Governments across the world have imposed restrictions on daily life in an attempt to stop an overwhelming spread of Covid-19. The hospitality sector, already working with paper-thin margins, is facing unprecedented precarity
The global foodservice industry is facing profound damage as the Covid-19 pandemic disrupts daily life. Chinese hospitality outlets have already weathered much of the storm, but took heavy losses: giant operators such as Starbucks closed up to half of its stores in China for a month.
As the disease spreads west and government intervention in Europe and in the US becomes increasingly severe, the industry is lobbying for support.
Retail and FMCG rush to meet demand
Some of the most visible disruption at this stage is in supermarkets. Across the world, consumer stockpiling and panic buying has meant empty shelves minutes after opening. The British Retail Consortium (BRC) has written an open letter – signed by almost every major British supermarket – that warns the public of the dangers of panic-buying. Thus far, it’s been ignored by many consumers.
Retailers have had to scramble to manage this behaviour. In the UK, many major chains are following an example set by a West Belfast branch of Iceland by keeping the first business hours of each day open just to elderly and vulnerable customers.
Supermarkets have sophisticated planning systems, automatically adjusting to seasonal spikes. “The one type of demand that these systems really don’t like is unpredicted spikes,” says Jan Godsell, professor of operations and supply chain at the University of Warwick. “The problem at the moment is that whilst there is stock upstream in the supply chain, it is hard for retailers to replenish it to shelf at the rate consumers are taking it.”
Many chains are rationing the sale of essential products, which Godsell says is a responsible reaction that will “improve availability of products to all, and encourage everyone to buy at the rate that they consume.”
Food banks are needed now more than ever, Godsell says, and donations have fallen as consumers stockpile. “Perhaps it is time to consider how we can move food banks online too,” she says, “with digital food bank vouchers enabling the most vulnerable to get direct supply from a retailer.”
Small businesses are on the frontline
What began as a trickle has turned into the perfect storm. Chinese and South Asian restaurants across the world were early victims, as prejudice drove customers unnecessarily away. London’s Chinatown reportedly lost around half of its trade, which naturally had knock-on implications for their supply chains.
But matters have widened, and worsened.
Borders have closed, stemming a tide of tourist trade. In France, in Italy and in Spain, restaurants and cafés have been ordered shut and customers told to stay at home. As French commentators noted last week, this is entirely unprecedented – not even during German occupation did restaurants in France close. President Macron has pledged state aid for those now unable to work.
Until Friday evening the UK government’s advice was for customers to stay away from bars and restaurants – but it had not ordered venues to close. Andrew Bennet MBE, national chair of the craft guild of chefs, called for clarity on a “half measure” that left businesses without customers but unable to claim insurance.
“This lack of clear guidance could spell the death knell for our industry,” he said.
New York-based consultant Arlene Spiegel FCSI, president of Arlene Spiegel and Associates, says that businesses should at the very least “check the language in their business interruption policy. They need to file claims as soon as possible. They need to send a written notice to their landlords and work on a ‘rent relief’ agreement.”
Restaurants, and all foodservice operations, “must immediately review their cash flow status and begin to cut all costs,” says Karen Malody FCSI, principal of Culinary Options. “As far as the menu is concerned, strategic reduction is essential. Depending on whether cash flow allows for an operation to develop innovative rear-guard actions, such as curb side, take out and even free delivery, the messages of altered services must readily get out to the customer base.
“Just because people are working from home, often with children in tow to boot, it does not mean that they have more time to cook. So delivery and curbside are the best options. Many people do not want to risk stepping inside an operation to pick food up themselves. What’s true is this,” says Malody. “Nearly all foodservice businesses are now operating as ghost kitchens.”
Hospitality needs rapid intervention
For all that small businesses are trying to cut costs, industry leaders across the world are calling on their respective governments for vital help on an unprecedented scale.
The UK government has now announced a one-year business rates holiday and launched a £330bn loan fund in an attempt to soften the blow. As of Friday, it has also ordered the closure of bars, restaurants, and pubs (although at present they can operate as hot food takeaways). But the industry is calling for the government to go further.
Jonathan Downey, owner of Milk and Honey and the founder of Street Feast, has started a campaign for a longer ‘time to pay’ window for VAT, a six-month lease forfeiture moratorium to protect businesses from being evicted from their premises, an employee rescue plan, and a six-month debt enforcement moratorium. Trade body UK Hospitality estimates that in two weeks, between 200,000 and 250,000 people have lost their jobs in the industry. CEO Kate Nicholls has issued a plea to government, saying that “in excess of one million jobs are now on the line.”
The sheer scale of what is required to keep the global hospitality industry afloat is staggering. In the US, hospitality is the second-largest private sector employer. The National Restaurant Association (NRA) has sent a frank letter to the White House, calling for “aggressive and immediate action” to fight what the NRA anticipates will be a decline in sales of $225bn and a loss of between five and seven million jobs.
Businesses are fighting and adapting
“This major event is a wakeup call for everyone in the hospitality industry,” Spiegel says. “The way we receive, store, prepare and serve food will never be the same.” Innovative and tamperproof packaging is already being developed, she says, and transportation vehicles will need to be built with sanitisation in mind from now on.
The crisis will prompt huge changes to the way the industry operates in the long term, says Malody. “Some of us are already working on think tanks, webinars, and strategies for the future. We must. With the attempt to not totally panic and remain optimistic, we owe it to our industry to be forward thinkers.”
“As consultants, we must be at the forefront of solutions,” Malody says.
As Spiegel says, “Our industry should be commended for stepping up to volunteer to feed the front-line health care workers and vulnerable people in the communities where they operate. They donate food, staff and even their facilities to support the recovery effort.”
Despite everything, a huge number of gestures of extreme kindness and generosity across the world have come from this sector.