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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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UK Hospitality: sector closures until Christmas could risk 1/3 of the hospitality sector

The government chief medical officer’s comments that social distancing measures could be in place through the year has prompted a strong response from the hospitality sector. UK Hospitality calls for deferred rent payments and an expansion to the furlough scheme to protect businesses and staff.  They estimate that two thirds of businesses in the sector did not qualify for government grants because their rent payments were above the government threshold, and that 500,000 sector employees do not qualify for furlough payments due to the seasonal nature of their employment.  Chief Executive Kate Nicholls says “If we don’t get that intervention on rent and we are forced to remain closed until Christmas, I think you could put a third of the sector at risk”.

Aldi joins list of retailers included in Free School Meal vouchers scheme

The list of food retailers where free school meal vouchers can be exchanged now includes Aldi, Sainsbury’s, Tesco, Asda, Morrisons, Waitrose and Marks & Spencer.  The Department of Education is working to increase the number of retailers involved. Where schools are not able to provide meals or food parcels directly, the scheme allows them to distribute vouchers to families either electronically or by post.

 

Tesco creates 600,000 new delivery slots and starts testing staff for coronavirus

Tesco has increased its weekly online capacity from 600,000 to one million deliveries, with a target of doubling original capacity to 1.2 million. Delivery slots will still prioritise customers identified by the government as being vulnerable, although Tesco also aims to serve the needs of others who “might need support”.

 

IGD supports restaurant chain decisions to re-open for take-away, deliveries or drive-through

IGD commends Pret, KFC, & Burger King for opening small numbers of restaurants for take-away, delivery, or drive-through services. Although the immediate financial benefits may be limited, this provides opportunities for the businesses to:

  • Test new operational processes to cope with social distancing requirements
  • Keep staff engaged and at least some on payroll
  • Maintain supplier relationships and value chain processes
  • Stay relevant to customers
  • Build goodwill by offering free or discounted services to vulnerable groups and key workers.

With a growing realisation that some social distancing measures are likely to remain in place beyond the next few weeks, IGD argues that the businesses that can make this work are building resilience for the challenges to come.

Burger King fails to make its rent payments and calls for a rent freeze

Burger King fails to make its rent payments in April and calls for a nine-month rent holiday.  Chief executive Jonathan Downey says two million jobs could be at risk across the hospitality sector with the industry expected to feel the repercussions of the lockdown until at least mid-2021.

 

COVID-19 impact on food businesses: weekly summary 

March and early April saw a range of responses from the industry, some voluntary, some more a matter of business survival.  Food retailers applied purchasing restrictions, in-store social distancing measures and dedicated shopping times for clinically vulnerable groups and NHS and care workers.  Restaurant chains and caterers, being forced to close, were forced to either shut their doors or innovate, with a number of new partnerships and initiatives springing up to provide home delivery, take-away or click & collect services.   

As April has progressed we are seeing retailers maintain their position on demand management (although purchasing restrictions have eased and empty shelves are returning to something a little more like normality for now).  British Retail Consortium provide a useful summary of current retailer responses here. 

Capacity building and new partnerships continue to evolve in order to meet demand for home deliveries, for example Morrisons partnering with Deliveroo, and other retailers adapting their delivery offering. 

Some restaurants are reopening for take-away or delivery services, from smaller independent operators to high street names, and quick service chains. 

Zooming out a little, the longer term forecast for many in the sector appears uncertain.  Tesco warns that increasing sales in March and additional operating costs may balance each other out.  With restaurant giants such as McDonalds acknowledging the potential for long-term negative impacts and Burger King not making its April rent payments, the industry cry for more government support for the sector is getting louder. 

We’ll be keeping an eye on the financials across the sector, with some stakeholders arguing for any economic re-boot to be an opportunity for all industries, food included, to make sustainability, resilience and social responsibilities more central to their core strategy 

 

Food businesses offer discounts to NHS staff

In the last couple of weeks a number of high-profile companies have been offering dedicated services and discounts to NHS staff. NHS England has a handy list of key offers.  From the food sector these include discounts and vouchers for deliveries (Deliveroo and Just Eat), several 50% discount offers from restaurant chains pivoting their business models to takeaway and delivery, and 10% discount offers from retailers Morrisons, Coop & B&M).”

Jay Rayner discusses current and future challenges for restaurants

Jay Rayner discusses the financial challenges for restaurants during the lockdown, and the hurdles they may still face when they re-open.  Concerns revolve around paying ongoing fixed costs, cashflow for re-opening, and genuine uncertainy about how the public will respond to life after the lockdown.  Interviewees call for a phased and government supported approach to re-opening.”