A Pandemic’s Impact on Imports

Coming to terms with the effect of COVID-19
on cheese imports to the U.S.

It’s difficult to find a historical parallel for the COVID-19 outbreak and its dramatic, wide-ranging impact on the cheese import industry.

Adam Moskowitz, owner of Larkin Cold Storage in Long Island, NY, offers the possibilities of World War I, World War II and the Spanish Flu because of their comparable global ramifications, but it takes returning to the first half of the 20th century to find episodes worthy of discussion—a time when the cheese importing industry looked much different.

Philip Marfuggi, president of the Washington, D.C.-based Cheese Importers Association of America, says the pandemic simply represents unchartered territory.

“There have been segments of business, impacted by strikes, value of the dollar, tariffs, oil prices, supply issues and bacteria outbreaks that we have faced, but this COVID-19 outbreak totally encompasses all aspects of business and life as we know it,” Marfuggi says.

He adds that the pandemic’s emergence began to be felt on cheese imports in the United States as early as February 2020. By March, the entire U.S. economy had been thrown into turmoil—cheese imports right along with it. Marfuggi says the initial impact of the pandemic included canceled orders and the loss of sales related to the closing of restaurants and lodging facilities. And cheese that was more perishable became “a liability at the retail level.”

Compensating & Adapting

Many retailers shut down their cut-and-wrap programs, increasing the demand for prepackaged, exact weight and random weight cheeses, while reducing the demand in bulk orders, as consumers and stores practiced social distancing. Importers couldn’t sell some perishable cheeses even at reduced prices and were forced to destroy some product.

“COVID-19 has certainly made its mark,” says Lassa Skinner, who oversees a new branch of Switzerland Cheese Marketing in the U.S. “It is too early to really understand the monetary impact, but because all tastings, cutting to order and even customer handling of pre-packed cheeses has been stopped at the retail level, sales have certainly slowed.”

Moskowitz says cut-to-order cheese is “in dire jeopardy now,” and he worries the short-term problems in that area will lead to long-term challenges.

“The labor shortage coupled with there being a concern about COVID-19 has made everything around cut to order just tighten up,” Moskowitz says. “Everything’s being wrapped right now; the demand is for pre-packs or nothing. And I wonder how that will play out long-term. Are we not going to see cut-to-order cheese shops anymore? Are we going to see it in a modified form? What is that going to look like?”

The supply chain’s abrupt unpredictability also immediately created a host of issues for importers. Moskowitz says freight costs increased on April 1 because of an equipment imbalance surcharge tied to reduced freight moving from Asia and a subsequent decline in available empty containers to ship goods.

“So not only is there an increased cost per container, but you have to work rather diligently to actually even be able to get the containers that you want to put cheese in,” Moskowitz says.

He also has seen freight delays related to a slowdown at the ports ranging from a few days up to a week.

“Freight delays have been a very big deal,” he says.

Moskowitz adds the disappearance of catering to offices and parties has been a blow to both independent and chain retailers who depend on that revenue source for their business models. Food distributors who worked with restaurants are among those most directly and hardest hit by the crisis.

“They lost 90 percent of their business overnight,” Moskowitz says. “These are companies that have been around for years, if not decades, and they have built up this business and then in a matter of a couple of weeks, they’ve literally lost all their business.”

Because the distributors ceased to buy cheese, among other products, for their restaurant clients, importers instantly felt the blow as orders stopped and distributors struggled to pay the bills they owed.

“A lot of cheese is bought weeks in advance based on what we’ll call advance orders or just general buying patterns,” Moskowitz says. “And so a bunch of importers were buying under the impression that they would be selling what they normally sell. Now their customers just disappeared. Yet that product is still coming in, and they still own that product. So there’s a scramble in terms of, ‘what do I do with all this product that I have now?’”

Meanwhile, Marfuggi says one of the most important tasks importers face is attempting to keep employees on the payroll in the face of “lost sales, lost customers, bad debts and lost profit.” And they have been attempting to accomplish that while ensuring the safety of employees and transitioning some in office staff to remote working.

But there is a bright spot. Moskowitz says cheese professionals were already following strict hygiene practices that have made them prepared to manage food safety efforts tied to the pandemic.

“Many of us in the industry have already been practicing deep cleaning, sanitation, using gloves, etc.,” Moskowitz says. “I think we were ready for this in terms of how to conduct ourselves in the workplace.”

Searching for a Recovery

According to Marfuggi, the unpredictability of the outbreak and its eventual resolution makes forecasting and planning for the future particularly difficult and complicates decision-making. Purchasing is a challenge, as it becomes more difficult to maintain inventory with lead times ranging from five to eight weeks to bring in product from overseas, he says.

“The impact will be felt for some time,” Marfuggi says. “I do not think the restaurant, hotel and foodservice sector will respond favorably when this outbreak subsides. I feel that companies in whatever business they are in will cut back on travel and entertainment as well as the general public, and that does not bode well for the hospitality trade. The retail sector I feel will bounce back much quicker, but I do think the trend will be towards more pre-packaged product.”

Marfuggi says it is too early to project when a recovery could even begin for the imported cheese industry, as this depends on a range of factors tied to COVID-19, including the availability of a vaccine.

“At the present time, with what little we know about this virus, along with the cancellation and postponement of all trade shows, sporting events, concerts, live broadcasts, no travel, etc., the world is shut down. Some parts are just opening up but with face masks, restrictions, etc.—it is very difficult to be optimistic for the near future,” Marfuggi says. “But I do feel when we actually are 100 percent certain of the cause and start by eliminating how and where this started, find a suitable treatment and develop a vaccine, we will as a world or nation come back strong. But it will be a while.”

Part of the challenge in envisioning a pandemic recovery is the many players around the world in cheese importing and the ways they are closely linked. The fate of one company can send ripples around the world.

“This is global, right?” Moskowitz says. “This is having an effect not just on us but on the producers and exporters in foreign countries. Everyone is going through something similar.”

In general, Moskowitz says, it’s difficult to anticipate what the new normal in the imported cheese industry will be.

Marfuggi similarly wonders what a recovery will look like. Will customers continue to buy specialty cheeses? Will there be fewer consumers with the funds to buy imported cheeses?

Skinner says importers will need to be innovative in the challenging climate.

“We are looking toward creative ways to introduce our cheeses to buyers at all levels, both digitally and through partnerships,” Skinner says.

According to Marfuggi, it will be crucial for cheese importers to stick together through the difficulties.

“It is a time where all cheese importers can help make a difference by keeping your employees safe and working wherever possible to ensure a safe product for the consumer,” Marfuggi says “And even though we are all competitors, sometimes even customers of each other, we should try and help each other where we can.”

Skinner says the appeal of specialty cheeses will not dim, even as these obstacles emerge.

“COVID-19 will leave its mark on the consumer in ways we don’t even understand yet, but it doesn’t stop people from wanting to eat well and indulge in specialty cheeses,” Skinner says.

And, in fact, if there’s a glimmer of optimism to be found amdist the chaos; Moskowitz says it has been clear that people continue to find comfort in food, even in the toughest of times. “Those in the cheese business are a resilient and positive community,” Moskowitz says. “And cheese has been a staple food for humanity for thousands of years. Cheese brings pleasure. With cheese, your meal feels better. So, if there’s a silver lining, hopefully this will inspire people to slow down and spend more time with family and enjoy their meals a bit more. I’m hoping that we all learn what’s most important in our lives and look to spend more time on that. And a great, great way for that to happen is over some cheese.”

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Written by Lisa White