Exclusive interview: COVID-19 leads to supply chain disruption and food fraud
Snack Food & Wholesale Bakery recently was able to catch up with Kevin Kenny, COO, Decernis, Rockville, MD, and Ron Stakland, global product director, HorizonScan, Deerfield, IL, about COVID-19 and its impact on the supply chain.
Liz Parker: What have been the supply chain disruptions for snack and bakery during the COVID-19 pandemic?
Kevin Kenny: Some of the items most affected for the snack and bakery vertical are honey, nuts and exotic fruits, as well as some grains/wheat.
Countries that provide nuts like cashews, and exotic fruits, such as India, Thailand and Cambodia, are experiencing difficulties that will ultimately impact the market, although we won’t see the signs for about four weeks yet.
Also, some critical supplies are being diverted to more developed countries, which can outbid and pay higher prices. Hence, food security risk is now a growing issue in smaller and weaker markets.
LP: Have any countries shut their borders to exports headed to the U.S., in an effort to stockpile goods for their own national security?
KK: Yes. Even before COVID-19 hit, there was a trend initiated by the United States, among others, toward overt economic nationalism. That trend has dramatically accelerated in 2020 as countries including Cambodia, India, Kazakhstan, Russia (which instituted a 10-day grain stoppage), Serbia, and Ukraine to stop the export of "key" commodities to protect their populations and national security.
LP: Has there been increased opportunities for food fraud?
Ron Stakland: It is still a bit too early to tell how much the pandemic will affect fraud in the supply chain, but we checked with our team at HorizonScan, the world’s most comprehensive database of food hazards. For the first quarter of 2020, reporting of hazards is down overall, but this might be attributed to the fact that less audits are being conducted.
That said, in terms of bakery items:
- The US has seen an increasing number of reports of illegal or undeclared colors in confectionery products.
- The Czech Republic has seen an emerging issue about bourbon vanilla containing synthetic ethylvanillin.
- We’re starting to see more diluted honey for example, even though we have also seen it in good times. There have been five reports about adulteration or substitution in honey since the beginning of 2020, primarily for honey coming from Spain.
- One report of poor traceability of Almonds coming from the U.K.
- No fraud reports in flour since April of 2019.
LP: How has the disruption of migrant work disrupted the supply chain, from farm to fork?
KK: India is a prime example of this. The country did a total shutdown on March 25 and has extended it through May 3 (thus far). It remains the tightest lockdown in the world. There is no public transportation at all, causing suddenly unemployed workers in big cities to walk home—often over days—to home villages to survive, which is problematic because India (like many developing countries) remains dependent on this informal economy for seasonal migrant and factory workers. While farm operations and their supply chains are often exempt, without migrant labor, there is no harvest.
This abject lack of migrant agricultural workers, coupled with the closing of restaurants and schools in many affected countries, is causing a steep drop in demand, leaving unprocessed food like pork, eggs, milk, and early-harvest fruits and vegetables to be destroyed or “tilled under.”
Countries like Brazil, whose leadership is turning a blind eye to the pandemic, will ultimately see a more significant impact.
LP: Have there been any shipping concerns due to port restrictions and/or lack of personnel?
KK: In India, truckers (many of whom are also sick) are also being stopped on their way to ports because permit enforcement between states is uneven. If they do get to port, there is a shortage of customs workers, etc. Add to this the problem of export foods stuck in containers or ports with limited market access, combined with import/export restrictions, and a crisis is at hand.
Another major factor in supply chain disruption is an unprecedented decrease in air cargo capacity with the grounding of passenger aircraft. Few realize that most passenger aircraft are equally laden with cargo, so this will result in dramatic short-term air freight price increases.
LP: How is the snack and baking industry poised to meet demands amidst all these concerns?
KK: In the medium and long term, this will cause entire supply chains to be rethought. The cost savings found in China, India, Vietnam, and Thailand will now be weighed against the apparent threats to supply chain stability. The recent sourcing trend for large multinationals to partner with fewer, trusted providers—which was upended by the pandemic—may reverse once the dust settles.
Overall, global business leaders need to focus on building a more durable and flexible supply chain for the future, while at the same time dealing with the current fallout. That said, adversity is often the best catalyst for growth and innovation.