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Over the past week, local and state governments have begun to order sweeping restrictions on public life. As of today, this includes 8 U.S. states closing restaurants, theaters, and casinos and over 100 million Europeans on lockdown.
While it’s too soon for affected companies in the Food & Beverage industry to report against the full impact of COVID-19, we’re seeing trends emerge across supplier earnings calls, 8Ks, and conference transcripts.
- With new restrictions, many global food retail operations are announcing widespread temporary store closures
- Companies in F&B are bracing for the impact from supply-chain issues in China and Italy, in combination with lower demand in impacted regions.
- However, some companies feel that the worst has passed in China, and have seen demand start to return there
Here are the highlights. [Note: We are updating this post and our compilation post to reflect the most recent commentary. Last updated 3/17]
McDonald’s 8K (3/17)
The recent outbreak of the coronavirus has disrupted operations of McDonald’s restaurants in numerous markets around the world. Our primary focus and attention is directed towards the well being and safety of restaurant crew, franchisees, and employees.
In addition, we are working with franchisees around the world in order to evaluate operational feasibility and support financial liquidity (e.g. rent deferrals) during this period of uncertainty. We are also working closely with suppliers on contingency planning for continuous supply.
At this time, neither the duration nor scope of the disruption can be predicted, therefore, the negative financial impact to our results cannot be reasonably estimated. Below is a brief summary of operational impact to McDonald’s restaurants around the world; please note that this does not reflect declines in overall consumer behavior. At a minimum, we will provide an update during our Q1 2020 earnings release and call.
Several governments around the world have declared a State of Emergency and/or closed or partially closed all restaurants. The situation is constantly changing and we continue to work with our local teams on the operational and business impact.
U.S.: Substantially all restaurants are operating Drive-thru, Delivery, & Take-away only; subject to local restrictions, dining rooms are operating at restaurant discretion. Limited hours may apply.
International Operated Markets:
- Most markets, such as France and Canada, have limited operations including Drive-thru, Delivery and/or Take-away; some restaurants within these markets may be closed, have limited hours and/or restricted capacity.
- Several markets, such as Italy & Spain, have closed all restaurants.
International Developmental Licensed Markets: Substantially all restaurants are operating in Japan; China is operating ~95% of restaurants; operating hours in most other countries are driven by government regulations.
Shake Shack PR (3/17)
Pandemics or disease outbreaks such as the novel coronavirus (COVID-19 virus) have and may continue to impact customer traffic at our restaurants, may make it more difficult to staff our restaurants and, in more severe cases, may cause a temporary inability to obtain supplies, increase commodity costs or cause closures of our affected restaurants, sometimes for prolonged periods of time. We have temporarily shifted to a “to-go” only operating model in our domestic company-operated Shacks, suspending sit-down dining. We have also implemented closures, modified hours or reductions in on-site staff, resulting in cancelled shifts for some of our employees. COVID-19 may also materially adversely affect our ability to implement our growth plans, including delays in construction of new restaurants or adversely impact our overall ability to successfully execute our plans to enter into new markets. These changes and any additional changes may materially adversely affect our business or results of operations, and may impact our liquidity or financial condition, particularly if these changes are in place for a significant amount of time.
Pingtan Marine Enterprise LTD Earnings Call (3/17)
The first quarter of 2020 is a difficult time for many companies, including Pingtan that conducted businesses in China due to the coronavirus outbreak. The company has taken active precautionary measures and gradually resumed the work in mid-February to reduce the impact of the pandemic on our production and operations. Although the pandemic has not yet disappeared completely, we remain optimistic about the production and operational activities for the upcoming quarters. Pingtan has been devoted to being a leading supplier of natural seafood and high-quality [protein] in the Chinese market.
As always, Pingtan Marine will keep investors a place (inaudible) development and progress, and we welcome constructive suggestions and effective recommendations.
Reed’s Inc. 8K (3/16)
Anthony V. Vendetti Maxim Group LLC, Research Division: “Yes, I just wanted to start — I know you touched on the coronavirus, COVID-19. You’re not seeing any impact now, but obviously, things could be affected going forward. You mentioned, I guess, some of your ingredients, but not a lot, are sourced from Asia. Can you talk a little bit, though, from the sales perspective? I know that the guidance you’re providing right now is on the brands, correct? It’s just 10% plus on the brand. But it looks like the overall guidance for the year, you’re not reiterating or mentioning at this point. Is that solely due to the uncertainty around COVID-19 or is that just, at this point, not something you want to elaborate on?”
Norman E. Snyder CEO & COO: “More the latter. I’ll say this, we — and all of our forecasts and all of our planning, obviously, this is a recent development, and we haven’t had the time to absorb the full impact. And obviously, it’s a fluid situation with circumstances changing every day, so I think it would be remiss for me to make any sort of comments on that. We obviously are trying to do the best to stay on top of it, but like anybody else we don’t really have any visibility into the future so I’d prefer not to comment on that.”
Coffee Holding Company Inc. 8K (3/16)
“The other reason for the decline in sales during the quarter was the excessive volatility in the green coffee market which caused our green coffee customers to make smaller than normal purchases due to the constant daily price fluctuations. We believe once the volatility in the market subsides, our customers will once again resume their normal buying habits.”
“Other noteworthy events during the first quarter was the new distribution agreement with a large supermarket chain in the Northeast for three of our branded items. This chain has over 150 stores and has begun purchasing our Café Caribe items and two Harmony Bay 40 oz bag items. We also renewed our loan agreement with our lender, Sterling National Bank, for an additional two years at a more favorable borrowing base which we expect will save us approximately $35,000 annually.”
“Lastly, with the recent market volatility caused by the COVID-19 virus outbreak, I want to remind our shareholders that our balance sheet remains extremely strong and we believe our working capital combined with our $14.0 million borrowing base will see us through this event,” concluded Mr. Gordon.
New Age Beverages Corp Earnings Call (3/16)
Answer – David Vanderveen: Thanks, Brent. Yes, I mean, the opportunity right now is to add a lot of value to communities concerned about their health and to attract people who are worried about their finances. And there just isn't -- it's not what we wish for, but it's the reality that we have. And so this is a time when the direct selling segment of our business can really run. And fortunately, we've been working pretty aggressively since I came in, in January and Julie before that to dramatically overhaul the e-commerce part of the business. And also get some of these new tools like our mobile app and which will really help gamify the business for people coming in remotely, in particular, a lot of tools we're using like Zoom and WeChat and different social tools for communication, just makes it easier for us to execute that and for our distributors who are older to get in that as well. I brought some relationships with me and one of them, we have a great new social media team that's just overhauled all of our social platforms and is doing training now with a lot of our older leaders to help them quickly build the skills to be successful on some of those newer social selling platforms that people need to know. And so -- and we're just seeing great results. There's just a lot of excitement and a lot of activity. I was just -- I was surprised to see China do that well in this February versus previous year, given the impact of the coronavirus on that market, and they were right in the middle of, particularly Hubei, Wuhan, we're right in the middle of a lot of the big issues in February with quarantines, and we continued to see good things happening there. So it's going to be a bit of an ugly girl dance, but I think we're going to be the least ugly girl in some of these global pandemics right now. And I think we look relatively positive given that.
Natur International Corp 8K 3/13
Application for a 45-days extension of the filing deadline of the 10-K.
Natur International Corp. (“natur” or the company) seeks an extension of 45 days to file its annual report on Form 10-K, for the fiscal year ended December 31, 2019, based on the SEC Order under Section 36 of the Exchange Act, set forth in Release No. 34-88318, issued March 4, 2020, which authorizes the Commission to exempt, either conditionally or unconditionally, any person, security or transaction, or any class or classes of persons, securities, or transactions, from any provision or provisions of the Exchange Act or any rule or regulation thereunder, to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors.
On November 11, 2019, the company announced a merger with Share International, which has its operations in the Peoples’ Republic of China. The closing of this transaction, originally planned for midst of February 2020, is delayed due to the circumstances in China caused by the COVID-19 virus. Share International is currently not able to deliver the closing documents and financial records of its China activities due to illness of some key employees. As this transaction was announced to the public by form of press release on November 11, 2019, the company is obliged to inform the public in its 10-K, as a subsequent event, about the materiality of the transaction and to publish the (unaudited) results of the 4th quarter 2019 of Share International, which are part of the required closing documents. With its head office in the Netherlands and having a Chinese Financial Director, the company itself is also hit by absences of staff due to the effects of the COVID-19 virus, causing a material slow-down of the activities needed to finalize the audited financial statements of the year 2019.
The company expects to file its annual report within the time frame of the extension, on or before May 14, 2020.
Attached is a signed statement from Mr. Zeng Li, the CEO of Share International and the Chinese activities, who is located in Chongqing, PRC, which confirms that due to the illness of several staff members of the local enterprise and the fact that the office was closed in the early part of 2020 and continues to be understaffed, it has not been able to provide the financial information to the company for its completion of its financial reporting.
It is to be expected that the operations of Share International will be negatively impacted due to understaffing, and a significant decrease of consumer demands in Chongqing. We expect that as the Covid-19 Virus expands as a pandemic and state actions are taken that are disrupting commerce at all levels of industry, there will be various adverse effects experienced by companies such as ours that deal in consumer products and services Although the company and Share International are taking measures to mitigate the effect as much as possible there is no assurance that the steps will be sufficient. In most respects it is too early in the pandemic to be able to quantify all the ramifications.
Although the company is confident that filing will take place within the timeline of the extension, this is not a certainty as local in the locations from where require information for our reporting circumstances may change for the worse.
Tyson Foods Inc 8K 3/13
Pandemics or disease outbreaks, such as the novel coronavirus (COVID-19 virus), may disrupt consumption and trade patterns, supply chains, and production processes, which could materially affect our operations and results of operations.
Pandemics or disease outbreaks such as the novel coronavirus (COVID-19 virus) may depress demand for protein because quarantines may inhibit consumption. Restrictions on public gatherings or interactions may also limit the opportunity for our customers and consumers to purchase our products.
The spread of pandemics or disease outbreaks such as the COVID-19 virus may also disrupt logistics necessary to import, export, and deliver products to us or our customers. Ports and other channels of entry may be closed or operate at only a portion of capacity, as workers may be prohibited or otherwise unable to report to work, and means of transporting products within regions or countries may be limited for the same reason.
J&J Snack Foods Corp 8K (3/12)
Pennsauken, NJ, March 12, 2020 - J & J Snack Foods Corp. (NASDAQ-JJSF) announced today that it expects its results of operations to be impacted by the closings and anticipated lower attendance and traffic at many of the venues and locations where its products are sold such as schools, stadiums and arenas , movie theaters , amusement parks and restaurants and by a general slowdown in activity throughout the United States resulting from the effects of the coronavirus (COVID-19). The Company said that it is unable to estimate what the impact may be although it said the impact may be material. The Company stated that its sales at the venues and locations mentioned above is approximately $350 - 400 million annually.
Gerald B. Shreiber, J & J’s President and Chief Executive Officer, commented, “We have and are continuing to develop contingency plans to address and lessen the impact of the effects of coronavirus on our employees, our customers and our overall business.”
Premium Brands Holding Corp Earnings Call (3/12)
Answer – George Paleologou: I think, David, it's safe to say that when we put together the budget, we were facing -- for 2020, we were facing a very inflationary environment with respect to protein. It's no longer the case. I mean, there's been demand destruction, obviously, in China and COVID-19 in North America also -- will also cause demand destruction. So that situation is changed as of today currently. We don't see that changing any time in the near future. So anyway, that's sort of our view today.
Question – David Francis Newman: And if you look at ASF, there was a lot of somewhat manipulation going out into the market with the Chinese, ahead of the lunar year and things like that, which seems to have subsided a little bit. But that certainly must have added to the volatility that's going on in the market on the ASF as well, would you not say?
Answer – William Dion Kalutycz: Well, yes, it certainly was taking supply out of the system because our read of the situation is a lot of suppliers, a lot of processors were putting away product in anticipation of a strong Chinese New Year. Well, as we all know, that did not happen because of COVID-19. Yes. They got caught and that fed into some of the weakness we're seeing now.
Answer – George Paleologou: Don't also forget, David, that a lot of the proteins exported to China are consumed traditionally in the Foodservice segment. And then the Foodservice segment in China has been impacted immensely by COVID-19 as well. So there's been some demand destruction in the Foodservice channel, in particular.
Empire Co LTD Earnings Call 3/12
To date, the coronavirus has not negatively impacted our business, and we are taking all prudent precautions. We will continue to monitor the situation as it evolves and take all necessary actions.
However, beginning on February 28 and accelerating, starting on March 8, we saw overall elevated sales increases clearly attributable to public concerns surrounding the coronavirus. Specifically, we began to notice in many regions of the country that customers were increasing purchases in certain nonperishable categories such as household cleaning supplies, paper products, canned and packaged foods and health and hygiene products.
Sanderson Farms Inc Bank of America Merrill Lynch Consumer & Retail Technology Conference 3/11
Answer – Peter Thomas Galbo: So maybe I'll jump back in here. Joe, you spoke a little bit about food service demand remaining strong at this point. I guess the question just kind of becomes, if food service does begin to fall off because of greater spread of coronavirus, can you just talk about the dynamics and the potential to convert some existing capacity and maybe some of your big bird plants over to retailer tray pack plants, if that's where the demand is going to be?
Answer – Joe F. Sanderson: Well, we've done that before. We recall, a couple of years ago, good to try to get my bearings when we did '18 and then we went back in '19. Yes. We converted Hazlehurst and Hammond from big bird into tray pack because we had some business come our way, about 100 million pounds of tray pack business came our way as we were building Tyler, and we did not want to pass on that business because we knew Tyler would need it. So we converted 2 plants. And that is a doable thing to convert some. You just have to run a lower live weight, pick your weights down about 6.75 from 9.25. And you can do that over time. But I have 5 retail plants that can run some additional pounds of retail weight birds are the parts and what you do is, you take your bird weight down at the Hazlehurst and Hammond, for example, cut those chickens up and ship the parts into the tray pack plants. But you can't -- I don't have enough room. it's old 5 plants to take all of the jumbo birds down, but could do some of that. And then if it fell off enough, what you'd really do is, you have to reduce your slaughter at some of your big bird plants, and euthanize some birds in the field, drop your slaughter down to 50% probably. And you keep your growers and your employees on payroll, just like it was a natural disaster, which we've had at Laurel and which we had up in North Carolina, keep your business intact and weather the storm. But you could shift over part of the birds into retail birds.
Royal Unibrew Earnings Call 3/11
Question – Richard Withagen: I have three questions as well, please. First of all, yes, back on COVID-19, could you please remind us what the split is between on-trade and off-trade in your Italian business? And what kind of measures you have taken in order to help reduce costs or where you can actually reduce costs?
Second question is on Finland. I think we see a continued channel shift in Finland with Alko selling less and other outlets selling more. Do you expect that to continue in 2020? And what are the main commercial initiatives for you in 2020?
And then the last question is on Lorina in France. I've been reading that you've made quite some changes to the management of Lorina in France, the general manager, recently a new marketing manager. Does this mean that the integration is largely done? And what kind of capabilities have you been looking for especially?
Answer – Lars Jensen: If we start with the first question, in terms of Italy. So our beer business in Italy is about 70% out-of-home consumption and 30% at home.
Whereas the soft drink business is close to being the opposite. Since the beer business is bigger than the soft drink business, then we are skewed more to the out-of-home consumption and on-trade.
So if you take the mix of the true, it's in the neighborhood of about 60% of our business that sits in the on-trade business.
Then you asked questions around what kind of measures can we take? I think this is not only something that is isolated about measures in Italy. This is about Royal Unibrew as a group, helping each other and securing that we, as a group, delivers and create flexibility. So we are looking at exactly the same measures as we are looking at if we have a very bad summer, bad weather, what can we do to operate smarter? What kind of cost can we avoid, et cetera, et cetera. And I think the latest example we have goes back to the summer of 2017, which was the most dreadful summer, I think since we start measuring weather in the Nordic scene. So we have, I think, in general, in the organization, we have a pretty good way of dealing with these things in a very agile and proactive way. So this is not only Italy, just to stress that point.
Casey’s General Stores Earnings Call (3/10)
Question – Paul Trussell: So maybe just to circle back on what's happening kind of near term, maybe just give a little bit more detail about the rewards program being such an early success? Maybe give some examples of how you're finding your customers engaging with the app and the behavior that it's driving? And then also just on coronavirus, I mean, like you said, you mentioned you might be a little bit more insulated than others. But just is there anything that you would attribute to coronavirus in terms of any impact to your business so far that you can see?
Answer – Darren M. Rebelez: All right. Well, Paul, this is Darren. I think with respect to the rewards program, we're really happy with how that's been progressing so far on a couple of fronts. One being just the absolute enrollment. And seeing that number move up pretty significantly, nearly 1.8 million members as we sit here today. And that was -- that exceeded our goal for the year already. And so we're resetting targets, and we're seeing that engagement. We're -- the other thing I mentioned in the narrative was that just -- virtually 20% of all of our transactions now have some rewards participation in them. And that also is ahead of where we thought we would be. So the people that have enrolled and that's growing consistently, they are being very active inside of that. So we're -- we like how it's moving so far. And it's giving us a new opportunity to engage with guests in a way that we haven't been able to before. With respect to coronavirus, I -- it's still really difficult to say what that impact is going to be. I guess, I would have to say, in the near-term, prior to this real fall off with crude oil due to the OPEC issue, I would say, that gasoline was starting to come down in cost already based on some demand concerns in the marketplace. We haven't seen any erosion in demand but what we have seen is the reduction in cost. So that's enabled us to continue to grow gallons. At the same time, be able to harvest some margin. So that's probably the most significant impact we've seen so far. But we're on top of this, virtually all day, every day right now looking for anything else to happen. But at this point, we haven't had any other impacts.
BJ’s Wholesale Club Holdings Inc Bank of America Merrill Lynch Consumer & Retail Technology Conference (3/10)
Answer – Robert Frederick Ohmes: Terrific. Thanks, Lee. I'm going to ask the question that I've gotten a lot on -- that you're getting a lot on, just -- I know people want to know if we can get any more thoughts on the stock-ups related to coronavirus and how you guys are thinking about that operationally and pressures on the system? And maybe how you think about what happens when you get beyond that period as well?
Answer – Lee Delaney: Sure. Let me answer it in a few ways. So one is we are taking increased measures to protect our team members and our members either in our kind of home office, distribution or club facilities that includes things like greater hygiene, cleanliness standards, et cetera, which is really important. I think it's something that all retailers can and should be doing.
Two, we're very actively managing the supply chain. As we look at the supply chain today, there's a little bit of risk with long lead time items particularly out of China. We were first worried about goods that hit our clubs in April. There were a couple of dozen SKUs that we weren't sure we would get. As we sit here today, it's down to 2 SKUs that we're not sure we're going to receive, which is a very small risk and de minimis in terms of the impact on the business. As you look to May, you have the same basic size problem. There's a couple of dozen SKUs that we're not sure we're going to receive, but that in terms of overall risk is pretty small. We will just assort other things in the space that is freed up and you'd have some categories where there are articles that we were excited about that we won't have. But out of 7,000 articles in the building, 25 is a relatively small constrained impact. And as you look further out, there's a little bit more uncertainty. And so we're kind of actively managing that.
But then you have the flip side of that, which is there's certainly been some increased consumption for things you would have seen on the news, cleaning supplies, canned food, et cetera. And that is stuffing with supply chains of the partners to provide that to us. And so we are in incredibly frequent contact with all of the key players to make sure that we are staying in stock for our members on, what you say is still a narrow set of goods where you're seeing more frequent shopping.
I think as it relates to what that means to our business and -- for over a longer period of time, it's really hard to say. It's clear that some consumers are nervous about how the situation with coronavirus will evolve. And so we're seeing what clearly is some stock-up behavior on goods that would be associated with a broader change in kind of an everyday life in the country. But it's still, we think, a smaller portion of members on a narrow set of goods, and so we're not sure how that will evolve. And you could imagine in a few different scenarios, either broader kind of nervous buying or longer term but real change and things tied to school and work closures, et cetera. And so we're just managing supply chain in our business under a world of broader range of scenarios that we normally would do in making sure we're well prepared to pivot however the world evolves.
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