How has the pandemic affected the food and drink sector?
COVID-19 has resulted in the boundaries between how we consume food and drink breaking down further.
Business Leader Magazine spoke to some leading figures within the Food and Drink sector to discuss the true impact of the virus, whether government schemes have helped and the future trends that could help steer the industry to a brighter future.
What has been the true impact of COVID-19 on the food and drink sector?
Clifford: “The pandemic has created huge challenges for the food and drink industry, but it has also been the catalyst for huge opportunities. These are both immediate, with many businesses thriving from agilely adapting to new consumer needs, and in the long-term as the crisis will leave a number of lasting legacies. Although many aspects of the ‘next normal’ are shrouded in uncertainty, Mintel expects this phase to be characterised by a heightened interest in physical health, emotional wellbeing, local businesses and communities, the environment and real value for money.”
Backman: “COVID-19 has been, and will continue to be, a great accelerator for the shifts between in and out of home consumption that have been emerging over the past 15 years. Current consumer behaviour is a catalyst for change, which is happening far faster than anything I predicted just six months ago. As we move forward, every part of the supply chain will have to be able to adapt rapidly to this changing landscape.
“The hospitality industry has taken an unimaginable hit, but many operators have used it as an opportunity to pivot their businesses and redefine both their offer and the way it’s delivered. The entrepreneurial spirit and dedication to save a much-loved industry has been refreshing for all to see.
“Consumer demand will drive and shape the eating in and dining out markets more than ever before, so suppliers, foodservice operators and retailers will need to react, adjust and innovate to allow for evolving scenarios. The food industry has always been fast-paced; it’s about to get faster.”
Wren: “It has had a massive impact. It has reshaped many aspects of the food and drink sector by triggering changes in supply and demand, which have endured long enough to become habitual, the ‘new normal’. It has consolidated sales and capital into large retailers, while placing many food service outlets at risk of closure.”
Lawson: “The biggest single change has been the huge increase in the ‘at home’ occasion, due to lockdown and the latest tiered restrictions reducing out of home and on trade visits. During the initial lockdown, overall alcohol consumption fell to 1.3 billion litres, down from two billion the previous year, but that shift of occasions into the home has seen the off-trade sector grow by over 25% since restrictions began.”
Was the Eat Out To Help Out scheme a success?
Stewart: “The path of the virus continues to dictate the direction of the economy as a whole, and that of consumer spending in particular. Despite the boost from pent-up demand, staycations and the Eat Out to Help Out scheme, there was less bounce in August’s GDP figure than expected. Now, with case rates rising, new restrictions being introduced and government support reducing, the outlook is for an even slower pace of growth in the coming months.”
Littlejohn: “The Eat Out to Help Out scheme was one of a number of important government measures put in place to support businesses hit hard by the impact of COVID-19, and in restoring public confidence as the country emerged from lockdown during the summer. The scheme was part of a package of vital economic support which was important to our sector, including the gradual reopening of tourism and the reopening of Scotch Whisky distillery visitor centres over the summer.”
Wren: “It depends on how you measure success. It created a feelgood vibe around eating out and helped a lot of restaurants to fill seats. In retrospect, £500m is a huge price to pay, making the scheme seem like a fanciful use of public money when so many livelihoods are at risk as we enter the next phase of restrictions.
“The knock-on effects of restaurants and food service outlets closing, or facing severely limited custom, has had an enormous effect on producers who were supplying this part of the food system.”
What other Government help is needed?
Perkins: “The gradual reopening of the physical high street and strong online trade has seen retail sales growth rebound to pre-pandemic levels. Consumers, already poised to spend, have been enticed back by end-of-season discounting. Following a challenging Q2, many consumer businesses will find improvements to net spending this quarter encouraging, but the lead up to Christmas will remain important. With consumers indicating a reduction in planned spending, maintaining momentum of online sales, and ensuring distribution channels can cope with demand will be key to a successful ‘Golden Quarter’.”
Lawson: “The hospitality sector, and suppliers to it, are massive casualties and the biggest tragedy is the number of young people that sector employs. This is compounded by Brexit and the additional regulations on imported wine that add cost and insult to injury. De-regulation and additional support for businesses and employees in that sector are vital. Reducing duty on wine, beer and spirits would add some much needed support to the industry.”
Can the sector recover? What will this recovery look like?
Littlejohn: “Recovery will depend on a variety of factors – the success of public health measures in the absence of a vaccine, the impact of economic policies and support measures, the easing of lockdowns in global markets, and how quickly international travel, hospitality and consumer confidence rebounds. Despite the challenges, the industry will continue to work to regain our strength globally, and in doing so it will be critical to us to have the support of government in keeping trade flowing.
“The longer restrictions go on – both in restricted opening times and sales – the harder it will be for these businesses to survive or play a full part in the recovery.”
Wren: “Recovery will reshape the sector, placing more sales into the big retailers and delivery companies, while bringing more food service opportunities to the towns around major cities where workers are relocating due to working from home policies.”
Lawson: “As far as the hospitality sector is concerned I am sure it will. We have seen tremendous innovation from wine suppliers with increased focus on online marketing, tasting and selling. While the hospitality sector is undoubtedly hard hit by the regulation and behavioural changes that it’s beset by currently, I have every faith the innovation that the sector is renowned for will see the hospitality industry bounce back.”
What future trends will we see in the industry as a result of the Coronavirus?
Thomas: “COVID-19 has resulted in the boundaries between in-home and out-of-home consumption breaking down further and faster than any of us could have imagined. The future is unpredictable; we don’t know what path the virus will take or how lockdown measures will affect the performance of markets in the medium to longer term.
“In this highly uncertain environment, it is crucial that retailers and suppliers are able to respond successfully and quickly to events as they unfold. Considering which changes in shopper behaviour will become permanent will help identify the solutions that you want your business to nurture.
“Foodservice companies must balance customer focus with practical, operational issues and work collaboratively with partners to achieve this. Much thought must be given to the best time to reopen and foodservice companies must be prepared to rewrite their business plans with a start-up mentality.”
Ryder: “Although the pandemic has presented the sector with some significant challenges, we have also been impressed with the way many craft bakers have successfully adapted their businesses to not just survive, but grow too. The lockdown prompted many people to shop more locally. As a result, some consumers discovered their local bakeries for the first time and came to appreciate the great quality and taste of the products available. We expect this trend for regional products and ingredients to continue into 2021, which is, of course, a real positive for the craft bakery sector.
“We expect the trends for shopping locally and for products offering provenance and traceability to continue into 2021. Health and safety will continue to be a big priority for business, customers and employees into next year and beyond. At the CBA, we will be with our members every step of the way – providing them with the very best support and guidance, so that they and the wider craft baking industry can continue to thrive.”
Lawson: “No question the significant growth in online food and drink shopping is here to stay, with October seeing almost 80% growth in online grocery sales.”