How is food consumption going to change following COVID-19?
The COVID-19 crisis has brought big challenges for all companies on the food industry chain. In AGEXPORT, we work to provide different information regarding the crisis that is ahead of us.
This is the first of a series of articles that we will write on the present and future of all food consumption modes, including retail, restaurants, and processed foods. Once these trends are understood, companies on the supply chain can adjust their strategic plans to overcome the crisis in the best possible way.
This is the summary of an investigation we started at AGEXPORT’s Market Intelligence Unit about the current state and trends on restaurants and the implications for all companies and their supply chains.
A highly impacted industry
The restaurants industry has been strongly impacted since the start of the COVID-19 pandemic, as restaurants have not been able to host their clients indoors. This had never happened, even at the worst previous crisis. But, among this negative situation, the industry has come up with innovative ideas as they seek to survive this period.
Restaurants are characterized for being innovative and resilient, which is helping these companies to adapt to a “new normal”. They have needed to shift their value proposal considering the current health concerns of their clients. Customers new seek less human contact, value cleanliness and are modifying consumption patterns due to the economic crisis.
The most significant change that restaurants have implemented is regarding how they serve their clients. With prohibitions to open restaurants for dining in, these companies are currently implementing delivery and drive-thru options worldwide, as well as packaging ingredients to prepare food at home.
This has strong implications for the future of restaurants. Social distancing and reduction of out-of-home food consumption will continue to hit the industry during the COVID-19 pandemic period and even months following the end of this health crisis.
The changes will stay
At first, it is important to realize that social distancing regulations will stay for an indefinite amount of time, at least until it is guaranteed that all population is immune to COVID-19. This will imply that even if restaurants can open, they will need to reduce the number of tables to allow enough distance between one client and other. Restaurants will also need to increase the space at common areas like soda fountains, salad bars and others.
Also, restaurants need to update the design of their facilities to focus on social distancing. All these measures are currently being implemented in China, as the country reduces its quarantine restrictions. All these actions will impact the revenues of restaurants, especially those that focus on dining and cannot easily change to other service modes.
The escape route that some restaurants have implemented is to serve food out of the dining tables, on modes like delivery, drive-thru, pick-up in store and others in order to maintain cash flows into the company. Yet, even with these modes implemented, sales are only a fraction of the usual pre-COVID sales. It seems that restaurants that have not yet entered these new trends will soon have to implement at least one of these channels.
Lastly, maybe the most decisive factor is the economic impact that consumers are facing. Nowadays, amidst the current economic crisis, consumers might tend to increase food consumption at home and reduce out-of-home food purchases, as these expenses become non-essential. According to a survey of Boston Consulting Group, 81% of Americans are spending less in restaurants during the COVID-19 crisis. Even in China, despite the fact that they are leaving the worst period of the pandemic behind, one third of Chinese citizens say they plan to spend less in restaurants than before the crisis.
Additionally, consumers do expect a recession to hit in the upcoming months, which will force them to shift their priorities of future consumption and force the restaurant industry to enter a re-invention phase on the services they provide.
This can lead the way for a new trend, inspired on the amount of time that consumers are now spending at home because of the lockdowns: cooking. Youth clients are now discovering the kitchen and adults are going back to the kitchen as well. People are returning to consume food at home, raising the importance of retail and processed food products.
A more in-depth version of this research can be downloaded at the following link: