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OPEX and CAPEX challenges posed by Covid-19

27 August 2021

Sue Springett shares insights from a recent survey asking about the impact that Covid-19 has had on the food processing sector. 

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The Covid-19 pandemic has placed huge stresses on food businesses – from shutdown to significant unplanned CAPEX investment and increased OPEX costs, notably on cleaning and hygiene.

As Covid starts to lessen its hold, what has the real commercial impact been on the food processing sector and what might the new normal look like? Via an online questionnaire, Teknomek asked its customers for their honest opinion on the state of the food processing industry.  What have been the real pain points over the last year and what might the future hold? 37 businesses from across the UK responded to the survey, with turnover of businesses ranging from £1 million to £5 million.  

It’s certainly not been an easy year for our sector. Unexpected costs due to Covid have been significant and it appears as though costs will continue to rise for many businesses.  More than one-third of businesses who responded to the survey (38%) said their spend on hygienic and social distancing support equipment (entry controls, additional rooms, temperature checks, PPE, hand-sanitiser, signage etc) during 2020 was double that of the operating budget at the start of the year. 42% of respondents said their cleaning budget had more than doubled with a further 27% revealing cleaning costs had increased by 50% more than budget. This all amounts to a significant and unplanned cost burden to keep the business operating. 

The vast majority of survey respondents anticipate that operating expenditure will either stay at these higher levels or may even increase. Many businesses have accepted that elevated operating expenses are now part of ‘business as usual’ and they will sustain these indefinitely.  However, it was worrying to note that a further 38% were unsure how long they can sustain these increased costs.

And of course, as operating expenses increase, it can have a negative impact on funds available for investment. One respondent, who revealed that 2020 spend on hygienic support equipment and cleaning had doubled over the past year, said that whilst operating expenses continue to increase (‘as we are still in the pandemic’) they are trying to spend less on capital expenditure.

Another expected, that due to reduced profits in the business, capital expenditure will reduce accordingly. 

However, the overarching theme emerging from the survey is positive. More than half of the spoken to (51%) are optimistic about the future, with 54% saying that the food processing sector has proven itself to be resilient during the pandemic. More than one-third said they are likely to expand in the foreseeable future.

Before Covid-19, everyone working in food processing understood the importance of hygiene, in terms of their responsibility to the public and for BRC compliance. The pandemic, however, has made hygienic best-practice more personal: It has elevated the importance of hygiene to the personal safety of each individual.

In March 2020, protecting staff became the highest priority for the majority of businesses. They had to adapt and innovative; implementing safety strategies that protected employees whilst ensuring production continued to keep the nation fed.

More than three-quarters (76%) of those who answered the survey agreed that lessons learned during the pandemic will have a positive impact on hygienic best-practice for the long term. This can only be a good thing for the food processing sector and all who work in it.

Sue Springett is commercial manager at Teknomek.

Additional survey findings:

Which of the following strategies did you implement during the pandemic?
Social distancing - 90%
Additional PPE  - 85%
Temperature testing -76%
Social distancing segregation screens in production areas - 57%
Staggered shifts - 38%
Reducing the amount of furniture in production areas - 38%
Reducing the number of product lines produced - 4%

Which of the following strategies are you planning to maintain post-pandemic?
Additional PPE - 61%
Social distancing - 61%
Temperature testing - 42%
Social distancing segregation screens in production areas - 33%
Reducing the amount of furniture in production areas - 23%
Staggered shifts - 19%
Reducing the number of product lines produced - 0%

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