# Insight

Food for Thought

The coronavirus has also jolted the food industry. Four managers explain how this led them to focus on essentials—and how they even discovered some new opportunities.

A farmer fills sacks with barley grain in a warehouse in Cervera, Spain. Despite filled warehouses, logistical problems led to bottlenecks in the supply of food in many places at the beginning of the corona pandemic. David Ramos/Bloomberg/Getty Images

Flour, oats, yeast—just a few months ago no one imag­ined there might be short­ages of food sta­ples such as these. But with the advent of Covid-19, a sense of uncer­tain­ty arose. As the virus broke out in dif­fer­ent coun­tries and gov­ern­ments respond­ed with restric­tions on pub­lic life, gaps began appear­ing on super­mar­ket shelves.

Faced with an unknown virus, many peo­ple want­ed to be cer­tain at least of a well-stocked refrig­er­a­tor and pantry. So far, so human. But the sud­den rush to squir­rel away sta­ples pre­sent­ed food pro­duc­ers with unprece­dent­ed chal­lenges. From one day to the next, some had to shift their pro­duc­tion and oth­ers had to mobi­lize con­sid­er­able addi­tion­al capac­i­ties.

A look at the food indus­try reveals that its busi­ness­es employed a wide array of meth­ods to address the cri­sis, or even used the weeks of lock­down to put new ideas into prac­tice and advance changes. One fac­tor turned out to be con­stant throughout the indus­try: in an emer­gency, com­pa­nies were able to count above all on the loy­al­ty of their employ­ees and cus­tomers.

Consequences of the lockdown

But let’s start at the begin­ning. In the West, the lead­ing role in the coro­n­avirus tragedy fell to Italy because the coun­try and its mar­kets were the first to encounter an out­break as sud­den as it was severe. Ital­ian busi­ness­es were there­fore com­pelled to han­dle sub­se­quent devel­op­ments with­out the ben­e­fit of any advance warn­ing or suc­cess­ful prior expe­ri­ence.

Diego Zanetti/Granarolo S.p.A.

Out-of-home sales to restaurants and cafeterias, for example, dropped by 90 percent.

Filippo Marchi
General Manager Granarolo S.p.A.

One of those com­pa­nies is Gra­naro­lo (2019 sales: 1.3 bil­lion euros), a food pro­duc­er that found itself in the eye of the storm right from the start because its head­quar­ters and most of its plants are locat­ed in north­ern Italy, which was espe­cial­ly hard hit. “The lock­down imposed fol­low­ing the out­break had an imme­di­ate and very strong effect on con­sumer behav­ior,” says Granarolo’s gen­er­al man­ag­er Fil­ip­po Marchi on a video call from his office. Illus­trat­ing the focus of the company’s activ­i­ties, a cow on a poster behind him appears to gaze over his right shoul­der: Gra­naro­lo pro­duces pri­mar­i­ly dairy prod­ucts and sells them through­out the world.

“Out-of-home sales to restau­rants and cafe­te­rias, for exam­ple, dropped by 90 per­cent,” he says. “Depend­ing on the mar­ket, that accounts for 30 to 50 per­cent of our turnover. At the same time, demand for sta­ples such as but­ter, mas­car­pone, and moz­zarel­la rose steeply.” Gra­naro­lo adapt­ed its pro­duc­tion overnight to meet these new demands. It closed some of its pro­duc­tion lines, and assigned addi­tion­al shifts to oth­ers. These efforts have been suc­cess­ful, because the company’s sec­ond-quar­ter loss­es are expect­ed to be lim­it­ed to 10–14 per­cent (as of June 2020).

Tom Maurer/Hengstenberg

Given the huge challenges posed by the crisis, the industry performed well.

Philipp Hengstenberg
President of Food Federation Germany (DLV) and Managing Director Hengstenberg

Fish sticks, vegetables—and ethanol

Philipp Heng­sten­berg, the pres­i­dent of Food Fed­er­a­tion Ger­many (DLV) and head of a fam­i­ly-owned com­pa­ny based in Esslin­gen, watched the changes to the Ger­man mar­ket. In north­ern Europe, cus­tomers were espe­cial­ly eager to buy foods with long shelf lives. Yet many of these items were sold out for a while even though the indus­try had had about two weeks to pre­pare before the virus arrivedBut the shelves were quick­ly filled again, says Heng­sten­berg, and fol­lows up this obser­va­tion with praise. Given the huge chal­lenges posed by the cri­sis, the indus­try per­formed well.Hengstenberg’s own com­pa­ny offered pre­cise­ly what cus­tomers want­ed: canned sauer­kraut and toma­toes and jars of pick­les fea­ture promi­nent­ly in its prod­uct range. The increase in sales prob­a­bly does not reflect a long-term rise in demand for these items, but rather that cus­tomers have stored them away. But while con­sumers were fill­ing their larders, the company’s ware­hous­es were emp­ty­ing out. We’ll make it to the next har­vest,says  Heng­sten­bergbut our stocks have never been so low at this point in time.

Some com­pa­nies man­aged to stand out from the field. One exam­ple would be Fros­ta, a frozen foods pro­duc­er (2019 sales: 523 mil­lion euros) based in the north­ern Ger­man city of Bre­mer­haven, whose stock rose by 20 per­cent from March 20 to May 20. But the notion that Fros­ta could be a ben­e­fi­cia­ry of the cri­sis is reject­ed out of hand by board mem­ber Maik Busse. Instead, he says, the company’s per­for­mance dur­ing the emer­gency is a prod­uct of its hard work over the pre­ced­ing years. You can­not build trust in your customers and part­ners overnight, he says. We could only draw on it because we had been devel­op­ing it for years before­hand.

And cus­tomers did in fact buy more prod­ucts from Fros­ta dur­ing the cri­sis, espe­cial­ly fish sticks. That’s our high­light for the lit­tle ones,says Busse with a smile, also on a video call. Demand for fish sticks rose by 70 per­cent. But sales of ready-made meals and frozen veg­eta­bles also showed a marked increase. So much so that bot­tle­necks arose. We had a few major prob­lems meet­ing the demand, because we source our raw goods from all over the world, he explains. First there weren’t any mung bean sprouts from China; then there were short­ages of veg­eta­bles from south­ern Europe; and final­ly, logis­tics in gen­er­al turned out to be com­pli­cat­ed.

At some point, we board members were almost superfluous.

Maik BusseMaik Busse
COO and CFO, Frosta AG

Employees support their companies

For a while the avail­abil­i­ty of pack­ag­ing was also an issue, because ethanol was need­ed to print it—and of course,  it’s also used to make dis­in­fec­tants. “That caught us by sur­prise,” admits Busse. The key to solv­ing this prob­lem was found in the cri­sis man­age­ment skills of the employ­ees. “They real­ly did a superb job, because every­one pulled togeth­er to find solu­tions and any sign of a silo men­tal­i­ty was gone. At some point, we board mem­bers were almost super­flu­ous.” Frosta’s employ­ees worked togeth­er to find alter­na­tive ingre­di­ents or new sup­pli­ers to ease the bot­tle­necks.

Busse describes how the fac­to­ry work­ers rose to the chal­lenge in espe­cial­ly impres­sive ways and showed them­selves to be the back­bone of the com­pa­ny. Work­ing with Porsche Con­sult­ing was also help­ful. “At the end of 2019 we had launched some pilot projects in our fac­to­ries to enhance our cor­po­rate cul­ture. When the virus hit, we imme­di­ate­ly expand­ed them, which enabled us to meet the increased demand.”

Zen­tis, a fruit-pro­cess­ing com­pa­ny based in the Ger­man city of Aachen (fruit prepa­ra­tions, jams, and con­fec­tionery; 2018 sales: 664 mil­lion euros), also reports fac­ing chal­lenges at the start of the pan­dem­ic. Suc­cess­ful sup­ply-chain man­age­ment depends on unre­strict­ed glob­al trans­port of goods,explains its exec­u­tive man­ag­er Nor­bert Weichele. In March, logis­tics capac­i­ties came under pres­sure and bor­ders were clos­ing downOur raw mate­ri­als come from all over the world. As a part­ner for both indus­try and trade, the chal­lenge was to ensure a secure sup­ply of raw goods.Weichele notes the advan­tage of Zen­tis hav­ing its own logis­tics. Despite the lock­down and high degree of uncer­tainty, its dri­vers con­tin­ued to work through­out Europe to ensure trans­port and sup­ply.

As a partner for both industry and trade, the challenge was to ensure a secure supply of raw goods.

Norbert WeicheleNorbert Weichele
Executive Manager,
Zentis GmbH & Co. KG

The employ­ees showed remark­able sol­i­dar­i­ty and com­mit­ment dur­ing the cri­sis,says Weichele in sum­ming up the sit­u­a­tion. He has been with the com­pa­ny for about a decade, but was par­tic­u­lar­ly sat­is­fied and impressed in recent weeks. Every­one showed team spir­it in rapid­ly adapt­ing to the new cir­cum­stances, whether in com­ply­ing with the dis­tanc­ing rules, putting new shift mod­els prompt­ly into place, or mov­ing their offices to their homes. The dig­i­tal infra­struc­ture that Zen­tis had intro­duced about two years ear­li­er was par­tic­u­lar­ly help­ful and proved its worth in the cri­sis. One could say that the coro­n­avirus played a key role in advanc­ing the dig­i­tal trans­for­ma­tion at Zen­tis.

Accelerated change and digitalization

Fil­ip­po Marchi also remarked on this ben­e­fit for his com­pa­ny in Bologna. Thanks to the virus we’ve seen that it’s pos­si­ble to work in a dif­fer­ent way, which brings a whole series of advan­tages,he says. With all the office staff sud­den­ly work­ing from home, it was clear that dig­i­tal oper­a­tions can help bal­ance pro­fes­sion­al and pri­vate lives, and that many time-con­sum­ing meet­ings are not in fact nec­es­sary. In order to retain these positive effects after the emer­gency sit­u­a­tion is over, Marchi has asked his man­agers to work with the per­son­nel depart­ment to deter­mine what per­cent­age of work can be done from home in the future.

Project with Porsche Consulting

Industry pioneer in direct sales

Gabriele Fiolo/Granarolo S.p.A.
Granarolo’s sales operations were old-fashioned and inefficient until just a short time ago, says the general manager Filippo Marchi. “We had known for a while that we had to make changes, so we developed a pilot project with Porsche Consulting and carried it out in mid-2019.” The project focused on digitalizing the supply chain and making it more direct. In the past, many sales points—both at supermarkets and in the out-of-home sector—had been served by delivery trucks, with the drivers also providing consulting services for the products. With the new system, orders are placed online and a specialized department can offer consulting if desired. This reflects a “key step in development,” according to Marchi, who is making Granarolo a pioneer in its industry in Italy. “We are the first business to use this system to sell fresh products,” he notes.

Marchi sees yet more ben­e­fi­cial results of the coro­n­avirus cri­sis. With the sup­port of Porsche Con­sult­ing, the com­pa­ny used the decline in the restau­rant and cafe­te­ria busi­ness to con­tin­ue restruc­tur­ing its sales. Gra­naro­lo had already car­ried out a pilot project with the man­age­ment con­sul­tan­cy last year on dig­i­tal­iz­ing its sup­ply chain (see boxed text). “The cri­sis gave us a chance to accel­er­ate the roll­out in the out-of-home sec­tor as well, where mod­ern­iza­tion was over­due,” remarks Marchi. Thanks to the virus, restruc­tur­ing was com­plet­ed with­in just a few months instead of the antic­i­pat­ed year and a half.

As Marchi con­cludes, “The virus com­pelled us to focus on the essen­tials of our busi­ness.” Over recent years the prod­uct range had become increas­ing­ly sub­di­vid­ed and com­plex. But the cri­sis revealed which prod­ucts con­sumers real­ly need—and which ones they don’t. “We turned our atten­tion back to our vital organs, so to speak, and will be stream­lin­ing our prod­uct range.”

The cri­sis also served as a reminder that com­pa­nies con­sist not only of sales fig­ures but also and espe­cial­ly of the peo­ple who stand behind them—the employ­ees and cus­tomers who should be taken care of under such extra­or­di­nary cir­cum­stances. Gra­naro­lo did just that. Only three peo­ple in a work­force of 3,000 test­ed pos­i­tive for the virus, and no one was infect­ed at the work­place. Last but not least: “Gra­naro­lo helped ensure that its cus­tomers felt secure dur­ing this spe­cial sit­u­a­tion, because its prod­ucts were always avail­able.”

Read the next topicInnovation Tackles the Virus