Australia’s FMCG and retail companies, particularly those with close ties to China, are on high alert as the spread of the deadly coronavirus gathers pace globally.
Coronavirus 2019-nCoV, which was first detected in Wuhan, China, has now infected over 7000 people globally, according to UBS.
“Given the mortality rate of 2019-nCoV is higher than for Swine Flu and
it appears to be spreading faster than SARS, financial markets are understandably concerned with the economic and earnings impacts across a number of sectors,” UBS analysts said in a report released on Thursday.
With the economic link between Australia and China “multiples larger” now, there is much greater risk to business.
“While it’s too early to know the full potential impact of coronavirus 2019-nCoV, it is clearly another negative for the economy, on top of the catastrophic bushfires.
“The potential impact could now be much more significant.”
Analysts expect stocks exposed to the Chinese consumer including Treasury Wine to feel the hit.
Dairy giants take action on the ground
Many of Australia and New Zealand’s big dairy companies have a large footprint in China, including a2 Milk, Bubs Australia and Bellamy’s.
The a2 Milk Company told Inside FMCG that it has put international travel into China on hold for the time being and is keeping staff movements within China to a minimum.
“We have in the first instance ensured all our staff are safe and taking the necessary precautions to reduce the chance of contracting the virus, including issuing masks and restricting staff movements within China,” a spokesperson for a2 Milk told Inside FMCG.
The milk and formula company is also working with its local partner, China State Farm Holding Shanghai Company Limited, to assist with the distribution of its products to consumers in affected areas.
Bubs Australia, which has enjoyed great success with its goat milk products in China, referenced the virus at its second quarter financial report on Friday.
Bubs founder and chief executive officer, Kristy Carr said the company is “saddened” by the outbreak in China and that the focus is on ensuring citizens have access to necessary products.
“We are working closely with our stakeholders and partners in Australia and China to ensure that our customers and their families continue to have security of supply,” Carr said.
Meanwhile, the dairy company reported a 21 per cent uplift in second quarter sales over the previous corresponding period, with revenue of $14.54 million.
During the quarter, the focus was also on transitioning its Beingmate joint venture to key partners, while continued investment is being made in partnering with Alibaba in the cross-border e-commerce channel.
Aldi China enforces strict health and safety procedures
German discount supermarket chain Aldi has enforced strict health and safety procedures at its stores in China which remain open at this point.
“While our office in Shanghai will be closed until 9 Feb 2020, in accordance with the advisory issued by the authorities, our stores remain open and online delivery available to customers,” a spokesperson for Aldi China told Inside FMCG.
It is compulsory for team members to wear masks while at work, and to wash and sanitise their hands every 30 minutes. Customers have also been encouraged to wear masks while shopping.
All public surfaces, including handlebars of shopping trolleys, are disinfected every two hours. While dining areas and condiment stations are also being cleaned more frequently.
Aldi said it is monitoring the situation closely and will adhere to local advisories to ensure the safety of customers and employees.
J&J pours resources into developing vaccine
Meanwhile, Johnson & Johnson’s pharmaceutical arm is working on developing a vaccine to combat the virus which it hopes could provide immediate relief to the current outbreak.
Paul Stoffels, MD, vice chairman of the executive committee and chief scientific officer at Johnson & Johnson, said the company is supporting global efforts to make the greatest impact.
“We are collaborating with regulators, healthcare organizations, institutions and communities worldwide to help ensure our research platforms, existing science and outbreak expertise can be maximized to stem this public health threat,” Stoffels said.
“This latest outbreak of a novel pathogen once again reinforces the importance of investing in preparedness, surveillance and response to ensure the world remains ahead of potential pandemic threats.”