45 days into this mandated distancing program I find myself battling emotions, considering broad reaching changes to industries and looking for that crystal ball I seem to have misplaced. Busy formulating thoughts on the importance of experience and authenticity my worldview (and focus) quickly changed as my vocabulary expanded to include terms like “social distancing” and “flattening the curve”. Covid 19 had officially become the most critical thing, business issue, talked about topic, ever!
Feeling anxious, reflective and THANKFUL at the same time can task the mind and body. Over the past couple of months, I’ve tried it all. The sock draw has been sorted. The garage has been given a facelift. Touch up painting? Check. Spring gardening? Done. I’ve not been out in weeks, don’t remember what the interior of a restaurant looks like and have been doing what I can to “support local operators” during the madness that Covid 19 has unleased upon us all.
While I’ve weaned myself off of televised news there is one headline that’s now very clear. “THE EFFECTS OF COVID 19 HAVE DECIMATED THE FOODSERVICE, HOSPITALITY, CATERING & EVENT INDUSTRIES.”
There will be monumental implications for consumers, clients, operators, manufacturers & those leading the supply chain. Bruce Reinstein, a former client and restaurant industry veteran, did a brilliant job summarizing his thoughts on this topic for Fast Casual. His post is definitely worth a read: CLICK HERE to read Bruce's thoughts on Covid impact
It’s impossible to overstate how hard hospitality sectors has been hit. My own observations relate to my little corner of the universe where local restaurants saw 95+% of their volume vaporize in the span of a week. While restaurants have creatively refocused on pre-order / pickup services there has been concern & speculation on the health & safety of those preparing, packing and delivering meals. In the end consumer confidence will either dissuade fears OR further fuel the fires enveloping the local “mom & pops” we’re all trying to keep in business.
In deference to Bruce’s thoughts, my personal observations are also shaped by the trends in my foodservice client business. Here are a few of those issues, and the longer-term implications I expect to take hold.
Corporate cafes are either shut down or servicing a small percentage of their normal populations with “grab & go” product options. An increase in food waste and packaging costs have been coupled with the need for significantly less onsite labor.
Midterm: volumes will be slow to return as corporations try to effectively manage building population levels. Its going to take several months, perhaps several business quarters, for associates to feel comfortable working in closer proximity to one another. Foodservice concepts & service delivery models will be transformed to reduce touchpoints and bolster consumer confidence. Labor allocations will be adjusted.
Longer term: Societal cues may provide some indications on “distancing” and its effect on foodservice trends. Population shifts between cities & the burbs and remote vs. in office headcounts should be monitored. TV commercials playing up the value of “touch free” delivery & intervention free pickup “food lockers” are already starting to pop up. Full-service cafes will be reworked, new construction will be more tech enabled, favoring centralized production schemes and smaller footprint, interactive “finishing” stations that offer the right balance between customization, labor efficiency & food security.
Revenue, profit and margin re-forecasting has everyone scrambling to measure the impact of the current crisis. Publicly traded companies are issuing profit warnings while taking drastic measures to protect their balance sheets.
Midterm: More re-forecasting and baseline adjustments. Finance and operations teams will collaborate to understand, measure and mitigate downside impacts to the business.
Longer-term: Contract offerings may need to look different. Subsidies may finally disappear as organizations look for more flexibility. Expectations for food away from home, and more specifically food at work, could and should follow the “less is more” philosophy.
Manufacturing / Supply Impact
Schools are closed. Food & beverage manufacturers have seen monumental volume reductions on core products that in many cases formed the backbone of their production models.
Midterm: Volumes will ramp back up as municipalities return to “normal” operations. Foodservice sales will return while supply chain professionals look to expand relationships. I’d be looking to strengthen local, regional and US based supply lines to mitigate future risk. The REAL impact of cheap food extends beyond health & wellness concerns and into the downside risk of a restricted supply chain.
Longer-term: Manufacturers will reduce operational complexity & manage downside risk by eliminating certain product lines. Recognizing an opportunity to blur the lines between foodservice, grocery & club channel offerings, innovators will retool & simplify packaging configurations to afford more flexibility should they need to pivot in the future.
We’re only seeing the tip of the iceberg in these commentaries. Hospitality leaders will further leverage technology and innovation to design solutions to current & future challenges. Some final thoughts on trends worth watching:
- Takeout and delivery options are now fully fledged channels for growth. Most businesses would be well served investing time & resources to expand their capabilities in this area.
- Catering & event volumes will be slow to return. Operating a profitable core business will be essential. Retooling Food & beverage offerings to reduce touch points is going to be critical.
- Pre-order / pay & touch-less technology solutions have become immediately more relevant. They’re going to come at a cost. Investments in these areas are going to be tough for individual operators which will create a NEW market opportunity for someone to pair the hard & soft applications.
- The much talked about “ghost” kitchen concept is a viable solution. I’d be targeting mid to large metro markets where population densities & transportation systems are growing.
- Food lockers? Full-service Automat vending machines? I’m not sure most Americans are ready for this level of sterility. Food has always been about quality, choice, customization and human interaction. Recent data however is beginning to paint a very clear picture on how health, (food) safety & environmental concerns will shape future consumer patterning.
Be safe out there.