Food manufacturers fight back as coronavirus threatens losses, closures
As the country prepares to shift to Level 3 of lockdown, with an easing of restrictions, food manufacturers are bracing for the possible impact of further losses and infections among staff.
Companies have been taking proactive decisions to shut down operations when risks become apparent, says Chamber of Baking executive director Geoff Penny. But larger food manufacturers are likely to weather the storm better than smaller ones, he warned.
"They are continuing production. I think there have been business casualties and some of the smaller units have been discontinued.
"The larger players have seen large increases and decreases." However, smaller businesses "may wait until the lockdowns have ended altogether", said Penny.
In April, Tiger Brands – which already sustained heavy blows from a listeriosis outbreak in 2018 – had to close a large bakery over concerns of staff members contracting Covid-19. Tiger Brands is one of the largest food manufacturers in Africa.
The company reported profits of R359.6 million for the six months ended March 2020, compared to R1.4 billion in the corresponding period a year before.
Tiger Brands has expressed confidence in its ability to return the bakery to operation at minimal risk to staff and consumers. But it has warned that this may come at the cost of jobs.
CEO Noel Doyle said during the six months to March, operating margins from continuing Tiger Brands operations declined by 3.2% to 7%. Tiger Brands invested almost R500 million across the portfolio and included replacement, efficiency optimisation and brand development; and that it plans to spend an equal amount in the second half of the year.
"Given the challenging outlook, we have indicated that we are implementing cost saving measures and structural re-engineering.
"Regrettably, job losses may be required in order to sustain the business into the future, which the company will only resort to once all other cost saving initiatives have been executed," said Doyle.
Doyle said the group was working to realise more accountability and control in each operation category.
"This will lead to more specific and measurable improvements at each of our businesses. It also means a thorough review of procurement, supply chain and processes to ensure improved efficiencies and enhanced productivity," Doyle said.
He ruled out the possibility of adding pharmaceuticals and hygiene products to Tiger Brands' assets, more than a decade after the company unbundled its stake in Adcock Ingram.
Asked about the temporary precautionary closure of a bakery in KwaZulu Natal, Doyle said the provincial Department of Health had helped to set up a mobile testing facility. No loss of income had been incurred by Tiger Brands and employees were still paid.
Following hygiene precautions and social distancing, and with assistance from the Department of Health, operations restarted on 25 April.
Tiger Brands is not alone. Other large food manufacturing companies are also feeling the barbs of a harsh economic environment in the throes of the coronavirus pandemic.
Premier Foods spokesperson Siobhan O'Sullivan said the company took the precaution of closing its Cape Town Blue Ribbon bakery after 69 of the 70 positive coronavirus tests it conducted on staff came from that facility.
However, O'Sullivan said, authorities found Premier to be "fully compliant" with the required protocols and had praised the company for proactive initiatives.
A spokesperson from Pioneer Foods said at the end of April and early May, a number of employees also tested positive for Covid-19 at the Shakaskraal bakery in KwaZulu Natal.
"A beverages factory closed temporarily following a single employee testing positive for the virus. Similarly, one of our rice packing plants was closed for deep cleaning but reopened 48 hours later. One of our other bakeries in Cape Town has seen a number of positive cases," the spokesperson said.
Penny said the pressures that weighed on Tiger Brands in the past two months would have a similar impact on other companies in food manufacturing, and that some food processing facilities had already closed down over health concerns.