Weathering the Challenges

There has long been a divergence between how well large and small businesses are able to weather the challenges of the food industry, and the winds of change carried in with the COVID-19 pandemic have served to only intensify the inclement climate.

“A lot of the challenges that small companies have became magnified with COVID,” said Foah International Vice President Shawn McBride. When companies plan for crisis management and business continuity, they plan for hurricanes, fires, and such. No one had anything in place for a pandemic, she said.

In speaking with McBride and other small business executives, the primary challenges of small food businesses — both before and during the pandemic — were said to be those related to the workforce, supply chain, and regulation.

THE WORKFORCE. Finding and attracting qualified people is an issue for a lot of food companies, and for those for which demand escalated during the pandemic, the problem escalated as well. With fewer employees to cross over into needed positions, some small companies had to operate around the clock just to keep up.

Beaverton Foods is seeing that very challenge, as sales increased 25% because of its strong retail presence in specialty condiments — “an affordable luxury,” said CEO Dominic Biggi. But even without the business increase, hiring to replace retirees, of which the company has had a lot, has been difficult, he said. “We’re trying to replace them, but it’s really hard to find the talent — both on the floor and in management.”

The company provides generous pay, benefits, upward mobility, and employee safety practices, and has even added temporary incentives for its workers to help combat the increased levels of unemployment pay. With only three of its 90 employees “opting to go a different route,” the company has done pretty well, Biggi said. But it still has needed to use temporary agencies to fill some positions and continues to seek warehouse, production, and middle management employees.

The pandemic also brought in new employee concerns and management issues. With employees seeing all the bad news when they go home, and hearing about a friend of a friend who has the coronavirus, everyone is nervous, he said. So managers now also need to manage that anxiety and help to keep everyone calm and rational.

That fear became an excuse for some to not came back to work at facilities that had temporarily closed, McBride added. So companies not only had the issue with wages not equaling unemployment benefits, they had to implement new worker safety protocols — and the expense that that entailed — then effectively communicate what had been put in place to make the workplace safe. Add to that the difficulties in getting employees to understand how important it is to disclose to their manager if they have come in contact with a person who tested positive, and the situation becomes even more complex.

REGULATION. Staying up to date with all the regulations with which food facilities must comply is another of the challenges that can have a greater impact on small companies, which have fewer people in-house to focus on them. WaterBox, a provider of spring waters in environmentally friendly packaging, has had procedures in place for years related to regulatory requirements for food safety, recalls, logistics, supply chain, and other key areas, said Vice President of Sales & Business Development Trish Pohanka. And to stay up to date on new regulations and other changes, they follow the information from the California Department of Public Health, she said.

Beaverton Foods also uses local resources to help keep them updated, Biggi said. With his company located in Oregon, he has found Food Northwest to be his best resource — and he advises others to do the same. “Get to your association,” he said. “They should be able to help.”

With all the employee safety protocols that were required with the pandemic, McBride said, companies also had to rethink and revise their food safety plans, particularly those related to employee hygiene and sanitation. And, she asks, “What other kinds of regulations could we be expecting longer-term to have these practices — will they become best practices or regulation?”

While a positive outcome of the pandemic has been the increased awareness of health, we may see some of the added standards, such as those implemented for sick leave, remaining. “We can’t go backward,” she said.

SUPPLY CHAIN. One of the greatest supply-chain challenges for smaller companies is that of economies of scale, Pohanka said. While full truckloads would rarely be needed for distribution, the trucking companies want to ensure minimum runs, so it can be difficult to keep costs down. But, even with the supply limitations that have been seen with the pandemic, the company has not had issues with sourcing because its water comes directly from Mt. Shasta, Calif., and Blue Springs, Ga., so requires no other ingredients, mixing, etc. The company does, however, test every batch and partners closely with its downstream manufacturing facilities to ensure they are following all public health regulations.

When the pandemic brought the new health requirements, “we were very confident in our policies and protocols, so we just ramped up,” Pohanka said. “Because we’re direct source, we don’t have people touching the product.” Even, so every employee is taking every precaution possible — and going beyond, she said. “We have no employees as of today that have tested positive.”

With such a limited supply chain not being the norm for food facilities, many faced challenges in bringing on suppliers for ingredients that had become scarce, McBride said. And, this, along with quickly developing confidentiality agreements and other documents to be ready to roll right away — “That’s different than what was needed for a hurricane,” she said.

In looking at the downstream chain, state “stay-at-home” orders also made it difficult for small companies to attract buyers to get their products to consumers. Trade shows and in-person visits had always been the primary way this had been done, and few were prepared to do the kinds of presentations needed for virtual selling through video conferencing.

In crisis management planning, No one had anything in place for a pandemic.

Additionally, with spring being the season in which new and specialty products are introduced for holiday sales, the timing of the pandemic couldn’t have been worse. But with consumer sales stabilizing in retail, stores are again looking for these products, finding that consumers are hungry for new products and flavors.

So it is critical that small companies work with their customers, Biggi said. Shortages still remain; “there is not a grocery store in the nation that’s not running out of stuff,” he said. Which translates to manufacturers not being able to get ingredients to provide the products to keep the stores in stock. “Every day is different; I feel like a MASH unit,” Biggi said. “Every day we hold our breath. It’s been an adventure.”

Biggi credits Beaverton Foods owners for the success the company has had in maintaining supplies. Because they don’t have a lot of debt, he said, they are able to motivate suppliers by paying cash on delivery. “Not having debts is a huge advantage for us.”

And in this case, there are advantages to being small. “We’re more nimble; we can make decisions fast,” he said.

“It’s all about cash flow. You have to manage your costs and cash flow … and keep your people.” For a small business, he said, the key is: “Keep your people happy.”

The author is Senior Advisor and Former Editor of QA magazine. She can be reached at llupo@gie.net.