The COVID-19 pandemic has not only prompted a shift from meat and poultry purchases at the foodservice to purchases at the retail level, but also a shift to “traditional products,” Maple Leaf Foods CEO Michael McCain said.
McCain, speaking during a quarterly earnings call on April 29, discussed some of the shifting consumer behaviors that have resulted from the COVID-19 pandemic.
More demand at retail level
“There’s been a migration of demand from foodservice to retail,” McCain said, noting that retailers account for about 75% of Maple Leaf Foods’ business in general. “This migration, while being net neutral to overall volumes is highly disruptive because of its largely distinctive supply chains.”
But McCain said the Canadian company is fairly well positioned to adapt to the differing demands. However, in some protein product categories, it can adapt more easily.
"Generally, we’ve been able to meet the demand,” said McCain. “It’s very, very category specific. There are some categories that we have the capacity to meet the retail growth while the foodservice contracts. There are some categories that we are more restricted on, but in those categories we are taking steps around optimizing our retail production output through things like skew optimization and other operational tactics that have been very effective. In general, we are in a pretty good position to shift with that channel disruption.”
McCain added that in recent weeks, he has seen somewhat of a rebound in the foodservice channel.
Demand for ‘traditional products’ rises
With the amount of meals being eaten at home higher than normal because of the pandemic, that has caused somewhat of a shift to the kind of animal and plant-based protein products being consumed, McCain said.
“I think there is some evidence of people migrating to traditional products,” McCain said.
Maple Leaf Foods has seen “real strength” in categories like wieners, sausages, sliced meats and bacon. On the other end, there has been some weakness in deli products, because “deli operations in most retail outlets are not functional or (under) significant reductions.”
Demand for lunch kits has also declined, he said, because families have been staying at home.
McCain added that demand for Maple Leaf Foods’ plant-based protein products has also increased, but he said some of that increase is due to seasonality and may not be directly related to COVID-19.
Will another shopping surge come to Canada
During the early stages of the pandemic, Canada, like other countries saw a surge of people flocking to grocery stores to stock up for the weeks to come. That has since subsided, but one analyst pointed out that following attention to supply chain challenges in the United States, Canada’s neighbors to the south have started a second wave of “pantry filling.” He asked McCain if he thought that would also happen in Canada.
While McCain didn’t rule out that it would happen again, he said the two countries’ situations are different.
“The media has been more attentive to the supply chain challenges in the U.S. than in Canada, largely because they have had more supply chain challenges in the United States than Canada, but I can’t say that that wouldn’t occur again,” he said.
Financial results for Maple Leaf Foods
McCain, along with Maple Leaf Foods Chief Financial Officer Geert Verellen, also discussed the company’s financial results for the first quarter of fiscal year 2020. The quarter ended on March 31.
The company experienced a net loss of CA$3.7 million (US$2.66 million) for the quarter, compared to net earnings of CA$50.1 million for the first quarter of 2019. The company said that loss was driven by “unrealized losses on biological assets and derivatives.”
A sales growth of 12.8% was reported for the total company. The meat protein division experienced a sales growth of 12.7%, while the plant protein division saw a sales growth of 25.9%, which was in line with expectations.
View our continuing coverage of the coronavirus/COVID-19 pandemic.
