In recent days and months, almost everyone has been thinking about the changes and effects Covid-19 will bring into our lives, including growing interest in the future of the economy and particular industries. The unprecedented emergency measures restricting the mobility of people and goods have raised the question: How will the coronavirus affect globalisation?
Globalisation is present in many areas of the economy, but in this article, we are going to focus on answers specifically related to the food and beverage industry and the food market.
Globalisation of the food industry has been driven by several long-term mechanisms
The world’s population growth has been one of the main forces driving global demand for food. At this moment, there is no sign of this trend stopping or reversing. This factor will probably continue to have a significant influence on the food industry.
Extreme weather anomalies caused by changes in the climate in the past few decades have made food production even more unpredictable than before. Many food distributors have reacted to this problem by geographical diversification. This tendency has also intensified globalisation, and because there is no sign of change either, it will probably continue.
As consumer societies evolve, so does demand for a healthier diet and better quality food. This affects global supply sources, which in turn strengthens globalisation. Needless to say, the current pandemic and the subsequent focus on disease prevention will only reinforce this trend.
The internet knows no borders and is now accessible anywhere in the world. The constant flow of new online content generates demand for diversity in lifestyles or eating habits. Technical advances in telecommunications and social media will continue to be a major driving force of globalisation.
We could go on citing further examples of the factors driving globalisation. However, given that those already mentioned will continue to exert their influence, we can safely say that globalisation of the food industry will carry on growing even after Covid-19.
Let’s take a look at the last recession. Banks and mortgages did not disappear after the global financial crisis. Substantial changes were made, however, in the business practices of the banking sector. Now, in the wake of the coronavirus and the ensuing economic crisis, can we expect long term changes of a similar magnitude in the globalisation process?
What changes can be expected in the globalisation process of the food industry?
Simplified supply chain
In recent decades, supply chains have expanded greatly, based on the assumption of sustained high mobility of goods and people. As soon as mobility is compromised, however, supply chains are jeopardised. The longer a particular supply chain is, and the more leverage it has in its processes, the greater the likelihood of interruptions and unpredictability. To reduce these risks, food producers are likely to switch to more in-house processing and increase direct trading activities, especially with far-away markets.
Direct management of export markets
Even if products can be delivered to their destinations without disturbance, how easy will it be to manage the process? If distributors want to reduce the number of intermediaries, how can they confidently manage the flow from the other side of the world? Better and more reliable trade flow management will be just as crucial as a simplified supply chain. On-site management and localised marketing and communication will be far more highly valued than before.
Transparency of origin
As the processes mentioned above become simpler and more transparent, traceability will also improve. Traceability and the origin of food products started to receive closer attention as consumer societies became ever more sophisticated and healthy lifestyles gained greater prominence. However, not only food safety standards, but food marketing as well will have to react to the above trends in diverse ways in order to satisfy the rising level of consumer demand. It will be more critical than ever to develop packaging or promotional content that not only effectively communicates the qualities of the products, but at the same time also directly appeals to the local consumer culture.
In summary, the globalisation of the food industry is unlikely to end. On the contrary, it looks set to grow. What is more, it seems reasonable to forecast a global food market that further minimises risks, takes a different management approach, and is more transparent. In all likelihood there will be a transition period, but afterwards, on-site management of export markets and improved localisation of products will become more paramount than ever. The key to competing in global food markets will lie in customising local information to meet the producer’s needs and having dedicated local management. Maintaining direct connections with far-away export markets reduces reliance on multiple intermediaries and results in more direct control. This, ultimately, will help producers and marketers make business decisions that are mutually beneficial to both parties.
TOO International provides localised and customised services that help develop and manage your markets for food and beverage products in Japan. www.toointernational.com