The Food and Beverage Industry in the Lockdown Economy

Article by Kelly Chen

When COVID-19 struck the global food and beverage industry in March 2020, many restaurants faced various hardships due to the required closedown. Dine-in became impossible because it is not easy to keep enough social distancing. The disrupted supply chain and the quickly deteriorated economy made things even worse. However, because food and beverage are essential, this industry is gradually recovering.

Herein, thirty interviews including three follow-ups of small business owners from thirteen countries, conducted by Lockdown Economy from June 2020 to April 2021, are reviewed. Among the twenty-seven businesses interviewed, twenty were opened years before the pandemic, while seven were opened right before or during the pandemic. The analysis below summarizes the different strategies they used to adapt to the pandemic.

Creating new products

The products they are selling vary, and many already have their own niches in the market, such as organic, vegan, low sugar, artisanal, halal, and cannabis-derived (CBD), presented and well-branded. During the pandemic, some chose to keep developing new fresh, tasty, healthy menus with assured cleanness to ease the safety concern. Others tried to develop new products to meet the new normal. For example, Jill Kuehler’s distillery from the USA made hand sanitizer and developed a fresh mix program for canned cocktails. Graeme Fox from the UK started a cook-along business via Zoom to provide social breaks for friends while cooking, eating and talking together.

Switching business model

During the lockdown, many companies that previously did wholesale or catering business shifted to retail because of the cancellation of big events. The B2C model requires intensive and timely communication with individual customers. This can be a challenge, even for these traditional retailing companies, because of the stress everyone is enduring in their life. Some people also tend to be impatient for many reasons such as delayed delivery which is common these days. Heidi Ehlers highlighted the importance of open communication with customers and employees. Close communication with customers is particularly important these days in order to accurately understand customer needs, to keep customers interested in your products and services, and, thus, secure regular customers.

Digitizing promotion

Many interviewees mentioned the increased use of social media and/or their own homepages for promotion. Some used local influencers to increase the company’s visibility (Karen Ertrachter). This is especially anticipated because in-person interaction is not easy and efficient anymore. These social media platforms are not necessarily big ones; because many businesses are targeting local customers due to travel restrictions, micro social media marketing focused on community-based advertising becomes the focus.

Adapting to new consumer behaviors

To respond to the desire for quick, contactless, and safe services, online order has been predominantly adopted. Pre-order and regular (reoccurring) orders have become good options. This has actually increased the efficiency of business conduct. As in-house service is not practical, curb-site delivery/pick-up, home-delivery, and drive-through have become the major means to continue the business. While outsourcing courier food delivery services is popular, many companies chose to build their own delivery teams to lower the cost. In addition, companies are more careful about the safety of their products. Besides following requirements by the government to ensure that employees who prepare the food are healthy, it is expected that products are not contaminated during the delivery. For example, Mich Oliva, the owner of Sugar High Bakery from the Philippines, sealed all the boxes and trays for delivery and made sure that all products are sanitized.

Cost control and supply chain security

While layoff may be inevitable, there are many other ways to control cost such as sharing kitchens (Karen Ertrachter) to lower rental cost, transforming to digital management to improve efficiency, and optimizing the production procedure to avoid waste. This is very important because customers are especially sensitive to price increase during the pandemic. In addition, supply chain disruption is a common problem during the pandemic. Due to the limited supply, prices usually increase, and the delivery time can be much longer than before. It is therefore very critical to plan ahead (Sofia Pinzon and Mich Oliva) and communicate well with providers (Heidi Ehlers) to secure the supplies and make any appropriate adjustments when necessary (Simran Makkar and Kamna Chaudhary).

In summary

There are some obvious changes occurring in this industry, especially the digital transformation. Many of the interviewees expressed their eagerness to get help with digital skills to run their business. In terms of preparation for the post-pandemic, one needs to try to predict any changes that might be long-term. For example, it is envisioned that a restaurant of the future may have an expanded kitchen area and a smaller dine-in area with more drive-through, takeout, and direct delivery options.

The pandemic may also end up creating a new format of business. For example, in a virtual bar, Maria Haddad, the owner of Confined Cocktail from Lebanon would chat with customers about what kind of cocktail to try as well as how they have been for the day. This apparently opens up a new market for people who do not have the time to go to a physical bar and expands the capacity a bartender can serve at one time.

While it is not easy to predict the new normal post-pandemic, let’s keep our eyes open and evolve with the trend. At least it is obvious that the food and beverage industry is recovering; some interviewees have even already started planning for expansion. While financing is still not easy due to the pandemic-related uncertainties, these concerns may soon be eased with the increasingly available vaccines.

Let’s all wish for the best.

https://challenge.lockdowneconomy.org/

The UN-registered nonprofit social initiative that helps small businesses and self-employed professionals to overcome the challenges of the pandemic.