Coronavirus lockdown: Consortium of F&B SMEs puts forth supply chain grievances for essential commodities

Coronavirus has resulted in humungous human loss and set in motion a period of great economic distress. With over two billion people on lockdown across the world, countless businesses and startups are hit as they struggle to deal with disruption caused by lockdowns and social distancing.

In India, the government’s call for a complete 21-day national lockdown has led to much confusion, panic buying, and frenzy.

It is an evolving scenario and since a clearer picture of how individual State governments define “essential items” is yet to emerge, many food and beverage brands have put their factories on lockdown and have not been able to supply products to consumers.

This has led to an enormous cash crunch for startups and big businesses alike, and the halting of work has led to workers being sent home. Some of these startups are bootstrapped or have just raised their pre-Series A round. Reported supply chain skirmishes can lead to not just businesses accruing losses, but citizens going without essential supplies like vegetables, rice, pulses, milk, and cooking oil.

To address this unprecedented crisis the nation faces, 50 entrepreneurs from the F&B segmenthave come together to form a consortium and work on a slew of issues.

The consortium will work to get the government to let them run their operations —smoothen supply chain kinks by allowing trucks to pick up and deliver items to retailers, address the credit crunch and loss of jobs caused by this crisis, and lobby for a bailout package for F&B brands and their manufacturing units.

Called the F&B Covid Emergency Group, it has created an online petition, signed by around 1,200 entrepreneurs (and counting), to stand in solidarity over the current business crisis because of coronavirus.

“The government must realise that the 50 entrepreneurs have employed more than a 1,000 people, and with other entrepreneurswho have signed the petition, the number employed can be close to 10,000. This crisis can destroy India’s young brands, which thrived on ecommerce and had their own supply chain,’’ says Surabhi Talwar, Co-founder and CEO of Happy Jars Pvt. Ltd, a company that makes nut butters.

The first order of business is to get State governments to define what exactly constitute ‘essential food items’ and let their products be supplied to retailers accordingly.

We currently have to get a pass from the local district police station to operate our manufacturing unit and to transport our products. The level of ambiguity in the process however is creating challenges for small businesses. The processes are different in each state at the moment, posing challenges for intercity supply. We are adhering to all the norms for work environments and only asking essential staff to come as well as ensuring our premises are well sanitised and completely safe for production. But we do need guidance and support from the government and local police to allow us to operate." says Paras Fatnani, Co-founder and CEO of Honey Twigs, Nectwork Foods Pvt. Ltd, which manufactures pure honey in sachets.

Ambiguity in the definition of essential food items has rendered some doubt around packaged foods. Brands that sell their products in glass jars or single-serve packs say the government does not consider their form of packaged food to be “essential”.

 “The Indian government should provide bailout packages for brands. The governments of UK and Canada have announced packages to pay salaries to workers in small businesses. A host of relief measures are being announced to protect small businesses; this prolonged crisis can hit entrepreneurs very hard,’’ points out Maulik Mistry, Co-founder and CEO of MOJO Bar & MOJO Thins, a brand of Pure Snacks Pvt. Ltd. 

The consortium lists some of the key challenges startups and SMEs in the F&B space are facing due to the lockdown:

1. Payment collection: With large retailers shutting doors in some cities already, young brands are seeing a major challenge to get payments for orders that they have supplied and go beyond the agreed payment terms. “In many cases, the payment cycles are even higher than three to four months now,” Surabhi says.

2. Business operation and logistics: Currently, with a complete lockdown in place, food brands/SMBs are struggling to service any orders and are unable to run their factories in many cases.

“Several of our large clients have shut operations too,” Maulik says.

Some ideas put forth by the consortium include:

1. Interest-free loan for MSMEs for six months 

2. Waiver/delay on GST payment beyond June.

3. Invoice discounting by government/large banks to support cash flow. 

4. Help with enforcement of 45-day payment commitment to MSMEs from clients, without the risk of losing business. 

5. Cover 75 percent of staff salaries during the period when businesses are closed to retain all employees

“We welcome many more constructive ideas from SMBs and request their support to ask the government to help us all,” says Paras.

The consortium includes entrepreneurs from Little Farm Co, Positive Food Ventures, Nutri Being, Appkin, Agro Freeze Cold Storage, Apeksha The Gourmet Jar, Dharmya Business Ventures, DRB Foods, Gaganmandal Technologies, Go Desi Mandi, Happy Jars, Muddy Puddle Foods, Nectwork Foods, Planetary Foods, Pure Snacks, Sleepy Owl Cold Brew Coffee LLP, STRIVE Plant-Powered Nutrition, The Healthy Cravings Co, To Be Healthy Foods, Square Root Farms, Fountainhead Foods, Qans Consumer Products, and Juggernaut Beverages.

Meanwhile, the Department for Promotion of Industry and Internal Trade (DPIIT) has stated that it has set up a control room to monitor the real-time status of transportation and delivery of essential commodities in the country. It will also monitor difficulties being faced by various stakeholders during the lockdown period from March 25 to April 14.

Home Secretary Ajay Bhalla held a detailed meeting on Wednesday with DPIIT, traders and ecommerce firms on smooth supply of essential goods in the country.

(Edited by Evelyn Ratnakumar)