The food industry and the next pandemic

At the recent Impetus conference, Steve Newton from Metcash gave a truly fascinating insight into the effects of a pandemic on the food industry.

We have all heard the story — the next pandemic is overdue … But if, like me, you have paid scant attention, Steve’s presentation provided a wake-up call.

A global epidemic (pandemic) could easily cause more damage than the current global financial crisis and it will definitely affect the food manufacturing sector.

The last pandemic, the SARS crisis in 2003/04, was fairly modest because the virus had a relatively low infectivity rate. Even so, the regional cost was US$40 billion and the economies of Singapore and Hong Kong shrank by 10%.

If the highly pathogenic avian influenza virus H5N1 mutates into a human-to-human form, it is anticipated that it will take 19 to 30 weeks before a vaccine is widely available. During this interval several waves of infection will spread through the country. One model assumes that 25% of people will be directly affected; 35–50% of staff will be absent due to self-quarantining and parental duties; and 1–3% may die.

Can your business survive with 50% of staff for an extended period?

Don’t forget all your suppliers will also be affected, including the utilities. So, you won’t be able to access all your usual raw materials, you will not be able to rely on your power and water supplies and you’ll be way understaffed.

In fact, running your business won’t be your only concern — feeding your family may well be difficult.

Currently, the Australian food chain is driven by ‘just in time’ manufacturing. There is a maximum of 30 days of non-perishable supplies in the supply chain and this is reducing. Fresh supplies are even more critical, with a maximum of five days' supply available.

These figures are even more desperate when you factor in panic buying, which is expected will purge supplies in just two days in the event of a pandemic. Around 95% of homes in Australia have only 2–4 days pantry stock so panic buying will be pretty universal.

The major retailers — Woolworths, Coles and Metcash — supply about 90% of Australia’s groceries daily from around 200 distribution centres. To do this they need around 280,000 people, 1800 major supermarkets, 3000 mini-supermarkets and 3000 plus manufacturers. Now imagine the impact of a 35–50% staff reduction across the board.

Luckily, the state, territory and federal governments have imagined these circumstances.

The Australian government, through the Attorney General’s Department, has established a range of inter-governmental and business government consultative mechanisms to assist in the development and coordination of national security policy. The Trusted Information Sharing Network for Critical Infrastructure Protection (TISN) enables the owners and operators of critical infrastructure to share, on a national level, information on important issues such as business continuity, consequence management, and threats and vulnerabilities.

The Business-Government Advisory Group on National Security has also been created to provide senior business leaders an opportunity to input into the strategic direction of Australia’s national security policy.

The Food Chain Infrastructure Assurance Advisory Group includes the Food Industry Working Group (FIWG) — chaired by the Australian Food and Grocery Council CEO, Kate Carnell — and the Retailer Action Working Group (RAWG) chaired by Steve Newton. The FIWG and RAWG are working together to ensure the food and grocery, food service and manufacturing industry contingency plans are well thought out and create an effective integrated response.

The TISN is critical for industry commitment to provide data to develop a new logistics crisis tool which will be used to coordinate a response to a pandemic. 1600 priority foods and groceries from 120 suppliers have been identified and protocols for their equitable distribution across the country are being established.

At the same time, there is a push to increase the stockpile of food in the community by getting households to increase the contents of their pantries so they have 14 days of supplies on hand. This ‘resilience’ initiative was given a soft launch via the retailer-funded website www.pantrylist.com.au earlier this year, with a community TV campaign and brochure drop planned for next year.

With all of this in mind, it is probably worthwhile to consider how your business will cope when the pandemic hits and to pop out to the grocery store and stock up on some staples.