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Coronavirus Epidemic Significantly Impacting Dairy Supply Chain

The coronavirus outbreak has placed considerable supply and demand-side pressures on China's domestic dairy sector. SMEs are poorly equipped to buffer the impact of the outbreak. Major issues relate to disruption to logistics, reduction in the supply of primary outputs, and staffing issues. These disruptions will likely translate to an increase in the price of raw materials. However, brands are warned to avoid passing these prices on to consumers during the epidemic. Bricks and mortar businesses are expected to be worst hit by the epidemic.

ChemLinked Prediction

In the webinar “2019 China Food Industry Recap” [1], Chemlinked predicted considerable merger and acquisition activity in China’s dairy sector in 2020. The impact of the coronavirus on China’s supply chain is likely to accelerate the rate of SMEs exiting the market. These smaller companies will suffer in many ways and at multiple links in the supply chain. The impact on logistics will be a significant issue that will likely drive the price of raw materials up. Additionally, SMEs will also be poorly equipped to buffer the temporary hiatus placed on production, staffing issues, and general lack of liquidity.  

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