Global Pandemic (2019-nCoV) or at best a near miss?
Many have asked me over the last few weeks what are the potential business effects and damages that have been caused by the Coronavirus worldwide outbreak? I have had many of these discussions which I will now try to summarise for you all who are worried and are working in our great Food & Beverage/cafe market here down under. I am not going to fully explain what the Coronavirus (2019-nCoV) is, there are simply enough clear medical reports and other articles provided on this on the global web.
I have lived and worked in China over the past six successful years in the development of the China Cafe Market expansion and was one of the few to visit regularly many Tier 1 large China cities and their specialty cafes, including those found at Wuhan in the Hubei province, Central China. We can now report that Wuhan is the “Ground Zero” site where the Coronavirus commenced early December 2019. Facts remain that 96% of all Coronavirus infections are in China mainland and sadly there are now over +60,000 persons reported to be seeking medical care and to date many more are unconfirmed due to the up to 14-day virus cycle. The largest concern to most of us is that the infection rate rise has not curved to the cured and thus started to decline in the number of infected persons and this has added to the global pandemic concerns of all governments and health care services.
Whilst we pray for all those infected persons to recover and for the further prevention of the disease, both in China and elsewhere, here so far in Australia and New Zealand we have a very low number of Coronavirus infected individuals. There have been inward restrictions in place on “resident only” entry since early February 2020, which have now been extended another week and most likely to the end of the month, awaiting the same signs of an infection rate decline and other health care measures before these and any new restrictions are lifted.
Outward travel to China also has Government travel warnings and many mainstream airlines have already cancelled or at best heavily reduced flights to China. This has personally affected my family and I, as we are now remaining in Australia until travel to China resumes and/or the infection rate declines. The more important fact is that hundreds and thousands of Chinese University Students, regular holiday visitors, family and friends of Australian residents have been stopped entering Australia and New Zealand at this peak infection time. This has dramatically impacted the local hospitality sectors (China provides 20% of all tourism dollar earnings) by considerably reduced patrons in CBD cafes, our amazing tourist areas and educational centres where normal F&B business flourishes at the start of the year and during the popular Chinese New Year period, beginning 23rd January Lunar Calendar 2020.
It’s interesting to look at the past to best understand what lays ahead, as most previous pandemics have taken 6-18 months to run their course and then peter out as measures are taken to slow their spread (eg. hygiene, quarantining, banning gatherings, preventing travel). SARS ended quicker due to the nature of the virus and rapid action by authorities. In 2005/2006, there was significant concern that a severe strain of bird flu (called H5N1), which was resulting in human casualties, mainly in parts of Asia where people had contact with chickens, would mutate into a form that was readily transmissible between humans. However, this didn’t really eventuate and as such the economic impact was modest although it did cause bouts of volatility in share markets. Similarly, concern that the spread of swine flu would become a global pandemic rattled share markets for a while around April 2009, and Ebola did the same in 2014, but both quickly faded.
Key Learnings from China’s coffee industry, and how it has been affected
The Chinese coffee market has grown rapidly in recent years, with coffee imports having tripled over the last decade. Due to the rate of growth it’s also considered to be one of the markets with the most potential, with experts forecasting considerable growth in the coming years. However, since the Coronavirus outbreak just over a month ago, investors have been understandably unsettled, with the benchmark index for coffee futures dropping by more than a fifth.
Two of the biggest coffee shop chains in the country have taken a massive hit as they have decided to close stores temporarily. Starbucks have shut more than half of their +4000 mainland China stores, and Luckin Coffee have closed all of their stores in Wuhan. Both brands have seen a knock-on impact to their shares, with Starbucks dropping 6% and Luckin Coffee by a third. Depending on how these brands manage to bounce back, this could be a massive blow for the fledgling Chinese coffee industry.
Coronavirus containment is expected within the next month or two – the number of infected cases continues to rise but it remains mainly confined to China (and Hubei), with the number of new cases peaking in the next month or so. This said there would be a lift in these travel restrictions hopefully to be completely removed by the June 2020 quarter. Now, to the local Australian and New Zealand cafe market this a long time to survive and more importantly for our recovery.
With many of our local F&B businesses surviving month to month, the result from this Coronavirus pandemic could be a surge in the number of bankruptcy’s and place real financial hardships upon many businesses in these affected Chinese dependent areas mentioned at the start of this article, and also for those you wouldn’t expect initially to suffer, as the travel restriction bites hard to now include airports, main travel centres and wider regional tourist areas and therefore their F&B product suppliers.
The longer the period before and during containment the longer these businesses servicing the reduced turnover cafes are hit over the next few months, taking us into the 1st July 2020 new financial year. Roasters, cafe suppliers, cafe services and employment all have a lag effect from February 2020 and will see many F&B service related businesses like coffee machinery, retail and other equipment, repairs and maintenance contracts, and new cafe openings dramatically reduced. Their financial recovery efforts will last many months until normal business trading patterns return likely in the July to December period.
What can the Cafe Industry do to stay safe?
Global Health authorities are currently working hard to keep the coronavirus as contained as possible, hopefully the situation will be under control soon. Here are some general tips to reduce your risk of being exposed to the virus, and some general hygiene tips to help you stay safe.
- Avoid travelling to mainland China unless absolutely necessary.
- Our nationals in China have been advised to leave if possible.
- Wash your hands frequently with soap and water or use alcohol-based hand sanitisers.
- Maintain social distancing (at least 1 metre away from others) where possible, especially if they have shown cold or flu like symptoms.
- Avoid touching public surfaces, and then touching the eyes, nose and mouth.
- If you have a fever, cough and difficulty breathing, seek medical care early.
- If you have mild respiratory symptoms but have not travelled to China, practice basic hygiene and stay home until recovered. If persists seek medical assistance.
- Respect your staff sick leave days and support their return to work safe practices.
- Avoid public cupping events and open table meal sharing at restaurants and breakfast buffets where possible.
Please do not discriminate Asian people at this time as most are Australian or New Zealand citizens that have not recently travelled to the infected areas in China and has such have not shown any signs of the common flu like symptoms at all. Once travel restrictions lift and there has been a marked reduction in the new infection rates, when tourists and students return we need to all welcome them and their potential business to you again. Major Chinese and Asian communities in places like Richmond, Box Hill & Doncaster in Victoria, Sydney’s Hurstville, Chatswood, Haymarket, and Surry Hills, along with other major cities with heavy Asian demographics have been dramatically affected since the beginning of 2020, with many businesses reporting drops of up to 60% on previous takings from the same period in 2019.
These areas along with the CBD’s and inner city suburbs have been dealt severe hardship and real loss of patrons since the outbreak earlier this year and we are yet to see the worst of this over the coming weeks if not months ahead. This could take these F&B businesses the entire years’ trading to recover. For those who are customers of Westpac Bank, some amount of relief is offered with an announcement to defer loan payments and other small business support during this crisis period. We ask all affected cafe businesses to consider flagging your business and personal losses to your major bank now to seek understanding and support.
These certainly are hard times for many hospitality based businesses and we at Café Culture International will update this article in a few more weeks once we know the Coronavirus outcomes first hand and can prepare with future recovery solutions.
Many have asked me over the last few weeks the potential business effects and damage caused by the Corona Virus worldwide outbreak and yes, I have had many of these discussions in which I will now try to summarise for you all who are worried and working in our great FOOD & BEVERAGE (F&B) / café market here down under. I am not going to fully explain what is the Corona Virus (nConV) there are enough clear medical reports and other articles to go research yourself on the web.
Having lived and worked in the development of the China Café Market expansion over the past six successful years and having been one of the few to visit regularly many Tier one large China cities and their specialty cafés like those found at Wuhan in the Hubei province central China. We can report that Wuhan as the “Ground Zero” site where the Corona Virus commenced early December 2019. The fact remains that 96% of all Corona Virus infections are in China Mainland and sadly there are now over +60,000 persons reported to be seeking medical care and thus many more are to date unaccounted for due to the 14 day virus cycle. The largest concern to most of us is that the Infection rate rise has not curved to the cured and thus started to decline in the number of infected persons and this has added to the Global Pandemic concerns of all governments and health care services.
Whilst we pray for all those infected persons to recover and the prevention of all those yet to attract the Corona Virus both in China and elsewhere, here so far In Australia and New Zealand we have a very low number of Corona Virus infected persons and here there are inward restrictions on “resident only” entry in place since early February 2020 and have now been extended another week and most likely to the end of the month awaiting the same signs of a lower infection rate decline and other health care measures before these and any new restrictions are lifted.
Outward travel to China also has Government travel warnings and many mainstream airlines have already cancelled or at best heavily reduced flights to China – This has not only personally effected my family and I, as we are now remaining in Australia until both the travel to China resumes and/or the infection rate declines. The more important fact is that hundreds and thousands of China University Students, regular holiday visitors, family and friends of Australian residents have been stopped entering Australia and New Zealand at this peak infection time and this has dramatically impacted the local hospitality sectors ( China is 20% of all Tourism dollar earnings ) by both dramatically reduced patrons in CBD Cafes, our amazing tourist areas and educational centers where normal F&B business flourishes at the start of the year and during the popular Chinese New Year period that started 23rd January lunar calendar 2020.
It’s interesting to look at the past to best understand what lays ahead as most past pandemics have taken 6-18 months to run their course and then peters out as measures are taken to slow their spread (eg, hygiene, quarantining, banning gatherings, preventing travel). SARS ended quicker due to the nature of the virus and rapid action by authorities. In 2005/2006, there was significant concern that a severe strain of bird flu (called H5N1), which was resulting in human casualties, mainly in parts of Asia where people had contact with chickens, would mutate into a form that was readily transmissible between humans. However, this didn’t really eventuate and as such the economic impact was modest although it did cause bouts of volatility in share markets. Similarly, concern that the spread of swine flu would become a global pandemic rattled share markets for a while around April 2009, and Ebola did the same in 2014, but both quickly faded.
David Parnham –
Research Director Café Culture International
Date 14-02-2020
