The US foodservice industry is bracing for the next big challenge of the COVID-19 pandemic.
While outdoor seating has helped mitigate revenue losses caused by restrictions on dine-in foodservice to an extent, restaurants face an uncertain fall and winter, with more layoffs expected across the hospitality industry as temperatures fall, outdoor dining becomes uncomfortable, and the threat of COVID-19 continues to loom.
How are foodservice operators adapting to the shifting market environment and what effect are these changes having on foodservice products? A new Freedonia Group study analyzes the reopening of restaurants in the US during the COVID-19 pandemic, and what the industry can expect beyond it.
Restaurants Traditionally Geared to Delivery & Takeaway Expected to Fare Best
Since the first round of state-mandated non-essential business closures in March 2020, foodservice establishments traditionally oriented to takeout, delivery, and drive-through – such as pizzerias and fast food chains – have generally been better positioned to weather pandemic market conditions:
- Though grocery sales data indicate consumers began cooking for themselves more often during the pandemic, virtually all foodservice was restricted to orders that were consumed off-premise until May, when restaurants began to reopen in many states. This benefitted limited service and other restaurants that were already more oriented to takeout and delivery.
- Fast food and fast casual concepts that support on-demand digital ordering have seen increased online orders during the pandemic, even as overall revenues have fallen due to reduced traffic.
Meanwhile, many full-service – particularly fine dining – restaurants continue to struggle, driving operators to shift operations to support takeout and delivery, or close, many permanently:
- Because full-service establishments emphasize the dine-in experience and high product quality, transitioning to a profitable takeout/delivery model can be challenging.
- However, third-party online food delivery firms including luxury platform Caviar (Square) are helping businesses in this sector facilitate the switch.
Mixed COVID-19 Impact for Selected Foodservice Supplies
A variety of single-use and disposable products are used by the foodservice industry for continuing operations as the pandemic continues, with the outlook varying for these products not just in 2020 but also over the long term:
- The single-use foodservice product (a.k.a. foodservice disposable) segment has the greatest variety and largest number of products (from containers to bags to boxes to serviceware). It also has widest variation in growth rates, both in the short and long term. For instance, disposable serviceware demand is rising as many reopened full-service restaurants are now offering single-use plates, cups, and cutlery instead of reusable types due to their better hygiene.
- Disinfectant use in the foodservice industry has seen steady gains over the historical period, with growth in the short- and long-term boosted by increasing hygiene and sanitation standards. Wipes have generally seen better growth prospects than more conventional disinfectants, although this was not the case in 2020 due to shortages and the higher cost of wipes.
- Before the pandemic, the use of facemasks and shields by restaurants was minimal, but sales increased sharply in 2020 due to mandates requiring face coverings by restaurant workers.
Rapid growth in off-premise dining fuels investment in digital capabilities
In general, the pandemic is accelerating trends in food delivery and off-premise dining that were already occurring but that had been limited by strong consumer preferences for going out to eat and drink. Because consumers are unable or unwilling to go out during the pandemic, the share of foodservice revenues generated by drive-through and online sales has expanded. For example.
- Many leading foodservice brands – including Burger King, Chick-fil-A, McDonald’s, and Wendy’s – were already investing heavily in improving their digital ordering, delivery, and drive-through capabilities prior to the pandemic. Now, brands are deepening their focus in these areas as demand has surged for off-premise options that are affordable, convenient, and safe.
- In addition, a number of major brands had already formed strategic partnerships with online food delivery platforms – e.g., McDonald’s and Chick-fil-A offer delivery via DoorDash – and third-party cloud kitchen facilities to optimize delivery networks. Online food delivery platforms such as DoorDash and Uber Eats have seen increased activity during the pandemic, in large part because of their convenience and perceived safety, which often justifies the cost of delivery.
As the pandemic recedes and the economy normalizes, US consumers will likely resume going out to eat and drink, but the trend toward digital ordering and delivery will continue to gather strength.
Want to learn more?
US Restaurant Reopening: COVID 19 Impact on Supplies is now available from The Freedonia Group.