COVID-19’s effect on new product development unknown
The uncertainty of the coronavirus (COVID-19) could affect new product development projects of food and beverage companies, which in turn could affect Sensient Technologies Corp., a supplier of colors and flavors to such companies.
“Governments are imposing varying degrees of restrictions, sometimes changing them abruptly, which is creating uncertainty for businesses,” said Paul Manning, president and chief executive officer of Sensient Technologies Corp., in an April 29 earnings call to discuss first-quarter results. “Our customers are responding to these changes in various ways. Certain customers are deferring innovation and new product development while others are trying to adapt to keep projects alive.
“While we see an increase in demand in certain product categories in the food and beverage and personal care markets, we are seeing a lower demand in other categories, such as makeup, ice cream, confectionery and energy drinks.”
COVID-19’s impact varies depending on sales channel, geographic region and product line, he said.
“For example, orders increased in packaged food,” Mr. Manning said. “However, orders were substantially down for restaurant and quick-service sales channels. We see that trend continuing in the second quarter and possibly beyond, until the economies of the world return to a more normal rate of activity.”
Consumer demand is changing, he said.
“There may be more of a greater focus on buying local and a heightened emphasis on healthy products,” Mr. Manning said. “I am confident that our products can support this changing demand.”
“We continue to expect profit improvement in both flavors and colors as the year progresses,” Mr. Manning said. “Despite COVID-19, we believe we are on track with our plan and outlook for the year.”
Mr. Manning said globally all of Sensient Technologies Corp.’s production facilities are open and operating. Staffing and attendance at the facilities are at 95%.
“Our on-time delivery continues to be high at nearly 95%, as our supply chain teams are continually monitoring raw material supply base, increasing safety stock in certain areas and working to ensure raw materials are delivered to our facilities despite transportation and shipping challenges,” he said.
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