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?

Return to our homepage to view the COVID-19 Tracker in full.

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.”

Pub and restaurant chain Mitchells & Butlers announce  £121 million loss due to lockdown

Mitchells & Butlers, owner of Harvester, Toby Carvery and All Bar One, have announced pre-tax losses of £121 million in its half-year ending in April. Notably, like-for-like sales had been improving pre-lockdown, demonstrating the severity of impact the first month of lockdown has had on the hospitality sector. Chief Executive Phil Urban remains cautiously optimistic however, stating that experience of reopening sites in Germany has given the company confidence for the UK’s reopening phase.

60% of hospitality sector expected to reopen on 4th July bringing nearly a million people back into work

The Caterer reports that 60% of the hospitality sector is planning to reopen in some capacity at the weekend, bringing nearly a million people out of furlough, with this expected to reach 75% by the end of the month and further re-openings in September.

Upper Crust owner SSP Group announce up to 5,000 jobs to be lost due to Covid-19

With UK pubs and restaurants only days away from reopening, SSP Group, who operate fast food and restaurant outlets at train stations and in airports, has announced job cuts affecting up to 5,000 people (55% of its 9,000 strong workforce). The cuts come as part of a restructuring process in response to dramatic fall in customer footfall through lockdown measures and travel restrictions that have hit both rail and air travel.

Grocery year-on-year sales growth continues, with over 90% increase in online food sales

IGD reports that in the three-month period up to mid-June, grocery sales grew by 13.7% compared to the same period last year (data source: Kantar). With online sales growing by 91% in the previous four weeks, Ocado are the big winners with a record-high 1.7% of total market share. With sales growth of over 40% in the last 12 weeks, the online retailer has also raised £1 billion from shareholders to fund its future growth strategy in the UK and abroad.  As reported previously here, Co-op continue to take market share, with many customers preferring local smaller stores.  Tesco remains the best performer of the big four retailers (outperforming Sainsbury’s, Morrisons, and Asda).

Pubs and restaurants to reopen on 4th July with one metre social distancing allowed

The government has confirmed that pubs and restaurants will be allowed to reopen from the 4th of July, with a revised “one metre plus” guideline for social distancing. This means that pubs and restaurants will need to ensure that customers stay at least one metre apart and that additional safety measures are in place. These measures include partitions at tables, no “standing drinking”, no customer spaces at service points such as bars, and taking customer contact details for possible track and trace purposes. The hospitality sector has long argued that a one metre rule was the maximum needed to make the sector economically viable, although it remains to be seen how well the industry recovers and what appetite customers have for returning to eating and drinking out.

Government to review two-metre social distancing rule

As the restaurant sector gears up to reopen in early July, the government is due to reassess the two-metre distancing rule, potentially announcing new guidelines for one metre social distancing. The hospitality sector has argued for a revision of the two-metre rule, claiming that two metres would make most businesses in the sector inviable due to reduced capacity. This comes alongside an industry call for a wider package of support measures, including longer term financial support, to avoid widespread closures and job losses.