Transcript Blog- The Global Impact of COVID-19 on the Agribusiness Industry
In this episode of the Industry Insights by SAP podcast, Josephine Monberg interviews Anja Strothkaemper, VP of Agribusiness and Commodity Management at SAP. Listen now to hear Anja discuss the short- and long-term impact of the coronavirus pandemic on the agribusiness industry and how technology has helped in the recovery process.
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Welcome to the industry insights by SAP podcast series. My name is Josephine Monberg, and I am your host. You are now listening to the COVID-19 special edition of our show. Welcome to our podcast. Hi everyone. And welcome to this episode of our podcast. We are looking at different industries and examining how they’re being impacted by COVID-19. And more importantly, at the stage what’ll happen in the more longterm as we look ahead and move from the respond phase, which is the first phase and into the recovery phase, which is where I think a lot of countries are now. And then of course, the last week, which we believe to be the reimagine phase. So how do you reimagine your business model based on what’s been happening? And the massive impacts of COVID has had on industries. And today we are looking at an industry which is agribusiness, and to do this, I am so fortunate that I’m joined by Anja Strothkaemper. Anja, thank you so much for being with us on the show.
Yes. Good morning. It’s my pleasure. Thanks for having me.
And I’m actually thanks for saying good morning, because for this doesn’t happen too often, but I’m actually on the same time zone as you anja.
Yeah, typically it’s always, um, I’m always the early bird because I’m in the Europe right now, but Anja you’re the head of agribusiness and commodity management at SAP. Tell us a little bit more about your role and I hinted that we’re on the same time zone also where in the world you are.
Yes, for sure. So yes, I’m the head of agribusiness and commodity management. So what does that mean? I’m actually responsible for defining our industry strategy for agribusiness. So we try to understand what other trends, what is going on in this business. What, from the trends are the areas where we, as SAP should provide solutions and define a solution portfolio. And with that we then also work very closely with, um, different stakeholders. So we work with our customers, our partners, and influencers to ensure that we spread the message about what we as SAP do in this space. And, um, yeah, we, we have been very fortunate because we’ve always been working very closely with customers. So we’ve been creating what we call a customer council group, uh, for agribusiness. We also have a group for dairy to make sure that we actually have an ear to our customers’ needs as we design strategies. And as we define our portfolios going forward, so that’s a little bit of what we do, and we also have a strong focus on commodities in general. So that’s why you see, I have these two roles here at SAP.
Yeah. And you’re in,
I’m in Germany. So like most of SAP colleagues when the pandemic hit us. So I actually moved fully into home office, which has been an interesting experience as I’m sure we can all say. So, uh, we actually are a two parents and home office with a six year old and we’ve been trying our best to keep all balls in the air. Manage the different roles we have in life.
It’s been a tough time for it just still is a tough time for most people. I’m actually, for those who can see the video part of those, I’m actually in the office right now in Denmark, in Copenhagen. So we have, do have a lot of restrictions. Um, we can’t go in as we normally would, but we’re S studying, opening up of, um, the country in general, but Anja let’s talk a little bit about agribusiness, but perhaps first of all, when we talk about agribusiness, what companies are we then looking at?
That’s a great question. And that has actually been one of the first things we did when we said we want to have a focus at SAP on agribusiness, which is a big and huge industry. Um, so we really took a broader definition of agribusiness. Um, most companies have people when they hear about agri, they think about agriculture, which really is the farming part on the fields or also the raising of livestock. But we really look at it from, um, the provision of inputs. So that is the seed management, um, the crop protection side of the house, even the machinery that is needed to work on the fields. And we also look on the livestock side where you could say it’s the, um, the animal medicine or the, uh, the nutrition of animals. So that’s where it all starts. Then you actually have the, um, farming operations, which is an area where traditionally SAP hasn’t really been in, but where we mill made quite some investment and where we see a big potential where our customers need help.
And then the supply chain carries on with, um, yeah. Origination and trading. So you take what the farmers actually grew and do then, um, aggregated, you have silos, you have domestic trade. And then it typically goes into processing food processing in different stages, depending on the food. And then ultimately it’s more traditional consumer goods, manufacturing, food, manufacturing, retail, and the consumer. And we see that the, um, the trends in these industries are driven on the one hand side, by the consumer who has typically changing, um, preferences, would they buy, and they wanted to know a lot more where the food came from. So we feel it’s important to have the end consumer in mind when we look about trends, but also we see a lot of digitization happening on the field itself. Um, a lot of innovation happening in that space. So that’s why we took that broader definition of agribusiness in the space. Yeah.
So a huge industry and a very important industry as well. And I’m sure that it seemed impacts of COVID. I think that’s unavoidable for what, regardless of what industry that you’re in. So what are you seeing that the impacts are of COVID-19 on agribusiness companies and perhaps also, maybe you can talk a little bit about their business processes.
Yeah, absolutely and like you said, I mean, everyone has been impacted, uh, this industry, when you talk about production of food in a crisis, obviously has been, um, pretty dramatic. It’s actually, um, what you would consider a systematically relevant industry. So everyone needs to eat whether there is a crisis or not. So I think the biggest thing that happened when the crisis first hit was, uh, an unknown shock in the demand patterns. So when, like you said, most countries went into lockdown and different degrees, all of a sudden, um, there was a change in, um, in that D demand pattern and especially the food services, businesses were all closed and you would think, you know, we consume the same, whether we eat at home or in a container, but that turned out not to be true. So you see the whole food service like contains in schools, restaurants no longer taking certain products and that actually reduced demand.
And while some of it was shifted to the retailers, because you now go and buy a coffee yourself, or you have to cook yourself, or you, uh, you know, you have, um, milk, you actually, um, give you a child at home. It, some of it was actually, um, compensated by the increase in retail, but it didn’t fully compensate as you would expect. So that was a big shift and companies had to react fast. So there was no cookbook for it. And you actually had to really look fast on how can I handle, what can I do? And we’ve seen in some of our customers, like in the dairy industry, I took the example of milk. You know, a lot of milk is actually consumed in schools and contains, and, and there was just a surplus of milk that they had to deal with all of a sudden.
And when you combine this with the fact that in many countries, people lost jobs and they didn’t have enough income anymore. It’s been quite a stretch and a very, um, awkward constellation that we could see in that market. And then when you look at the supply side, um, supply chains were also not functioning as normal. So one of the immediate impacts you could see, for example, you’re in Europe, was when, when we closed the borders, which was a tough decision, especially in the free market zone here, you could see trucks actually line up on the, and that caused delays in the supply of food. So you had to constantly replan retailers who now we’re getting supplies from alternative suppliers, couldn’t take the food as it was produced. So it had a knock back effect along the whole supply chain. So understanding these short term changes was very important.
And I think that is something that, um, you can only try to be prepared, but it highlights the a very much real time supply chain that is in there. And I would say Josie, a third element, which is very important is the impact that it had to the workforce, because a lot of the work in the fields itself is very manual. So here in Germany, for example, when the pandemic hit, there was a shortage on, on temporary harvest workers to help with the harvest on asparagus, non strawberries. So a lot of nervousness on how to compensate for that. And then also how to keep your own workforce safe, how to ensure that in an environment where people are, you know, forced to work very closely together, um, how do you ensure it doesn’t spread? And how do you make sure you, you actually have the right measures in place? So that’s been something we’ve actually seen quite drastically.
I mean, it’s really the same for all industries that they’re being hit. And suddenly something dramatically changes. Whether it’s an increase in demand or decrease in demand and businesses have to respond. And you touched on having a resilient supply chain becomes more important than ever and being prepared for whatever disaster may come next is more important than ever. And I think in that case, technology plays a huge role in helping businesses do that. At least again, is what I’ve seen across all industries. And I think that a lot of businesses in industries have also seen the acceleration of digital transformation that they’ve had to do all of a sudden that they maybe didn’t think was possible, or they didn’t have the sense of urgency. But if we look at just the daily crisis management and agribusiness, how have you seen that technology can help agribusinesses solve their challenges, perhaps looking at it, both from the short, the mid and the longterm perspective. Yeah, it’s actually a great, great
question. So, first of all, I want to say we’re very humbled that a lot of the companies in this agribusiness value chain have, um, have selected SAP as their partner for digital transformation. So we have a lot of customers in this space in the last, um, you could say five to seven years, a lot of companies in this industry have seen the need to digitize and have started huge company-wide digitization program. So many of them have rolled out our digital core are in the process of rolling it, using some of our industry specific solutions, like to handle this trading process, the origination process, risk management, and what was very interesting to us when we, you know, when we checked in, when we talked to the customers, when we talked to the council members, the first message that came, you know, as CIO is when we talk about digitization, it’s also hard just to sometimes keep the excitement up in your organization.
But when this crisis hit, everyone could see why there is such a need for it because all of a sudden, many of our customers and the IT departments when like we did into a home office straight away. So all of a sudden you could just work remotely by using technology. You could bring all your people into home office. You had very little, you know, loss of efficiency and the CEO’s were quite proud because they got a lot of credit for the work they’ve done. And, you know, we got feedback, like even little things like I’m signing a document electronically, which was considered a little nice to have became super important to keep your processes running while you did this shift into the, um, the lockdown and the remote world that we now very much got used to. So that was very great for us to hear.
And we then see that the specific issues that the company is facing the crisis, you can see how technology in this particular part becomes more and more relevant. So when you look at, um, change in demand and supply chains, we see a dire need for companies to manage end, to end supply chains and to have good software in place to actually understand what is my holistic demand, what are my customers and my business, actually, I’m telling me how can I organize supply chains, rerun plans? How can I then also from the planning element, go to the logistics, which is very important because there’s a lot of trading. There is a lot of storing and redistributing in this business. So understanding that integration between planning and then distributing it is super critical. And we had seen an interest for these solutions before the crisis hit, but we see now that that is just so much more in people’s minds, that there is going to be an increase in understanding how we can use these tools.
And we’ve made quite a number of investments to actually combine our logistics solutions with the trading solutions. We’re looking at IBP and specific industry scenarios. So we really see an interest. And when you think about these short term last mile issues, like where is my truck? Is it arriving? We also think that here, the, um, the realtime information, um, by connecting your servers providers, the logistics service providers will be more important. So offerings like our logistics business network, where we can allow our com partners and customers to connect and exchange real time information, we see a, um, a strong demand peak for that. And we think that’s something we want to work with the industry on to see how far can we standardize, share best practice, which is very much what we, what we do as a team. And I would, would also see this, this whole topic of workforce management.
Um, I mean, it’s, it’s always been important, agribusinesses and industry that, you know, seeing a lot of aging workforce. We see a change in generation of farmers who are handing over us. We also see in the companies that there is a next generation of leaders coming in, so the, the need to have good human resource, um, processes in place, I think it was realized before the crisis, but when you are in the crisis and when you see what’s happening, when you need to onboard, um, you know, temporary workforce and you need to, in remote onboard, Mexico city checks give people access to systems. So we see our solutions in that space from SuccessFactors to field glass, see a new hype and interest. And we had some three offerings as a company. So, uh, on the field glass solutions side where we’ve seen interest in it, uh, we think that’ll probably stir more as we now go into the next phase, but also, um, when you think about Qualtrics, where we have this experience management thing, it was so important to stay in contact with your workforce. Um, and that’s where we’ve seen some of the meat companies that were affected quite a bit by, um, the spread of this, um, pandemic in their organizations. We have examples of companies using, um, the Qualtrics solution to stay in contact with our employees. So you see that there is this change on how can I try new things and do things differently. Um, also fast with cloud offerings to, yeah, to just respond quickly and this time.
And I think you hit on something that’s key, which is we have this current global pandemic, which totally shifts thing or shuffles thing is around and turns things upside down. And then businesses have to act differently in order to cope and respond and react. But those best practices are those changes that are happening right now, as in, for example, better connecting with the workforce, I’d assume that a business would want to sustain those that it’s not something like, Oh, we did this just for COVID, but why throw something away? That was actually good change. So what I’m wondering is our agribusiness is now thinking about new ways they can connect with their customers and their suppliers, not just during the crisis, but also after the crisis. Absolutely. Absolutely.
Absolutely. And I think that’s also been one of the, um, themes and the feedback we’ve received when we talk to different companies. I think in this business, it’s primarily been a B to B business. So as an agri company, you supply into the next one, down the chain, typically the consumer product food manufacturer, and then the retailer. So in that B2B, there is an element of connecting with your customers. Um, but it’s not like in the B2C set up, but we’ve seen that the crisis for some of our customers to do that. So when you’re hit so hard by, um, the, uh, decline in demand from the restaurants, you all of a sudden go new ways. So we have dairy companies that started to go and open online stores for fresh produce to deliver directly within, within a town. Yeah. To do like a try and market to see how can I maybe be what you know was very dominant in the United Kingdom for many, many years.
So you have a milkman supplying to your doorstep. So it’s totally new, different, a totally new model where you are actually a service provider and you have online store online service, online distribution, direct distribution. So, and I think this is something they probably wouldn’t have done if that crisis hadn’t hit. But now that you’ve tried, there is an appetite to scale it and see, can that be a profitable business? What would we need to change to make that a profitable business? And many of our customers, um, that originate from farmers and, and buy their produce from farmers have very, very good relationships with these farmers. It’s often a supply constraint business. So you can only sell as much as farmers produce. So having excellent relationships with, depending on what you do and that value chain, the farmer can be a supplier, but the farmers are treated as customers.
So that is a trend we’ve seen for quite some time, but we think to your point, it’ll only increase. So having farmer portals where, um, I, as a farmer can see what all have I delivered to you? What all have I received in terms of payments? Are you giving me some suggestions on when I should fix my price with you? So all these services that you may want to offer me, maybe you want to do that in a platform and all online. And I think we see this will only increase and the importance of these customer relationships. When you see, you may not be able to do what the industry has traditionally been doing, you know, be out talk directly. It’s good to have a second, which is that online channels. So we see this be, um, you know, also something that went up in importance also on the CEO level to say, maybe we should change our mind and, and open up to new Amazon type models in this space, if you like.
Interesting. So just shy station plays a key role here, of course, which it has or which it is playing in most industries. Just kind of a last words. If you view your sin, when you’re sitting with your customers now, and hopefully we have some of our customers that are listening, who can benefit from this conversation, but what do you tell your customers in terms of what they should be doing now to better prepare for whatever comes next or for the future? I know you already touched on it in terms of like having a more resilient supply chain and, and so on, but just as your last words, what would you, what do you tell your customers?
Yeah, it’s a, it’s a good point. I think what we see at the moment is, um, keep laser focused on continuing the projects that you’re doing. Um, as I said, a lot of our customers are in rollout and it’s hard. So we’re trying to help them to be even better prepared to roll out in these times of lockdown. And many of our customers say there’s remote working model work continues. So we want to help our customers to be almost as efficient, if not more creative, through new tools and less travel time to go live and, and continue the journey that they’re on. I think that would be the first one because it’s most customers have said we will continue these projects, even remotely SAP help us to be, you know, super well prepared to do online training and user training, these sort of things, very few apps that I need to delay a bit, but we haven’t heard a single one say I’m canceling it.
So we’re very proud of that. So keep, keep focused on, on the big projects that are ongoing secondary. I think we sincerely believe that the digitization opportunities will increase and consider what was probably, you know, um, a pain to solve an opportunity like this example of going online, try new business models, and we’re there to help. We really want to be the partner to convert our customers, to what we call this intelligent enterprise. So help to, to go into the cloud to quick innovations, change models, pilot, and also use a digital platform to onboard startup to help in that process. So we really want to encourage that, um, the spirit of, of it’s a it’s actually is a problem, turn it around into an opportunity. And we believe that those companies that, uh, that will go down this path will be leading the path going forward. And they’re humbled to be a partner, um, by customers.
Yeah. I can pull the echo those words. And I do think that’s the important thing is looking at the challenges, but then turning them around to become opportunities using technology to better advance in the future, because that’s really the only way that you’re able to fully recover, reimagine, and then keep up more longterm. So Anja those words, thank you so much for coming on the podcast. It was so fun to chat with you. And I learned so much about agribusiness. This is also a great learning experience for me because I get to learn about so many different, fascinating industries that we cover at SAP. So thank you so much. And, um, to everybody until this episode, thank you so much for listening and hopefully you will also tune into the next episode. Bye everyone. Please subscribe to our channel industry insights by SAP at open SAP, Apple, Spotify, or podcast, to learn more about what SAP is doing to help you cope in COVID-19. You can go to sap.com about global health safety and find free access to select SAP software tools, support your business in much more. Stay safe, everyone.