KANSAS CITY, MO. — A range of COVID-19 impacts to the pet food and treat industry in the United States are beginning to emerge, of which variability is the key takeaway.
While some businesses are experiencing both positive and adverse repercussions along the supply chain, in their workforces and through certain sales channels, others are reporting they have not yet been affected by the pandemic. Either way and although pet food sales are still expected to grow this year, this industry is bracing for impact.
Pet Food Processing conducted a survey of pet food manufacturers gauging the impact to businesses, distribution, sales channels and production thus far. Here are the results.
As of the beginning of April, a majority (63%) of manufacturers surveyed said they have seen an increase in demand as a result of coronavirus panic purchasing, while 19% said they have seen a decrease in demand, 10% said they have not yet been impacted but expect to be, and 8% said there has been no impact.
Out of these responses, 51% said the situation has reaped overall positive impacts, reporting increased orders, sales and demand. Adverse impacts are sprinkled into the mix, with several companies meeting increased demand but running into distribution and inventory issues down the supply chain.
Only 4% reported their production was not able to keep up with demand, which is causing issues with distribution, and 11% said they have either shut down production to ease employee concerns or are running production under-staffed.
One manufacturer said it expected April sales to be down 85% compared to year-ago revenue. Another 20% reported supply chain disruptions causing negative impacts to their businesses. A handful of responses reflected they are incurring extra expenses as a result of COVID-19, due to added payroll expenses and higher cost of goods tied to increased demand.
A combination of positive and negative impacts was reported by 13% of manufacturers. These responses reflected production efficiency issues to meet heightened demand, the effect of social distancing on production efficiencies, up-and-down sales, supply chain disruptions for receiving meat ingredients, and mixed distribution sentiments between brick-and-mortar, direct-to-consumer and e-commerce sales.
As many areas of the United States have issued shelter-in-residence orders and consumers stock up on essential items — such as pet food — for the foreseeable future, some manufacturers reported a huge boom in sales and production, followed by a steep decline in sales and demand.
Impact on sales channels and supply chain
When asked whether COVID-19 has so far impacted sales among certain channels, the response was a mix of negative and positive outcomes between the mass channel, convenience and dollar stores, pet retail specialty, distributors and e-commerce.
Most manufacturers (57%) said they have seen a positive impact in e-commerce sales, while 39% saw an increase in pet retail specialty stores, 30% said distributor sales have increased, 25% said sales were positively impacted in grocery stores, super centers and club stores, and 10% reported positive sales impacts in the convenience/dollar store segment. Overall, 28% of respondents reported no positive sales impacts in any of these channels.
While a majority (73%) of manufacturers said they have not seen a negative impact on any of these channels as of now, the pet retail specialty channel seems to have been hit the hardest in terms of adverse impacts, with 25% of manufacturers reporting a negative impact in this segment.
Otherwise, 10% reported a negative impact on e-commerce sales, 8% have seen a negative impact for distributor sales, and 4% have seen adverse sales impacts in both the mass channel of grocery stores, super center and club stores, as well as convenience/dollar stores.
The ingredient supply chain has been most affected by COVID-19, according to these manufacturers, as 43% reported disruptions. The supply chain for packaging materials has been less affected, with 17% reporting disruptions there, and the equipment supply chain seems to be holding strong with only 5% of manufacturers seeing disruptions. Half (50%) of manufacturers reported they have not experienced supply chain disruptions for ingredients, equipment or packaging materials at this time.
Of the manufacturers who distribute product abroad, 73% said their international business has not yet been affected. However, 23% of these manufacturers said some of their international markets have been affected, including those in China, the Philippines, Australia, countries in the European Union, Japan, Korea and Asia.
One manufacturer who is experiencing impacts reported a positive outcome, with an increase in demand in several European and Asian countries. Two other businesses said they are experiencing issues with importing ingredients from North Africa and the European Union, as well as from Asia.
More than half (52%) of manufacturers who answered the survey said they do not distribute product internationally.
On the safe side
Many manufacturers have implemented new policies and procedures at their production facilities in response to employee health concerns and some of the other challenges and opportunities posed by COVID-19.
For example, 36% reported increasing sanitation efforts during production, while 34% said they are enforcing social distancing between their employees. Another 27% said they are providing personal protective equipment (PPE) to employees or staggering shifts and breaks to comply with social distancing and safety guidelines recommended by the Centers for Disease Control and Prevention (CDC).
Eighteen percent of manufacturers have allowed eligible employees to work from home and, for those who are unable to work from home, another 16% of manufacturers have begun monitoring employee health, including taking temperatures on a daily basis.
Additionally, 11% reported they have halted business travel and/or restricted facility access to their employees only.
Other responses include increasing hourly wages for production workers, increasing employee training and education about coronavirus-specific procedures and general health and food safety standards, increasing inventory of raw ingredients, not accepting new customers or employee applications, offering alternative delivery and shipping options, increasing production rates and restricting sales calls.
Roughly 5% of manufacturers said they have not implemented adjustments at this time.
Overall, Pet Food Processing’s COVID-19 impact survey consisted primarily of pet food or treat manufacturers (88%), but also included responses from pet food or treat suppliers (8%), with the remaining 4% of responses coming from businesses operating in other segments of the pet industry.
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