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05.01.20

NP Connects - Conversation highlights for April 30, 2020

BY , Philip B. Taub

NP Connects brings together leaders from a variety of backgrounds to share real-time perspectives on the coronavirus (COVID-19) pandemic. 

Our April 30, 2020 conversation included guests Wendell Davis (SBA), Morgan Nighan (Nixon Peabody), Michele Pfannenstiel (Dirigo Food Safety), Matt Roghair (Piper Sandler), and Effie Stavrulaki (Bentley University). 

Watch a recording of the program, or read below for highlights.

Another $300 billion in Paycheck Protection Program (PPP) money was made available on Monday, April 27. The Small Business Association (SBA) paced applications of all lenders to make sure there was equal footing. There was a huge deluge on Monday as banks submitted a torrent of applications once the portal was opened. Some numbers:

  • For the three days ending April 29, there were $90 billion of loans approved for 962k applications
  • To date, 87% of all PPP applications received below $350k
  • In MA, the SBA approved $350 million benefiting 2k businesses in 2019
  • In MA, the SBA approved $10.3 billion benefiting 47k businesses over 12 days

Treasury Secretary Steven Mnuchin provided guidance that companies receiving over $2 million in PPP money will be audited. Additional guidance and direction are expected regarding consequences if an audit indicates the loan was not necessary.

Most deals within the food and beverage industry are on hold. Large strategic buyers are prioritizing employees, food safety, and their supply chain, but their appetite for acquisitions remains. Deals that were underway, and diligence had been completed are closing. Buyers continue to seek high growth, high quality, differentiated brands.

Existing supply chains were not prepared to accommodate the peaks and drops in demand witnessed over the past two months. Challenges arose in raw materials, production, transportation, and storage.

  • Raw material supplies are impacted by business and country closures. For example, 80% of pharmaceutical ingredients are imported from countries in lockdown so production capacity issues are impacted, and reagents required for COVID-19 tests are in short supply, thereby limiting production speed.
  • In labor-intensive companies, prior production levels cannot be attained because of physical distancing. Fewer workers work per shift, and consequently, there is less throughput per shift.
  • Companies do not know when raw materials will arrive as deliveries are stuck in ports. Centralized production makes the nations sensitive to trucks remaining on the road.
  • The level of infrastructure within the food supply chain has lagged because margins are so thin. Demand for warehouses is limited, as some may not pass a Global Food Safety Initiative (GFSI) audit. There's no room at feedlots, and there is no capacity in pork and chicken. Companies are struggling to know when to bring capacity back to supply restaurants.

Looking forward, companies that succeed will reduce complexity, remain agile, and diversify their supply chains. Smaller batch sizes are easier to execute in the face of changing demand. Management should focus on core products, services, and stock keeping units (SKUs)—limit SKUs to in-demand products—and increase the production of key products.

On a larger scale, trends quickly emerging include:

  • Online grocery shopping outside of urban markets, including the technology investment to accommodate Supplemental Nutrition Assistance Program (SNAP) vouchers for online purchases at supermarkets
  • Telemedicine and online yoga classes are convenient, germ-free, and efficient
  • Blockchain utilization solves provenance and improves tracking
  • Distributed infrastructure will shift back to regionalization
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Christopher P. Keefe

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Philip B. Taub

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