Drinks industry adapts and carries on

The non-alcoholic drinks industry’s second year dealing with the Covid-19 pandemic again showed the leadership it had demonstrated in 2020, says Australian Beverages Council Head of Corporate Affairs Cathy Cook.

“What the Australian drinks industry has learned is to be on the front foot, be adaptive and work with government to ensure conditions are in place to assure production can continue,” she says.

While much of 2021 has come with its challenges, a welcome development for the drinks industry that Ms Cook highlights were the “halcyon days” of the year’s first half, during which Australian consumers made up for the lockdown periods of 2020.

“But when Delta lockdowns came into effect and internal and external borders closed, industry quickly moved to deal with the new operating conditions, adapting – as before – to loss of on-channel sales by moving to off-channel and e-commerce, and addressing the new challenges posed by state government Covid rules in a responsive and responsible way,” says Ms Cook.

With the rise in Delta numbers, she says the drinks industry made a commitment to Australian manufacturing and led the way in investing in processes that guaranteed safe work conditions, while continuing to meet increased demands from consumers, many of whom had returned to long and stricter periods of lockdown.

“We’re pleased to say the drinks industry was lauded by government as a leader in safe work practices,” says Ms Cook, “which enabled this essential industry to continue to place drinks on the tables of consumers throughout lockdown periods.”

Despite this, she adds, the reality of the challenge the industry continues to face can’t be hidden: a surge in freight costs and raw material prices, closed external borders for fruit pickers and skilled facility workers, all “squeezing” profit margins at companies looking to recover from the impact of 2020.

“[The past two years] have shown just how vulnerable the drinks industry is to this kind of wide scale disruption to ordinary business, even though it’s not alone with these challenges,” she says.

“The reality is that because Covid affects different parts of the world at different severities at different times, the drinks industry is going to be vulnerable to shocks on different parts of our supply chain for quite some time. It could be availability of crucial imported inputs we need from the northern hemisphere suddenly becoming unavailable during their winter. Whoever would have thought that the supply of wooden pallets would run out?

“The simple point is that because Covid shifts from being a pandemic imposing very acute constraints on Australian drinks manufacturers because of local decisions – lockdowns, etc – it’s on its way to becoming an endemic disease that will have short-term knock-on effects that the world is still coming to terms with. And that means for the next year we should continue to predict uncertainty in supply chain environments, both for the availability of products and for pricing.”

Ms Cook notes that one of the lessons governments have taken from the pandemic is the need to have sovereign manufacturing capabilities for critical sectors, including drinks.

“The ‘Modern Manufacturing Initiative’ is an example of the government being willing to invest to foster that capability,” she says, “and the drinks industry has worked alongside government to ensure it works in the long run.”

Ms Cook urges the industry to “remain responsive, for the new normal forecast is for more of the same [eg, global supply chain instability and higher prices]”, as Covid-19 cases continue well into 2022 and beyond.

For more on beverages in 2021 and what the industry can expect next year, check out the November/December issue of Convenience World.

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