Post Pandemic Impact
Kelly Hensel

Kelly Hensel

Mary Ellen Kuhn

Mary Ellen Kuhn

Article Content

    It’s often said that change is constant, and that has perhaps never been more true than during the ongoing global coronavirus crisis, where health and economic news has changed on an hourly basis. How the food system will adapt and shift as result of the COVID-19 pandemic isn’t yet fully known, of course, but experts agree that the scope of change will be significant. Industry experts shared some predictions with Food Technology.

    Foodservice Trends Will Accelerate

    “The pandemic is causing many existing trends in the restaurant industry to accelerate,” says Scott Landers, who runs food delivery consulting group Figure 8 Logistics.

    David Portalatin

    New restaurant models will emerge post-pandemic, predicts The NPD Group’s David Portalatin. Photo courtesy of The NPD Group

    David Portalatin

    New restaurant models will emerge post-pandemic, predicts The NPD Group’s David Portalatin. Photo courtesy of The NPD Group

    “In 2019, the takeout customer traffic grew 4% in an environment where restaurant transactions overall were pretty flat,” explains David Portalatin, vice president, industry advisor – food, The NPD Group. “So, we were already seeing the consumer having a preference for taking food away from the restaurant, increasingly to consume that food in our homes. So, as we’re all spending more time at home now, obviously that’s accelerating. And we need to consider the possibility that some of that behavior is retained on a longer term.”

    Pre-pandemic, chains had already started to implement digital ordering platforms to ramp up takeout and delivery sales. Amid the pandemic, restaurants that hadn’t considered taking the leap into digital ordering are seeing it as a way to keep their businesses afloat with dine-in off the table.

    “In 2019, digital orders—either on a smartphone or a website—for delivery grew by 16%, and digital orders for takeout grew by 33%,” says Portalatin. “I think that what you’ll see is those companies that were already winning with those kinds of consumer offerings probably come out of this a little stronger than some of their peers.”

    Delivery has become as important as takeout, if not more important, as consumers shelter at home and avoid public places like grocery stores and restaurants. According to Portalatin, only 3.4% of all restaurant orders were for delivery prior to the pandemic. That has changed dramatically and is unlikely to go away after the pandemic is over. “Delivery will be more important than ever—both to the restaurant and to the diner,” predicts Landers.

    Maeve Webster

    Tamper-proof packaging for takeout fare will appeal to consumers, says Maeve Webster of Menu Matters. Photo courtesy of Menu Matters

    Maeve Webster

    Tamper-proof packaging for takeout fare will appeal to consumers, says Maeve Webster of Menu Matters. Photo courtesy of Menu Matters

    Maeve Webster, president of consultancy Menu Matters, agrees that takeout and delivery options will grow post-pandemic, and that “safety and sanitation are going to be significantly more important going forward.” This could include “tamper-proof packaging, antimicrobial materials, and obvious and frequent store/venue cleaning,” says Webster.

    With delivery and takeout likely to continue growing after restaurants reopen their dining rooms, restaurants may be designed differently in the future. “If the world in the future is more a takeout- and delivery-oriented world, then why wouldn’t we have multiple drive-thru lanes, or why wouldn’t we consider different types of physical models that would be better suited to high volume or off-premise business?” questions Portalatin. “Perhaps dining rooms get smaller. Perhaps for some people dining rooms don’t need to exist at every location. Perhaps we accelerate the ghost kitchen concept where people have shared kitchen space at a lower cost basis to facilitate more profitable delivery orders.”

    Portalatin is quick to point out that these trends were all growing prior to the coronavirus, but “sometimes something comes along that just puts a laser focus on things and forces something to take a leap forward.” The COVID-19 pandemic has done just that to the foodservice industry, and sadly, not all restaurants will survive the quick shift in demand, but as Webster predicts, “there will likely be a ton of new restaurants opening to take their place once the economy starts climbing out of recession.” The food is sure to be as tasty as before the pandemic, but the way it gets to you and how the restaurant operates will be different.

    Grocery Shopping Shifts

    With more consumers discovering the benefits of online shopping during the pandemic, expect retailers to enhance their online order fulfillment capabilities. “I think that one really important activity that’s going to come out of this will be to address fulfillment,” says Doug Baker, vice president, industry relations, for FMI-The Food Industry Association.

    Doug Baker

    Doug Baker of FMI-The Food Industry Association expects to see supermarket chains build more micro-fulfillment centers as grocery retailers work to do a better job of fulfilling e-commerce orders. Photo courtesy of FMI

    Doug Baker

    Doug Baker of FMI-The Food Industry Association expects to see supermarket chains build more micro-fulfillment centers as grocery retailers work to do a better job of fulfilling e-commerce orders. Photo courtesy of FMI

    “I think we’ll see a significant number of micro-fulfillment centers go up. … There were some being piloted before this crisis took over, and I believe we’ll see a significant expansion,” says Baker. He notes that many retailers currently have personnel picking products to fill “click and collect” orders from the same shelves that consumers are shopping, which isn’t efficient.

    In a related vein, says Neil Stern of consultancy McMillanDoolittle, “supermarkets might look very different.” Retail footprints may shift, he reflects, with staging areas for grocery pickup occupying up to a third of a store’s layout.

    More Respect for Processed Food?

    For food manufacturers, the impact of the pandemic could be felt almost immediately. As consumers rushed to stockpile food and beverages for a lockdown scenario, they were reaching for many of the same types of food. While only months ago, many were shunning processed and packaged foods in favor of fresh and organic, in March, they began buying canned goods, frozen vegetables, and macaroni and cheese. Stocks soared for some of the giant consumer packaged goods (CPG) companies that had been experiencing lagging sales for years. While the end of the pandemic is not yet upon us, many experts have begun forecasting what is in store for food companies in the year ahead.

    The food manufacturers benefitting from increased sales of packaged goods are hoping to retain some new customers that may have purchased their products after a long hiatus or for the first time during the pandemic. “You might see increased trial of these products that you wouldn’t normally have gotten, and so there might be some repeat rates that will be higher than usual,” says Robert Moskow, a research analyst at Credit Suisse. However, he also says that he is “reluctant to get too excited” about some categories because he’s “uncertain whether consumers are going to want to keep buying canned soup after the stay-at-home restrictions are lifted.”

    Food and beverage startups that have flooded the market and have seen a lot of success in recent years may have new challenges ahead of them. “These small companies were able to get to market very quickly while making their own financial sacrifices because they had access to capital,” says Moskow. “That could change.” Especially if there’s an economic recession as a result of the pandemic, investors may be less interested in funding risky startups in an unstable environment. How-ever, this doesn’t mean that the larger CPGs that fared well right after the virus spread, will continue to ride the wave.

    “An economic recession is not always a good thing for packaged food, but if it leads to a structural shift in at-home-eating occasions, that would provide more opportunities,” says Moskow. “During the 2008 recession, we were surprised to find that companies you would think would have done well didn’t do that well. Like Campbell Soup and Kellogg did not do well.”

    Moskow notes that companies like Hershey “outperformed” their peers in the 2008 recession, because “people want an affordable luxury. And you get a lot of emotional value from a bar of chocolate for a very low price.” Moskow also mentions that General Mills has proven very resilient during past recessions.

    New Connections for Supply Chains

    While external factors such as the economy are still playing themselves out, the pandemic has revealed some weaknesses within food companies. “The preparedness of the U.S. food system to respond to a global crisis will be greatly enhanced with lessons learned,” predicts Laura Dembitzer, director of marketing and communications for flavor and ingredient supplier Flavorchem. She suggests that manufacturers should use the year ahead to address the vulnerabilities in raw material sourcing and the supply chain to become more resilient and agile in the future.

    FMI’s Baker is hoping for a food system in which all the different players along the supply chain are better connected. “I think the long-term impact for the U.S. food system will be creating new technology to promote more seamless communication and information sharing [along the supply chain] so that when there is a crisis and we need to understand, it can happen,” he says.

    What Consumers Will Want

    Consultant Stern predicts that concerns about personal safety may begin to affect consumers’ shopping behaviors. Consumers may seek out more prepackaged foods and have lower comfort levels with salad bars and hot and cold food bars.

    Joan Briggs

    Joan Driggs of IRI says savvy retailers will offer consumers easy-to-assemble meal solutions. Photo courtesy of IRI

    Joan Briggs

    Joan Driggs of IRI says savvy retailers will offer consumers easy-to-assemble meal solutions. Photo courtesy of IRI

    Joan Driggs, IRI vice president, content and thought leadership, suggests that retailers work to offer stressed consumers easy meal solutions. “I would bet you that a lot of people went out and bought a lot of products like dried beans that they don’t even know what to do with,” she says. “Put something together for people so they know what to do—maybe it’s like a one-pot meal for the day. Say to people, ‘this is easy, and we’re here to help get you through it.’”

    Driggs also anticipates a permanent shift in the direction of e-commerce. “If there’s one thing that I think will really stick after the pandemic, it will be the shift to online shopping, especially click and collect,” she says.

    “I think people will find that they really like that, that they are shopping a little bit differently, which is again another opportunity for retailers and manufacturers to shift some of their promotional efforts to help people be inspired online versus merchandising in the store. It will not be an either-or. It will be both.”

    About the Authors

    Kelly Hensel, Senior Digital Editor, reports on the latest industry and research news for ift.org and the Weekly newsletter. She also interviews chefs about the intersection of culinary and science for the Culinary Point of View column.
    khensel@ift.org
    Kelly Hensel
    Mary Ellen Kuhn, Executive Editor, writes, edits, and manages editorial workflow for the magazine, working closely with the Food Technology editorial team and outside contributors. She manages IFTNEXT editorial content and particularly enjoys covering entrepreneurial innovation and food industry issues and trends.
    mkuhn@ift.org
    Mary Ellen Kuhn