Virus may cost China retail sectors billions

Bloomberg

The outbreak of coronavirus may have cost China’s retail and food service sectors billions of dollars in sales during the Lunar New Year week, according to a leading food and agricultural bank.
Revenue lost in both retail and food services during the Lunar New Year week could range from 20% to 80%, representing a fall of $31 billion to $124 billion, as major chains shuttered stores across country, Rabobank said in a report.
China’s industries, including food and agriculture, are bearing the immediate brunt of the coronavirus outbreak “as heavily-hit cities are under lockdown while the rest of the country rapidly hunkers down,” Rabobank analysts led by Ping Chew said. The impact could be more serious and longer-lasting if the virus isn’t contained within first quarter, they said.
Store closures by retailers Starbucks, Haidilao, McDonald’s, and Yum China came during a period when food service and retail sales were tipped to gain 8% to $155 billion, the bank said. The losses from food service alone could total $8.8 billion to $13.6 billion, it said.
The extent of total damage will depend on how long it takes before coronavirus outbreak, which has now caused more than 1,000 deaths in China, is contained, Rabobank said.
The food service sectors in Singapore, Thailand and Vietnam are also likely to be affected in the first quarter, as Chinese tourist numbers fall.
Food and beverage necessities like soft drinks are resilient to the virus while frozen foods, ready meals and bottled water may benefit due to panic buying.
Alcoholic drinks will be more affected, especially baiju, a Chinese spirit where 30%-50% of full-year revenue comes during festival holidays. Wine and beer sales to also suffer.
Impact on farm products will be limited in short-term as manufacturers usually have raw material inventory to last 45 days, so this will tie them over until the end of February.
Chinese animal feed consumption will remain stagnant in the short term as the virus postpones farmers’ decision to rebuild hog herds and poultry farms cull stock.
Animal protein consumption likely dropped greatly in January and February, and demand will remain weak throughout the first half of this year if the virus isn’t brought under control until May-June.