Sustainable Food Start Up Explores Credit Lines to Cope with Coronavirus

    Stockholm (NordSIP) – Among the many undesirable effects of the Coronavirus outbreak, the financial turmoil that follows on its heels is endangering businesses the world over. While entire industries are potentially threatened, more obscure but promising cash-strapped startups are particularly exposed to these dangers.

    Transportation Shaken By Epidemic

    Perhaps the most visible industrial victim of the Coronavirus has been the airline industry, for whom travel bans and quarantines have led to the cancellation of hundreds of thousands of flights On the industrial front, Boeing is reportedly lobbying the US government for a $60 billion in government aid package to the aerospace industry. The American industrial the restrictions imposed by the epidemic add to the costs of recalling its 737 Max planes last year.

    In the car industry, Toyota was also forced to close down factories in order to comply with quarantines. In consumables, Apple and Starbucks were also some of the early names closing factories and shops.

    Startups Feel the Pain

    Given the decisions to limit mobility to the very bare minimum, it is not surprising to see so much of the economic shock of COVID19 concentrated in the transport industry. Ride-hailing startups, Lyft and UBER, have cancelled shared rides to avoid minimising the risk of contagion. More prominently, Tesla has been told to suspend normal operations at its Fremont, California factory for three weeks, according to media reports.

    However, the problems are not confined to the transport industry. Among those hard hit by the financial turmoil, the fashion industry stands out due to its concentration in the North of Italy. This will inevitably affect companies trying to make an environmental impact in an industry that is responsible for 10% of the world’s carbon emissions. We were reminded of Aquafil, a small-cap that makes sustainable nylon fibres for clothes, which UBP‘s Victoria Leggett discussed with NordSIP last year. The company is a supplier of to some of the fashion world’s powerhouses including Stella McCartney and Safilo Group, an italian eyewear-maker that has expressed concerns about future order cancellations due to the epidemic.

    Impossible Foods Looking for Cash

    However, social distancing measures have also caused authorities to close restaurants. Among sustainable companies, perhaps those most at risk might be plant-based meat substitutes such as Impossible Foods. To deal with the potential economic hurdles created by the epidemic, the company has decided to get ahead of the curve and cushion itself with cash. According to an exclusive report from Reuters, “Impossible Foods is [preliminarily] discussing a new credit line worth several hundred million dollars with its lenders, as the plant-based meat company braces for the economic fallout of the coronavirus outbreak, people familiar with the matter said on Tuesday.”

    This discussion follows reports that the company concluded a series F funding round worth US$500 million, which would presumably leave it prepared to endure an extended sales slump. Whether its competitor, Beyond Meats, does the same or not might determine which of the two companies comes out on top in the aftermath of the COVID19 economic turmoil.

    Image by HeatherPaque from Pixabay

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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