We return to our discussions with Timothy Li from our Vanguard Shanghai office to share additional perspective on current conditions in China and how the Covid impacts are rippling through the global produce community. In part 1 (link) we looked at how the lockdowns are impacting current day-to-day activities, but as the lockdowns lift, Timothy shares how consumer habits are changing and if they are returning to a new ”normal”.
Q – There has been a lifting of COVID protocols in Shanghai as of June 1st. What changes are happening in the wholesale markets, supermarkets, and restaurants?
Timothy: Even with the lifting of COVID protocols on June 1st, we are still not back to pre-pandemic wholesale market policies. Buyers can only check product quality by video with the seller which limits the selling process.
Most restaurants are still not allowed to have inside dining. Only supermarkets are back to normal operations, but some grocers in higher risk areas still have policies limiting the number of people in the store at one time. Overall, we still need more time to properly return to pre-pandemic shopping and dining experiences.
Q- What impacts have we seen on consumers? For example, online shopping vs in person. Dine-in or take away?
Timothy: The main change of consumer habits is the move to online purchasing. Many of my friends don’t want to shop in the physical supermarket as they worry about the crowds and contracting Covid. When we look at restaurants, there has been less change as people still like to dine in so they can meet friends, and it provides the normal social activity they crave during the long lockdown period.
Q- Logistics have been a challenge all over the world. What have been the most significant challenges in China?
Timothy: I think the most significant challenges in China are the differing policies between local governments, which create fear for jobs in certain regions. The Central Government encourages simplified COVID protocols to facilitate logistical efficiency in China. However, ‘COVID Zero’ is the main goal for all local governments. Some small cities cannot have transparent COVID policies. They prefer to have a ‘one-stop’ policy to prohibit transportation from pandemic-impacted areas or enhance self-quarantine requirements (upwards of a 2-week quarantine) for drivers coming from pandemic-impacted areas. There is still much needed to have a country-wide, unified COVID protocol.
Q- We have completed our shipments of Vanguard’s Peruvian grapes. Can you share any highlights of the past season?
Timothy: I am very excited about our recent Peruvian grape season, as most of our customers had very good feedback, especially our fruitseating taste and brix. Our Vanguard brand series of Autumn Crisp is one of the top labels selling in China. Many buyers recognize the Vanguard brand and plan to increase their buying volume next season.
Q- Looking ahead to Q4 are there concerns about future lockdowns?
Timothy: My main concern is around the cash flow and profitability of smaller importers and wholesalers. The Shanghai lock downs have resulted in little to no business for over two months, yet they still have labor and wholesale expenses. It limits their cash for future buying this year. The fresh wholesale market has always been impacted by lockdowns, and most importers cannot go through another lockdown season. I am very worried that importers will cancel or reject ocean shipments if there are more lockdowns in the future. It will continue to affect the markets outside of China too because growers may need to divert their volumes from China to other markets.