The government offered foodservice a lifeline on Friday. Now it must get to grips with the huge shift in demand from on-the-go to grocery. By David Burrows
Across the UK, hospitality businesses pulled the shutters down on Friday night as the government ramped up efforts to stop the spread of Covid-19. However painful for the owners, staff and suppliers to the sector (worth £72bn and the UK’s third largest employer), this was the sensible decision (far more so than the frankly ridiculous one preceding it: that all these places can stay open but people shouldn’t go to them).
But as the lights went out on cafés, pubs and restaurants for what could be months, the Chancellor offered a glimmer of hope. At Friday’s daily press conference Rishi Sunak announced A Coronavirus Job Retention Scheme that would see the government offering grants to cover 80% of the salary of retained workers up to a total of £2,500 a month. The tax cuts and loans (still to materialise) had been welcome but this was intervention on another level altogether. Instead of 1m jobs being lost, leaders and commentators were instantly tweeting of 1m jobs being saved. “Bosses will spend their weekends working out what the package … will mean for the bottom line,” noted the FT.
Still, for some the news came too late. In the past few days, the sector has haemorrhaged hundreds of thousands of jobs. The Prime Minister Boris Johnson had on Thursday told businesses to stand by their workers “because we will stand by you” but many more can’t hold out much longer. According to research by JPMorgan, small restaurants in the US hold the lowest cash buffer days of any other businesses – just 16 days compared to an average of 27 days. Those here with payroll due early next week are already sweating whether they will make it. The scale of intervention is impressive but now the focus turns to speed: how quickly will the cash start to flow?
The big chains are not immune either. Over the weekend Starbucks and Pret closed all their stores despite food and drink businesses being permitted to continue operating takeaway services. Costa is still up and running, offering takeouts and click and collect but this has annoyed staff. Their concerns for the health of staff and families have been “ignored” by top management, notes a petition to close all stores on change.org. “Your staff have family members, for once put them first before profit,” notes one of 3,300-odd signatories.
This is how it will be for the next short while: brands will be in the headlines for the right reasons or the wrong ones. Indeed, executives can bet their bottom dollar that all their recent claims to be purpose-led and not profit-fed will be put to the test, arguably for the first time. Coronavirus certainly provides a litmus tests for responsible, sustainable, ethically-minded businesses: whether they care about staff or couldn’t really give a crap. As Mark Ritson warned in his (cutting) column for Marketing Week, customers have long memories. “As the coronavirus crisis deepens – and we should remember this is only the very start – we will see more examples of brands that remembered their values in the face of gigantic pressure; and of those that pressed the exit button and left customers, employees and the broader public to their own devices.”
Not to mention their suppliers. On Wednesday, UKHospitality said 200,000 to 250,000 jobs had already been shorn from the sector, but it isn’t only café, catering and other front-line staff who are in danger of losing their livelihoods. There is a food chain to consider, full of thousands of small producers and suppliers. Are these being protected? Are these valued as much as the staff? It is too early to tell but demand has dried up for the legion of small, often artisan or organic, suppliers feeding into all the places we freely ate and drank in up until last week. Some businesses have evolved or expanded into takeaways but these models, for many, are hardly sustainable in the long-term.
This response from Pret, sent to Footprint on Friday before the decision to close all stores was taken, is far from comforting. "Everyone in the extended Pret family is feeling the impact. As a result of the changing trading conditions, we have inevitably had to bring our orders with our suppliers down. We hope that our suppliers understand why it’s critical to make these changes in uncertain times." In other words: suck it up.
The cracks in our food system are already being brutally exposed by coronavirus. Footprint spoke to an organic cheese maker in Wales now looking to sell milk rather than make cheese from it (the restaurants and destination shops are shut); however the prices being offered by the local cooperative are paltry given that the likes of Pret don’t want organic milk at the moment. “We have a major problem,” explains Patrick Holden, the farm’s owner and chief executive of the Sustainable Food Trust. “It would be very nice if some of the big retailers thought how they could play a leadership role in sourcing locally and sustainably.”
Currently, their focus is on stocking shelves that are being stripped bare. Does anyone else see the irony in grocers selling out of fresh fruit and veg: this month marks 17 years since the launch of the 5-a-day campaign and for this first time many people will be hitting that target. On a more serious note, the supplies are there, it’s just they might not be in the right place. This email from a Footprint reader could unfortunately capture the zeitgeist. “We are a fresh fruit and veg farming company. We deliver fresh veg to restaurants in London. Restaurants are closing. Demand for fresh food is no longer needed. Yet supply still exists. We are having to adapt to the circumstances and urgently looking for those who are still in need of veg.”
Almost overnight we have gone from a nation of on-the-go grazers to having three meals at home – so is it any surprise that shelves are bare whilst fresh produce piles up on some farms? “Right now you have struggling restaurants and their staff ready to provide food to customers on the one hand, and on the other, supermarkets with empty shelves. The balance isn’t right,” said Leon chief executive John Vincent.
This could be true for public procurement too. Footprint reported last week that hospitals could see a surge in demand for food just as that for schools dries up, but no department seems to be taking the lead to ensure food gets to where it is needed. This of course includes the children from low-income families that rely on free lunches and often breakfast clubs. School gates may have closed but charities are working 24/7 to ensure that as many of those 1.3m “hungry tummies” as possible are fed. Feeding Britain, for example, is working with local authorities, schools and caterers to see that meals, hot or cold, are available for parents to take home. Some local authorities and caterers have got on with this very early on, says national director Andrew Forsey, citing the example of Edsential in Wirral. “They’ve given a very clear commitment to every school that food will be available for collection.”
The government has said low-income families will be offered vouchers for food but this can only be a stop gap until collection services are up and running everywhere. There is also the threat that, armed with vouchers, parents could turn up to stores and there will be nothing there. The panic buying of late should hopefully subside but the need for a “logistics supremo” – put forward by the FT over the weekend and covering food and health equipment – is an intriguing one. Clive Black, head of research at Shore Capital, reckons that coronavirus interventions will see 20-25% of the country’s calorific intake switch from foodservice to retail. This will lead to "a step up in the demand for fresh food production from the retailers and a shift in distribution across the whole food system”.
Supermarkets – freed by the government to collaborate more closely in order to help feed the nation – are already streamlining product ranges to increase volumes and keep stores stocked. Some have de-listed small food brands to concentrate on core products. As Andy Coyne, deputy editor at Just-Food.com put it: “The 'nice to have' and newly emerging is being replaced to make space for the essentials.” Whether supermarkets turn their backs on the small businesses longer term remains to be seen, but in the short-term small suppliers are seemingly being squeezed out. “We are trying to do the right thing but the centralised, military system is making life very difficult,” says Holden.
Those in the foodservice sector are naturally keen to cling on to as much of their share as they can. The wholesaler Bidfood tweeted on Friday that it is rolling out its delivery and click and collect services to the public, whilst Leon has morphed into a grocery store. This isn’t expected to be an ongoing business model, the chain tweeted. “We are trying to lead a rescue of the foodservice industry, which is currently collapsing, through a new e-commerce platform.”
Many businesses may be closed but the fight for survival continues.