Food Business

How is COVID-19 changing the food industry?

In order to understand food system consolidation and resilience, we’ll be monitoring COVID-19’s impact on the structure and economics of the food industry, identifying where old business models are forced to expire and where innovation is shaping new alternatives. We’ll also be looking at where companies are prioritising food that is healthy and affordable, and where private sector solutions to food access problems are ensuring that vulnerable groups receive the food they need. In the long-term, will the changes we see in this sector hinder or accelerate progress towards a food system that is healthy and sustainable for human and planetary health?

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Experts criticise Eat Out to Help Out scheme for being at odds with the government’s plan to tackle the obesity crisis.

With the government announcing new measures and a consultation process to tackle obesity, including restrictions on marketing of foods high in fats, sugar and salt as well as mandatory calorie labelling for restaurants, nutrition experts have pointed to the contradiction with the Eat Out To Help Out scheme.  The discount scheme allows for discounts on all restaurant food regardless of its nutritional value or calorie count and has been widely taken up by fast food chains such as McDonalds and Burger King.  Criticisms from academics were supported by some in the industry with celebrity chef Antony Worrall Thompson commenting that applying discounts to fast food was “a bit crazy”. 

Restaurant trade improves but remains significantly lower according to year-on-year comparison

Data from the latest Coffer Peach Business Tracker shows that pubs have been quicker to reopen than restaurants, with 74% of group-operated pub sites (excluding independent operators) having reopened, compared to just 24% of group-operated restaurant sites.  While total weekly trading levels remain over 30% down on the same week last year, restaurants have seen an improvement from 40% down (during the first week of restrictions being lifted) to 26.9% down (from week commencing 13th July).

Only 25% of UK restaurants so far registered for Eat Out To Help Out scheme

The government’s Eat Out To Help Out discount scheme for restaurants is due to launch on Monday 3rd August and yet an estimated 75% of eligible businesses are yet to register.  Chains such as Costa, McDonalds, Harvester, Burger King, Pizza Hut and JD Wetherspoons have announced their registration to the scheme, although only 36,362 of the eligible 130,000 pubs and restaurants are now part of the scheme.  With discounts only related to food and soft drinks, many pubs may not see the benefit of registering, while smaller operators who may have challenges with serving customers safely may decide against joining. 

Azzurri Group sale to lead to 75 site closures and 1,200 job losses

The economic pressure on the restaurant sector continues with Azzurri Group (owners of Ask Italian, Zizzi and grab-and-go chain Coco Di Mama) being sold to TowerBrook Capital Partners.  Under the deal 75 sites will be closed resulting in 1,200 redundancies, however, administrators KPMG were keen to point out that the sale will protect 5,000 jobs and allow 225 sites to remain open.  New owner TowerBrook is a certified B Corporation with a stated purpose-driven focus on responsible ownership that aims to balance people, planet, and profit. 

More closures and job losses expected in the restaurant sector as pressure from Ccovid-19 bites for Pizza Express, Azzurri and the Restaurant Group

As Covid-19 compounds existing problems for Pizza Express ( including debt of more than £1 billion and increased competition), the chain is expected to enter a company voluntary arrangement leading to up to the loss of 75 sites and 1,000 jobs.  Pizza Express joins other restaurant chains such as Azzurri (owner of Ask and Zizzi), Casual Dining Group (owners of Bella Italia and Café Rouge) and the Restaurant Group (owners of Frankie & Benny’s and Garfunkel’s) in looking to permanently close sites. 

Fast food chains pass on savings from VAT cut to customers as health organisations criticise the government’s Eat Out To Help Out initiative

Quick service restaurant chains such as McDonalds and KFC have joined other high street names including Starbucks and Pret a Manger in passing on the recent VAT cut to customers across top-selling menu items.  The VAT cut comes as part of the government’s attempt to boost the hospitality industry’s economic recovery, alongside discount vouchers for meals, and has been criticised by some for making junk food cheaper at the same time as the government is due to announce steps to tackle obesity. 

Chancellor cuts VAT to 5% for six months in boost to hospitality sector

Within a week of pubs and restaurants reopening, the Chancellor has announced that VAT for the hospitality sector will be cut from 20% to 5% for six months. The sector will also benefit from a new Eat Out to Help Out scheme where the government will subsidise the cost of eating out, where participating restaurants can claim back a government subsidy up to £10 per meal, presumably to incentivise restaurants being able to offer price deals to attract customers and protect their ability to pay wages.  The VAT cut is in line with the request for help made by the industry, although longer term “rent holidays” have not yet been announced.

Food Foundation discussed the future of the hospitality sector with leading analyst Simon Stenning

With the government cutting VAT for the hospitality sector, we spoke to Simon Stenning about the future of the sector as part of our Covid-19 Tracker’s focus on the food business. A leading analyst of the hospitality market with over 30 years’ experience working with brands including Forte, Hilton, Albert Roux, Pret A Manger and Compass Group, Simon has just released a new report for hospitality sector ‘The Immediate Future of Foodservice/Hospitality 2020/21’. Here, we share the exchange of ideas we had with Simon as pubs and restaurants in England prepared to reopen.

Sodexo reports 30% drop in revenues compared to the same period last year

Global foodservice operator Sodexo has recorded a near-30% drop in revenues for the quarter during lockdown compared to the same period in 2019. The biggest impacts have come in its education sector, although the anticipated reopening of schools and potentially business catering sectors in September may provide cause for more optimism. UK & Ireland regional chair Sean Haley told, “We are starting to see business return to a new normal and we are pleased to be welcoming new clients over the next few months with new contracts being awarded in our schools and universities and corporate businesses.”