From crisis to opportunity

New business models, new proteins, new carbon commitments and new regulations. Foodservice companies will need more of the agility and responsibility they showed during the pandemic as they head into 2021, says Nick Hughes.

A New Year brings new hope and, of course, a flurry of predictions for the key issues and trends set to define the next 12 months. This year, however, those businesses able to gaze into their crystal balls are in a privileged position. For many in the foodservice and hospitality sector simply getting through the first quarter of the New Year with a viable business will be success enough.

Addressing December’s Westminster Forum on priorities for the food, drink and hospitality industry, UKHospitality chief executive Kate Nicholls said a sector that went into 2020 in robust shape now finds itself in the middle of an “existential crisis”.

Over 600,000 jobs have been lost since February with many thousands more at risk as covid-19 continues to defy efforts to contain its spread. Nicholls warned that the government’s tier system had made the vast majority of outlets unprofitable and unviable, adding that April would be a “bloodbath” without continued government support.

All the while social restrictions remain in place the ripple effects will be felt along the supply chain. Suppliers and distributors to the out of home sector have been denied both a market for their goods and a level of state support comparable to that afforded to pubs and restaurants.

In this context, contraction of the sector seems inevitable with many experts bearish about the prospects of hospitality ever returning to its pre-covid size. And that’s before the impact of Brexit on food supply chains is added to the equation.

Yet the sector is also remarkably resilient. Nicholls noted how “if you lift restrictions one day customers come out the next day and you need to create a job on day three in order to deliver [your service]”.

New business models are already emerging. Many companies will not only survive the pandemic, they will emerge better placed to capitalise on the societal and technological trends that were already shaping the future of work and leisure before covid-19 struck.

Contract caterers have begun pivoting towards new, technology-driven service models with takeaway and delivery at their core.

High street chains like Pret with large legacy store estates are looking at new ways to generate revenues including the launch of retail lines and subscription services.

Businesses making big changes at speed will need to be mindful of shifting sustainability impacts – a move to centralised production and takeaway and delivery, for instance, may reduce food waste but increase the use of single-use plastic.

Which brings us to another trend that seems certain to dominate 2021 – the drive to become a net zero business. 2020 was due to be the year that flesh was put on the bone of national commitments made in the Paris agreement to keep global warming to well below 2C. Covid-19 put paid to that, but this has only served to make the revised COP26 in Glasgow in November an even more urgent and critical event.

The second half of 2020 saw a flurry of net zero commitments from the likes of Nestlé and Coca Cola European Partners, while Brewdog became the world’s first carbon negative beer business. Pressure will quickly mount on other companies, including major foodservice players, to follow suit, while at the same time scrutiny of new commitments will grow as experts pick apart their scope and rigour.

Declaring an ambition to be a net zero business is one thing; setting out a detailed roadmap to get there complete with milestone targets and transparent reporting is quite another. Environmental NGOs will want to see scope 3 emissions (the indirect emissions from supply chains) addressed and offsetting (whereby companies compensate for their own emissions by funding an equivalent saving elsewhere, for instance by planting new trees) kept to a bare minimum. Indeed, the detail behind net zero pledges will tell us much about which organisations are prepared to reshape their entire approach to doing business so that they tread lightly on the planet, and which intend to apply a green gloss of paint to their existing, unsustainable business models.   

Business actions will continue to be shaped by government priorities. The current administration has talked a good game about facilitating a green industrial revolution but detailed policies remain thin on the ground. Packaging will inevitably remain a key sustainability issue with plastic (rightly or wrongly) maintaining its status as public enemy number one. On that front, 2020 was perhaps understandably a year of snail-like progress on thrashing out the details of key policies like a deposit return scheme (DRS), extended producer responsibility and a plastics tax. Scotland has delayed the introduction of its DRS until July 2022 while The Grocer reports that a DRS in England has now been pushed back to 2024. Meanwhile, those waiting for greater clarity on standards for biodegradable, compostable and bio-based plastics have been kept in the dark now for 14 months and counting.

Uncertainty reigns too over the future of nutrition policy with Public Health England due to be wound down in the spring. One of its final acts was to deliver a wholly underwhelming report on sugar reduction which showed negligible progress in the past three years. As a result, and following the success of the soft drinks industry levy, pressure from campaigners for reformulation targets to be made mandatory can be expected to grow.

There is also increasing appetite (based on conversations at Footprint’s recent Responsible Business Recovery Forum on education) among businesses for stronger rules on public sector food procurement that move beyond the current voluntary, piecemeal approach. Public procurement is set to be a key issue addressed in part two of the national food strategy which is due in the spring and promises to spell out a vision for a healthy, sustainable food system. Whether ministers subscribe to that same vision remains to be seen.

Businesses, meanwhile, will continue to respond to changing dietary habits which are increasingly being driven by concerns around health and sustainability. Plant-based eating is once again set to be a defining trend with the majority of major brands, including fast-food giants, adding new vegan and vegetarian products to their menus over the past 12 months.

The recent recommendation from the climate change committee that meat and dairy consumption should fall by 20% by 2035 to align with a net zero ambition is set to strengthen the case for adding more vegetables and grains onto menus; and we can also expect new evidence to emerge on the impacts of different types of meat and dairy production systems and the degree to which they can still form part of a sustainable food system. Producers of processed meat alternatives, meanwhile, should prepare for greater scrutiny of the healthiness of their products amid evidence of some dubious nutritional credentials. Much is also expected of algae, insects and cellular meat as alternatives to traditional livestock proteins – but these will also need to be scrutinised. Those that can afford convenience treats are the lucky ones. The pandemic, lest we forget, has also seen a surge in people experiencing food insecurity. The need for companies to be a force for good in the communities they serve will continue as the impact of a deep and prolonged recession bites. The fact that foodservice businesses, denied a market for their products, almost universally found innovative ways to get surplus food to those in need at the start of lockdown speaks volumes about both the agility and responsibility of the sector. Those qualities will be needed in bucket loads as businesses prepare to face the unprecedented challenges 2021 has in store.

 

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