on pricing as consumers switched to cheaper products because of the economic impact of the coronavirus. (Reuters)