We are living during a period of great concern, for the health of our families, ourselves, our neighbors and countries. We’re simultaneously experiencing a time of significant economic uncertainty and at the same time social dislocation. We’re all humans first of course, and we need to take a human first approach to responding to new facts and information as it comes in.
Many of Worximity’s customers are in the food products and CPG (Consumer Packaged Goods) industries. Companies in these markets are seeing significant impacts on their business and are having to rapidly adjust to a new, short-term reality while trying to judge what is in the best long-term interests of their business, stakeholders, customers and employees.
There is actually a bit of good news for many food manufacturing and CPG companies compared to a lot of other industries. If you manufacture food, you’ve likely been deemed an ‘essential’ business by whatever local, regional or national authority governs your market. This means that you are likely not going to have to temporarily close your doors. Even many CPG companies making commonly used consumer products have been exempted from stopping operations.
Across the food manufacturing industry, companies are seeing unprecedented near term demand with significant spikes in business.
General Mills, Tyson Foods, Campbell Soup and Kraft Heinz all saw sales gains between 10% and 20% for the four weeks ending March 8 according to Food Processing Magazine.
Campbell Soup Co. is also experiencing “unprecedented demand” for its products, leading to massive boosts in sales across its sectors.
Kroger told its suppliers that demand had surged 30 percent across all categories in recent days. (For comparison, the company’s sales for all of last year rose about 2 percent.) as noted in the NY Times.
Even smaller local and regional brands are seeing significant increases in demand. H&S Bakery is ramping up production and distribution of its bread products — and hiring more than 50 new workers — to keep the shelves stocked at supermarkets across Greater Baltimore.
Smaller meats companies are even having to adapt, with Bilinski’s Sausage Co. doubling production to 180,000 pounds per week in New York City.
How are companies responding to this surge in demand? First and foremost, they’re looking to keep their production employees on the job, even as they work to ensure a continued safe working environment.
"Pepsi said it would provide at least an incremental $100 per week for its more than 90,000 U.S. frontline employees during the next month. The soda and snacks maker also will provide enhanced benefits to all U.S.-based employees, including those who have to quarantine, in the coming months. Those who quarantine will receive 100% of their pay. PepsiCo also said it will hire 6,000 new frontline employees across the U.S."
"Hormel announced it would give more than $4 million as part of a cash bonus to its 13,000 plant production employees. The special bonus includes $300 for full-time workers and $150 for part-time team members. Mondelez International said its manufacturing, distribution and sales hourly workforce would get a $2 per hour pay increase through May 2 and sales representatives would get a $125 per week bonus."
Smuckers, Maple Leaf Farms and Hormel are offering similar raise and bonus programs to keep workers engaged and productive while they each manage a surge in demand.
For companies large and small and their employees, there’s no doubt that we are facing a great challenge. As noted above, some companies are fortunate to have ‘the worst problem in business’ which is surging demand, while other businesses are seeing as softening in demand or even are required to suspend operations to comply with social distancing rules.
We at Worximity know that we’ll come together to combat this health crisis and that we will as a society get through this the best that we can. When we do, we’ll need an economy that’s functioning in order to rebuild back to where we were not long ago. That means that we need to act promptly and confidently to ensure that the means of making a living for as many of us as possible is still waiting for us on the other side of this.
We are aware that companies are currently having to change the way that they do things, change their processes and make important decisions. So with that in mind, here are some things that you might find helpful:
Wharton School of Business has penned a useful and timely article on risk management during this crisis.
The Food Industry Association has put together a downloadable guide titled “Coronavirus and Pandemic Preparedness for the Food Industry.”
Coca-Cola is expecting a V-shaped recovery:
Think about your customers
Different industries and markets are affected in different ways and having to make different decisions as this crisis evolves. You may need to rethink how you can best serve customer in various industries. Some may carry on largely as business as usual and others may need help adjusting to a new temporary reality.
Talk with your employees
You can’t underestimate the impact that this is having on employees. If you have to make headcount adjustments, of course you need to do it in a timely manner to keep the business running, but you can still act humanely in your communications. For employees that are left, explain that the difficult choices being made are so that the rest of the organization can move forward more securely.
Embrace new technologies and smart working habits
You can see tips in our previous article on how to optimize remote working conditions for success. These guidelines can be shared as part of your employee communications strategy.
Companies that traditionally have embraced working on site are possibly going to find that there are advantages to offering work from home opportunities to some employees and this may be part of our ‘new normal’. SaaS solutions can power this adaptation by enabling a seamless transition to remote working for operations and production management personnel. The advantages of offering work from home opportunities are well known and include the ability to recruit and retain top talent, company loyalty, better work life balance while achieving higher productivity and more.
Tradeshows, a staple of how food and consumer products are launched and sign up distribution are being cancelled. As we discussed above, there may be some ‘new normals’ as consumers and companies take the learnings of this period of time and apply it to longer-term decision-making. Food and CPG companies may use this experience to rethink how they market their products, by embracing remote sales technologies and digital events.
Gratitude is a cornerstone of happiness. Employees who are engaged in philanthropic acts promoted by their employers think more highly of their work circumstances, are more prone to promote the brand of their employer positively and are more loyal over the long run. Are there causes or activities that your employees can support that will make this a time of some fond memories as well being a time of anxiety and uncertainty?
Kraft Heinz Co. has committed to provide $12 million in cash and donations worldwide to help counter the effects of the global COVID-19 pandemic and we expect many companies to follow.
Plan for the future
Governments are already putting into place measures to ‘put a floor under’ the economy. This will have tremendous stabilizing effects for employment and will allow the economy to accelerate quickly as these temporary restrictions are lifted. The economy was fundamentally strong except for this health crisis. This is not a typical downturn driven by excesses in one part of the economy or another. Warren Buffet is famous for saying ‘Be fearful when others are greedy and greedy when others are fearful’. We’re not sure that you need to take it that far, but it is fair to be mindful that the economy is likely to be growing again and quite quickly in the not too distant future as the CEO of Coca-Cola notes below. Companies that plan for the turnaround and invest in the right directions now will have competitive advantage as this subsides.
Some experts are saying that current trends might be a harbinger of a more permanent change in consumer behavior, which could be good news for some food and CPG manufacturing businesses.
People who lived through the great depression were famous for having food staple supplies available at home and for being more frugal and cooking at home vs. going out so much. Some supply chain experts say that there may be a long term trend of staying at home more and going out less as a result of ongoing fear of the next pandemic or simply of people discovering the value of connection and their home life.
Companies that are paying attention to these new trends are investing, big. McKee Foods, the maker of ‘comfort food’ snacks such as Little Debbie ready to eat cakes and pastries, at the height of the promotion of social distancing announced a $500M planned investment in new capacity.
“It's worth remembering that the Coca-Cola Company, in its entire history, has emerged from every global crisis, whether military, economic, or disease pandemic ... stronger when it's finished," he said. "We've been better and we've grown versus the starting point. So, we're adapting." Quincey said the company is counting on a V-shaped recovery from the current recession but preparing for a U-shape.
In fact, there are 4 other well-known consumer brands that survived the great depression in addition to Coca-Cola. Exxon Mobile, PPG, Proctor & Gamble and Stanley Black and Decker are all still here and thriving. What do they have in common? All five of these companies maintained a ‘business as usual’ outlook, continuing to pay dividends to investors throughout the economic turmoil. All of these businesses emerged stronger from the depression than their competition. They continued to invest and grow, even in difficult times.
Habits may be permanently changed, in favor of retail food products and takeout vs. dining out. Among the winners of the Great Depression were home economists, those instructors of how to make the most of the resources available in the home. This behavior became well-ingrained in a generation and shaped buyer behavior for decades.
CPG and Food Companies have a real opportunity here, even as we go through what is likely to be a short and sharp downturn to re-invest in their businesses processes now and to return stronger and fitter as things return to the new normal. The new normal that emerges may well be an increase in share-of-wallet for food and CPG companies that provide retail products for preparing and consuming food at home.
Now could be a great time to invest in your business, to plan for sustained and profitable growth that’s coming and to ensure that your operating systems are efficient and able to scale to meet near term and long-term demand.
It's possible that you're looking for something to focus on right now to keep your business moving forward and prepare for the future. A great way to optimize your production efficiency and capacity is by focusing on OEE.
Here are some helpful OEE resources designed to help you to strategize new ways to capitalize on the coming new normal:
OEE & Business Financial & Operation Performance
OEE & Food Manufacturing