Maintaining food resilience in a time of uncertainty

Understanding the importance of food value chains in ASEAN and how to ensure their resilience during the COVID-19 crisis

ASEAN’s food value chain is not only a major driver of GDP and employment in the region, but is crucial for ensuring the region’s food security. The food value chain contributes to around 17% of ASEAN’s total GDP whereas the share of employment is even higher, with the industry accounting for close to 116 million jobs in ASEAN, or 35% of the total labour force.

ASEAN faces a number of long-term challenges to its food security, and based on our report, commissioned by Food Industry Asia (FIA), the regional association representing Asia’s food and beverage (F&B) industry, it is our contention that COVID-19 will exacerbate these challenges in the short-term.

ASEAN is at the heart of the global food security challenge

On the demand side, ASEAN is experiencing rapid urbanisation and growth of the consuming class. ASEAN will need to meet growing demands whilst facing unprecedented supply side challenges such as low availability of arable land, stagnating yields, aging workforce and food waste etc.

The spread of the COVID-19 pandemic throughout ASEAN and more widely, will put further stress on the longer-term issues facing the region’s food system. 

On the supply side, governments have largely refrained from implementing measures that explicitly close down food production, manufacturing and distribution, deeming these to be “essential services”. This measure varies from country to country. Nevertheless, measures in place have still created unintended challenges across the entire food value chain in the following areas:

Labour shortages

Whilst many areas of the value chain are highly capital-intensive, overall it is deeply dependent on labour. This labour is required at specific locations. Any restrictive measures on the movement of individuals can therefore significantly impact businesses’ ability to sustain their operations.

Input shortages

The food and beverage industry is dependent on many other industries for its inputs – which include packaging, chemicals, oils and electronics. Where production of these has been restricted (due to being classed as “non-essential”), this has had knock-on effects on the food supply chain.

Border challenges

Where inputs or finished products have reached national borders, they have continued to face difficulties in clearing them. One factor behind this has been a lack of clear guidance around logistics workers (such as truck drivers) being allowed to cross-borders, given the broader restrictions now in place. Another has been logistical bottlenecks at network hubs such as ports due to labour shortages at regional ports.

“Our discussions with major global food companies suggest that labour restrictions and supply disruption for inputs are the key challenges that the sector is currently facing in ASEAN. Nevertheless, as the situation develops, it will be necessary for stakeholders to broaden and strengthen mitigations, to ensure the region's food system continues to function effectively.”

Richard Skinner, Asia Pacific Deals Strategy & Operations Leader, PwC Singapore

There are various policies governments can pursue to protect the supply chain

Fundamentally, public health and economic support will remain the priorities for governments across all sectors. However, given the scale of the potential effects of disrupted food supply on broader society, it will be important for governments to also introduce targeted measures that can mitigate these impacts as much as possible. 

These policies will be diverse and directed at different areas of the value chain. The importance of a continued supply of safe, nutritious and affordable food to regional populations must be acknowledged. Here are several policy areas that could have particular importance:

Governments can consider strengthening exemptions from movement restrictions for food and beverage workers...

Majority of food and beverage players are small and medium sized businesses, which...

Over 60% of labour in the sector consists of smallholder farmers. These may require their own...

Both external and domestic border management controls must be kept as efficient...

Restrictions on per-transaction purchase quantities of essential foods...

Even with the best functioning supply chain, stay-at-home restrictions will still deny...

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Responsibility for mitigating the impacts of COVID-19 does not only lie with governments but also with businesses

They must also follow and implement their own mitigation steps in areas such as workforce protection, customer and supplier outreach, inventory management, production flexibility and distribution mitigations.

While these mitigation steps principally relate to maintaining operations and the supply of food, businesses must also consider their own financial health, particularly in light of more uncertain trading.

The impacts of COVID-19 on the industry will last long beyond the current crisis

It is important that government and businesses also consider what can be learnt from the current crisis over the longer term. Doing so will help protect supply chains against both future pandemics and other unforeseen events. Top impacts to consider include:

Changed consumer purchasing habits

The biggest impact is likely to be on the online food delivery market, which can be expected to retain a proportion of the new customers and increased order frequencies. Potentially, brand loyalty could also be affected due to factors such as accessibility during the crisis etc. Either way, businesses will need to carefully evaluate the effects of the crisis on consumer preferences and adapt accordingly.

Increased government focus on food security

The crisis can be expected to sharpen ASEAN countries’ efforts to become less dependent on specific trading partners, and imports of food in general. Whilst climatic factors will mean that countries will never be able to efficiently produce the full scope of commodities, a partial strategic step back from external dependence can be expected to occur. 

Diversification of supplier and customer bases

Businesses of all sizes can be expected to look to diversify the mix of their supplier bases to reduce their exposure to individual geographies. This logic will also extend to customers, with organisations looking to limit their concentration by product, geography and industry. This may increase organic and inorganic market entry activity, as businesses seek to broaden their focus. 

It is clear that the current crisis will impact the security and livelihoods of many across the ASEAN region. Nevertheless, the opportunity must not be missed for industry and government to build a stronger, more resilient supply chain in ASEAN.

Contact us

For issues relating to managing cash and repositioning your business:

Vishal V Thapliyal

Partner, Corporate Finance, PwC Singapore

+65 9617 0042


For questions pertaining
to the report:

Richard Skinner

Partner, Strategy and Food Security Specialist, PwC Singapore

+65 9737 9481


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