How COVID-19 is impacting natural sales, manufacturing and distributionHow COVID-19 is impacting natural sales, manufacturing and distribution
A deep dive into how the global pandemic is affecting natural brands.
March 20, 2020
Like many sectors, the natural industry is being rocked by the global changes wrought by the coronavirus. From employees who are working from home, to school, restaurant and everything-closures, the economic, social and cultural changes of social distancing will likely have far-reaching effects.
We reached out to natural brands across the category spectrum—including beverage, shelf-stable, frozen and more—to learn how the coronavirus is impacting sales, and how brands are building redundancy into their supply chains in order to ensure they can continue making and selling their products in the variable time of a global pandemic.
All of the natural brands we interviewed experienced unprecedented product sales over the past month. Greg Fleishman, co-CEO and co-founder of Foodstirs, which makes baking mixes, kits and ready-to-eat baked goods, says e-commerce sales have skyrocketed over the past two to four weeks. Amazon sales, says Fleishman, are up anywhere from one to two times normal volume, as is the company’s website sales and all home delivery services. Good Eggs, FreshDirect, Walmart.com and Instacart sales surged up to three times normal volume.
Similarly, Peter Truby, chief marketing officer at Elmhurst 1925, reports online sales of Elmhurst plant-based milk have been dramatic: the company has seen anywhere between 300 and 400% growth in e-commerce. This is particularly impressive because the company’s online sales have in the past struggled, possibly, Truby posits, because consumers believe their products require refrigeration (which they don’t—the product is shelf-stable).
Managing online sales growth has required strategic shifts to the business, as Elmhurst fulfills the majority of sales through the company’s website themselves. “We’ve had to staff up in that part of our business because we package and ship much of that product. We’ve tripled our staff for online orders,” Truby says.
And it’s not just e-commerce that is exploding. If news images of empty grocery shelves are any indication, product sales at brick-and-mortar retail locations have grown so much so that a strange phenomenon is occurring: grocery buyers are reaching out to brands to make sure they’ll be able to deliver on orders.
“Usually buyers in grocery stores hold the golden key—you beg to get a meeting with a buyer for even 30 minutes,” says Todd Hoffman, CFO at Chloe’s, maker of frozen fruit pops and novelties. “Now, buyers are reaching out to the brands to make sure we can supply products. So far, the communication between buyers and brands has been good.”
Even Amazon, an online reseller with a notoriously Darwinian sales approach, has been contacting brands. “Amazon has been reaching out to companies who make household staples—shelf-stable classics that have high household penetration—to ensure their own supply is met,” says Fleishman, adding that baking mixes fall under that category.
Clearly, the appetite for natural products during the era of social distancing and quarantining is strong. The question is how brands plan to keep pace with demand.
None of the natural brands and consultants we interviewed are currently experiencing manufacturing challenges, regardless if they operate their own facility or use a co-packer. But companies are closely monitoring their manufacturing processes by staying in touch with their facilities and operations teams.
Keeping manufacturing employees at work seems to be the most pressing challenge, not necessarily because these employees are sick and unable to work, but because most schools and daycares across the country are closed, and finding childcare can be a challenge. Some co-packers are finding smart solutions to better accommodate their employees, such as adding more shifts throughout the day (and night) they may not have had before for improved flexibility.
“At this point we’re not seeing a lot of impact on manufacturing, generally speaking [manufacturing facilities] are trying to respond to increased demand,” says Rick Williams, business partner, operations for JPG Resources, a food industry consultancy skilled in supply chain management. “There’s regional impact, but for the most part, people are coming into work.”
“We’re encouraging our brands to get heavy on their inventory right now because we don’t know when or if the distribution network or plants will be disrupted,” says Jeff Grogg, managing director of JPG Resources. “While the food system is generally likely to carry on and be functional specific to any one brand or ingredient, there could be a disruption.”
Some brands—particularly ones that create their product in-house, such as Elmhurst (their sister company owns their manufacturing facility)—are accelerating health and safety measures, such as adding temperature checks to line workers before they enter the facility. Elmhurst is also adding more product runs to meet demand.
Distribution continues to remain steady, but many brands are building redundancy (your new COVID-19 buzzword) into their delivery logistics.
“We work with a number of different carriers—around five,” says Fleishman, in order to ship Foodstirs to distribution warehouses, grocery stores and consumers around the county. “But now we’re going up to 10 carriers so we have the redundancy in case something goes wrong. We keep getting notices from carriers saying for now, we are OK.”
He points to a resource called FreightQuote.com, described as an Uber for freight and logistics that aggregates carriers from around the U.S., as a good tool for entrepreneurial brands to explore.
For Chloe’s, which requires freezer tractor trailers to move product, Hoffman says redundancy is already built into their supply chain, as there are a limited number of frozen-equipped trucks available. If one carrier company cannot fulfill shipping, the idea is there will be another one to step up and take its place.
“We have not seen surcharges in pricing, but we are seeing the [freezer] trucks are getting harder to book,” says Hoffman.
“The good thing,” says JPG Resource’s Williams, “is this isn’t a natural disaster. The roads are still in good shape, and the infrastructure is intact.”
As both brands and consumers are contending with crisis—whether that be working from home while also entertaining home-from-school children, or dealing with a maxed-out co-packer, Fleishman says it’s paramount to pay attention to your mental and physical well-being during this uncertain time.
He also says to engage your employees for support—even if they aren’t in a leadership role. “Look around your team and find people who seem to be comfortable in a crisis situation, and lean on them for support,” he says. “Some people surprise you and rise in stressful situations.”
Eric Schnell, founder of BeyondBrands, recommends that—if they can—young brands should forward-buy their next production run, although he concedes this may be tough for cash-strapped entrepreneurs. He also advises food producers to identify their “must dos” versus their “nice to dos” in order to remember business priorities, and contact their suppliers to forecast potential delays in ingredient delivery.
Lastly, keep calm. Seek solace that food is a necessary item—especially healthy food. “Keep innovating and keep coming out with new products,” says Chloe’s Hoffman. “People still need to feed themselves and their families.”
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