Catching up With US Food Demand During the Coronavirus Crisis
The widespread closures of restaurants, hotels, and other foodservice outlets resulting from the coronavirus pandemic have led to a dislocation in food demand. In this note, we look at how different sectors are responding to this dislocation and the challenges food processors are facing to convert production from foodservice to retail items, aiming to ensure supply at grocery stores and offset losses from lower foodservice activity.
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Most US State governments have ordered restaurants to close their dine-in rooms in response to the spread of coronavirus throughout the country. Added to that, school closures, event and conference cancellations, increased telecommuting, and reduced travel have shrunk foodservice activity, limiting food away from home to only takeout and delivery ordering, for an unknown period. With so many Americans staying home, demand for home consumption items has suddenly surged, and food availability in the retail channel has become a concern for consumers, authorities, food processors, and retailers.
“In this environment, players with high exposure to foodservice are the ones to feel more pressure,” says JP Frossard, analyst consumer foods at Rabobank. “Exploring supply gaps in the retail channel remains as an opportunity to offset – at least partially – revenue losses from foodservice. However, pressure may still be felt, as some products are mostly consumed outside the home, such as prime meat cuts, seafood, difficult-to-prepare dishes, and frozen baked goods, and don’t translate into retail in a one-to-one conversion. In addition, some players may face limited availability of retail-size packaging, different specifications, and distribution constraints, as well as working capital restrictions during these turbulent times.”
To a limited extent, foodservice production has already been converted to retail sizes, brands, and specifications. It is a less problematic task for players that supply both segments, although dedicated lines and availability of retail-size packaging and labels may represent a constraint. The specific challenges vary by sector. In this note, we outline, sector by sector, the actions that are being taken and the challenges players are facing to divert supplies from foodservice to retail channels.