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Food Industry, Adapting to the New Normal

The COVID-19 crisis abruptly and dramatically disrupted the food-service industry. The closing of schools and restaurants as well as the decline in travel seems to have had sudden and substantial impact on nearly all aspects of the industry. Meghan Cieslak of the International Foodservice Distribution Association estimates that across the industry, there will be a decline of around 35%, or $110 billion dollars of sales, by the end of 2020.

Finding New Opportunities

While business has been down, many distributors have gotten creative and found ways to adjust to meet new demands and customer needs amidst the pandemic. One such adjustment is the creation of “restaurant marketplaces,” where restaurants sell goods directly to customers. As some consumers have struggled to get access to products and have sought opportunities to avoid crowded stores, many restaurants have created marketplaces to meet these needs. Through pop-up shops in dining rooms and online sales, many restaurants have found that marketplaces are a good way to increase revenue.

Sysco has worked with customers to help create these marketplaces and reports that over 16,000 of its restaurant customers have set up some type of marketplace. Helping customers do this has enabled Sysco to keep and even grow its customers. In addition, Sysco says that it’s worked with restaurant customers to set up outdoor dining areas, develop delivery options, create new websites and takeout menus, and supply to-go containers. Further, the wholesaler has worked closely with customers to provide cleaning and sanitizing supplies as well as personal protective equipment. As a result of Sysco’s efforts to adapt to the changing needs in the industry, the company has created about $1 billion in new business this year.

Demand for Cold Storage

Another change to the industry due in part to COVID-19 is an increased demand for cold storage. Prior to the pandemic, there seemed to be a need for more cold storage space, but with the rise in direct-to-customer sales and e-commerce, the demand seems to have risen. In fact, an April report from CBRE estimates that an additional 75 to 100 million square feet of cooler and freezer space is needed.

To help meet this need, many customers are working with third-party logistics companies that can provide comprehensive supply-chain solutions. This was a shift that began prior to the current crisis but has become more prevalent amidst it. As restaurants and distributors are working to respond to changing customer needs, they seem to be relying more heavily on logistics companies to help them make the necessary adjustments.

While the pandemic has been difficult for the foodservice industry, many in the industry have creatively adjusted to the new demands and challenges. While it’s unclear whether some of the changes to the industry will be long-term, many believe that there will be a long-term increase in demand for direct-to-consumer and e-commerce, possibly resulting in lasting shifts to the industry.

To learn more about changes and opportunities in the foodservice industry, contact our team of logistics experts.

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