P.E.I. dairy sees 30% drop in demand

With restaurants across Canada and the U.S. shut down in the COVID-19 pandemic, the P.E.I.-based dairy ADL is having to deal with a marketplace that has been 'disrupted overnight.'

About 30 per cent of meals are eaten out of home, said ADL CEO Chad Mann, so the closure of dining rooms has had a huge and immediate impact.

"It's been disrupted overnight effectively, so it was there one day and gone the next. So there's a tremendous amount of inventory that would be built up," said Mann.

"In April things have been not too bad, but I look in May, June and July, I'm seeing truckload after truckload of orders cancelled."

Dairy farmers in Ontario are already dumping milk. It hasn't reached that point on P.E.I. yet, said Mann, but some kind of cutback in production is likely going to be needed.

Mann said demand in retail on P.E.I. has been strong, but that's not enough. About 90 per cent of ADL products are sold off-Island.

Caught off guard

Operating in the pandemic presents a number of challenges, Mann said.

The company can't just make product and store it. In an uncertain marketplace, ADL needs to ensure its cash flow is secure, that it is not incurring expenses with no near-term prospects of income.

Even without the drop in demand, the company would have to scale back production. Physical distancing required to ensure the safety of workers in the pandemic means full-scale production is not possible.

Producing and storing product may only delay the problem. The supply management system is designed to fulfil the market in real time, and doesn't allow for emptying of stockpiled warehouses.

"The markets were reacting quick as they can to mitigate any loss or exposure on that, but it's a sad story when you see some of the waste that has occurred," said Mann. 

"I, as a leader, should have seen this coming maybe four months ago or two months ago when we started hearing this news out of China. But I guess I'm not alone in how quick it's caught us off guard."

ADL is communicating with food banks around the Maritimes in an effort to move some of its excess product.

Mann said senior staff are putting together different scenarios for how to deal with the downturn. The ideal is to put ADL, and its 165 dairy farmer owners, in a position to respond quickly when the market rebounds, but he said it's hard to do that when you don't know when the rebound will come, or how strong it will be.

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