With COVID-19 disrupting supply chains, industries, and markets across the globe, we鈥檙e checking in with GAFSP Private Sector Window clients to see how the health and economic crisis is affecting their businesses and the smallholders in their supply chain. In the next installment of our 鈥淐OVID Conversations鈥 series, we talk with Daniel Spitzer and Teresa Law, CEO and CFO respectively, of Mountain Hazelnuts, Bhutan鈥檚 largest private sector employer. IFC and GAFSP鈥檚 joint investment in Mountain Hazelnuts supported the company鈥檚 program of providing free saplings, agricultural inputs, and training to the more than 12,000 smallholder families and community organizations in their supply chain. Spitzer and Law, a husband and wife team, talked recently about the challenges of transporting plantlet tissues out of China, what happens when hazelnuts are put in quarantine, and why their company built five ventilators to serve the rural Himalayan communities they now call home.
Question: How has COVID-19 affected Bhutan and your business more broadly?
Bhutan鈥檚 leadership realized that COVID was a threat and moved very quickly. The King has actively overseen efforts to protect the wellbeing of the country鈥檚 citizens. Together with the prime minister, who is a physician, and many members of the Cabinet, who are also medical doctors, they are putting the wellbeing of citizens first and the economy second. The government has been very proactive and so far, there have been only a handful of cases. Bhutan鈥檚 borders are effectively closed, and air travel is limited to the occasional repatriation flight. There are also stringent travel restrictions between Bhutan鈥檚 20 districts. This year, for example, we planned to register another 3,000 acres to be planted and the closures are causing significant disruption. Usually at this time of year, our advocacy team travels around the country, introducing hazelnut as a cash crop to interested farmers in public meetings. Gatherings of more than three people are prohibited and so we鈥檝e pivoted to a combination of online communication and door-to-door communication. Mountain Hazelnuts has roughly 150 extension officers around Bhutan and each support 50 to 100 orchards with bimonthly visits. Many of them have taken on the advocacy role in their communities, and though it鈥檚 been less effective, we鈥檙e all learning.
Question: How is COVID impacting the smallholders in your supply chain?
Many of our smallholders have family members who send remittances from abroad, which have dropped significantly. Trade and imports are carefully regulated now, so we have difficulty getting growers the inputs they need. This is the season for distributing and planting trees around the country: the first rains have started, and we would normally have lots of trucks filled with thousands of saplings rumbling along farm roads throughout the country. Because we鈥檙e not allowed to move from one district to the next, this process has become very challenging. We now have a backlog of one million trees in our nurseries. We normally provide all kinds of inputs鈥攆ertilizer, tools, and electric fencing to keep out wildlife鈥 but we鈥檙e unable to import the raw materials. Everyone鈥檚 income has been affected, but one positive is that most of our supply chain consists of subsistence farmers who grow their own rice and vegetables鈥 and so nobody is going hungry.
Question: Are trade disruptions affecting your operations?
COVID has seriously impacted our supply chains, domestic operations, and sales. We partner with a tissue culture laboratory in Yunnan, southwestern China, which micro-propagates hazelnut for us. In most years, we import at least one million tissue culture plantlets via air transport through Bangkok. As these are tiny, vulnerable plants, we transport them in climate-controlled boxes. Our typical shipment of 100,000 plantlets is kept overnight in a cold storage facility in Bangkok before flying on to Bhutan鈥檚 international airport. We then drive them for 15 hours to our main nursery, changing ice packs along the way. In early February, one of our shipments was delayed and our plants got stuck in Bangkok for an extra few days. While we usually achieve 75 percent survival, more than 60 percent of this shipment died due to the shipping delays. We鈥檝e had to stop importing our tissue culture plantlets and so our most important form of propagating new trees has been stopped. We now have a million plantlets in the production facility in Yunnan and can鈥檛 ship them to Bhutan. That鈥檚 a significant setback and a real inefficiency in our supply chain.
Question: Have your exports been affected?
We ramped up to export early this year and had originally planned to sell to China, but as concerns about the virus spread in China, we pivoted and began to explore potential buyers in Southeast Asia. In March, we exported to a buyer in Malaysia, via India, and new restrictions added uncertainty and costs to the logistics. When the shipment reached Port Klang in northern Malaysia, it was put in a 15-day quarantine. Though the hazelnuts were released, the customer has been unable to get them to their distributors because of restrictions. We were eventually paid, but it鈥檚 never good when a customer suffers.
Question: What has Mountain Hazelnuts done to protect its employees?
We started preparing for COVID in February and so by the time Bhutan diagnosed its first case on March 4th, we had already implemented safety measures. We lived in China during the SARS pandemic in 2003 (Severe Acute Respiratory Syndrome) and so we were already taking precautions, because it was clear to us what was going to happen. To facilitate social distancing, we created shift work schedules so that employees alternated between working from home and the office. At the office, we implemented daily temperature checks, modified the water taps and door handles to enable hands-free operation, and provided training on remote work effectiveness. Seven of us completed a training program in peer counseling to help colleagues handle stress and adjust to new schedules. We aren鈥檛 therapists, but we try to give people a sympathetic and listening ear. We鈥檝e also kept all our staff on payroll, despite the financial hardship. One of our colleagues has weak lungs. We recognized that would be a potential problem for him and realized that people in nearby communities also had potential respiratory issues. One of our senior technical people took this on as a project and fabricated five ventilators, which can serve eastern Bhutan in case the need arises. This isn鈥檛 something that everyone should do, but if you live in a rural part of the Himalayas and have tens of thousands of people who look to you for help, sometimes it is incumbent on you to figure things out.
