How we’re thinking about Coronavirus and CPG at Assembled Brands

1. Employee Relations

For the brands in our portfolio, the wellness of their employees is paramount during a difficult time like this. Managers across our portfolio are offering continued flexibility when it comes to working from home. With growing concerns around transportation, specifically flying, companies are eliminating any non-essential travel and allowing all employees to opt-out of travel for work based on their own comfort level.

2. Supply Chain Impact

Companies are already beginning to feel the crunch in their supply chains. One homewares business, which imports its goods from China, stated, “our main factories closed for two weeks for the Chinese New Year and then were closed for an additional few weeks because of the virus. Now, our factories are producing at about 80%.” It is likely companies will continue to see the impact of delayed production in the coming months.

Another portfolio company in the consumer electronics space told us, “We are actively trying to diversify our manufacturers in order to hedge the risk.” Notably, we’ve seen a number of our portfolio companies accelerating their cash flow cycles to buy more inventory and, in turn, leaning on our credit lines to help offset any setbacks and/or delays in their inventory purchases.

3. Consumer Demand Changes

With consumers fearful about the spread of the virus, there is a tendency to pause non-essential purchases. Per a flash survey given to the CNBC Global CFO Council, demand from Chinese consumers decreased by approximately 20%. This pattern is likely to continue as the virus spreads. Given the likelihood of Covid-19 affecting sales across all industries, it is important to revise 2020 projections and revisit assumptions.