Trends

COVID-19 Impact on the Food and Beverage Industry: Part 1

This is our first piece of content as part of a series of research related to the effects on the F&B industry caused by the COVID-19 pandemic and the resulting economic meltdown. It is primarily for US based audiences.

Firstly, we want to give a huge and heartfelt thank you to all the essential food workers on the frontline for their commitment and courage in the fight against this global health and economic crisis.

Every industry in the entire world has been impacted by COVID-19 in some way. Many industries have been impacted negatively;  hospitality, restaurants, and food service, in particular, are some of the hardest hit. Other industries, like grocery, technology and some sectors of healthcare are booming, but so much so that they too are struggling to keep up with the unprecedented demand.

We keep hearing that this isn’t a food supply problem, millions of tons of food from milk to produce are being wasted because food packers, distributors, butchers, and deliverers of direct to wholesale food products aren’t equipped to sell directly to consumers. From large cuts of primal meats to whole chickens to even commercial-sized rolls of toilet paper, massive supply chains are taking the time to adjust to rapidly changing consumer demand in the marketplace. Problems with the global supply chain affect everything from the procurement of plastic and cardboard takeout containers to the unavailability of toilet paper. 

From industry to consumer, these supply chain problems trickle down and result in consumers not being able to get what they want, where, when and how they want it. This same trickle-down process is also happening in the broader context of society, technology, the environment, the economy, and technology directly affecting consumer purchasing behavior. We’re seeing these behaviors change more rapidly than ever before as the world struggles to adapt to this pandemic. 

But what behaviors, products, staples, brands, decisions, and hacks are they making or turning to under the current COVID umbrella? 

Humans are social animals but with COVID-19 the biggest change that has come about is social distancing! The longer periods of isolation, not only remind us of our physical fragility, but it also undermines our economic security, throws our daily routines upside down and influences how we think, how we relate to others, and what we value.

With restrictions on people moving outside the vicinity of their homes, consumers are seeking new ways to connect such as on Zoom or Houseparty apps – cooking their holiday favorite dishes for Easter and Passover, etc., to eating popcorn and watching a movie together on platforms such as Netflix Party! 

They are also increasingly using digital methods to shop for food, groceries and even toilet paper. Given the uncertainty, they are also preparing for a possible emergency, which means that retailers need to ensure smooth, frictionless, and fast experiences on their ecommerce websites and mobile applications. 

COVID-19 has boosted e-commerce sales, as more and more shoppers stay home during the crisis, and with grocery delivery platforms such as Instacart, Walmart Grocery, and Shipt witnessing dramatic spikes in sales, it has quickly become the hotspot where the biggest long-term impact could occur. 

More and more people are being drawn towards familiar favorites and seeing a return to comfort eating habits since it has become difficult to procure fresh veggies and produce due to social distancing measures. 

The disharmony in the election year and constant media war supporting or attacking the policies of the current administration is adding to the misinformation as well as an uptick in anxiety. 

Dating back to February, the general public was being given conflicting information about the severity of COVID-19, to the point that many people had disregarded the mandates to social distance. You had partisanship of people who were panicking and hoarding and an entire other contingency of people on spring break carrying on like there was nothing wrong and spreading the illness. 

People are in a state of high anxiety, following the death and hospitalization counts and increased media reporting of the escalating number of new cases. We still see a place for CBD products, copaiba, lavender and other essential oils employed by consumers due to their ability to reduce anxiety and boost mood.

People are stress eating carbs, candies, and sweets, stress- baking sweet bread, pancakes, and cookies indicating a rise in sugar consumption and comfort eating. 

Functional foods and ingredients such as probiotics, selenium and dietary antioxidants (vitamins A, E, and C) that are not only a source of mental and physical well-being but also contribute to the prevention and reduction of risk factors for several diseases or enhance certain physiological functions, could see a rise in consumption as well.

Ayurveda and medicinal herbs, spices, roots, ashwagandha, turmeric, elderberry syrup, Indian gooseberry, ginger, and zinc that are purported to help in overall immunity-boosting are flying off shelves.  

Grocery stores are experiencing increasing sales of not just food products but an increase in home consumption of wine and canned spirits. Consumers are finding comfort in alcohol consumption. There have been higher levels of online wine sales than usual from retailers and smaller wineries who promote their options online. Pre- COVID-19 there was a rise in low or no ABV cocktail and beverage consumption. Health-focused beverage elixirs that tout health benefits are still popular, but more as health tonics to ward off illness, rather than as a “happy hour substitution.’ 

In a time of stress and uncertainty, alcohol consumption rises. Restaurants and alcohol delivery services are capitalizing on this trend. State laws in NYC, Denver, and elsewhere have lifted regulations on alcohol delivery as a way to add additional revenue-generating products to struggling retail and restaurant outlets. Restaurants are getting creative, a mom-and-pop food company in  Denver called ‘So Damn Gouda’ is delivering bottles of wine along with the proper pairings of charcuterie and cheese boards directly to people’s homes just in time for 4 PM.

With all that short term increased carb and alcohol consumption comes a longer-term impact of binge behavior; declining mental and physical health and weight gain as people are restricted to their home, away from their preferred fitness classes and routines. This provides brands with the opportunity to create, repackage and co-brand products designed to mitigate and help customers repair any damage that might have been done to their diet and physique. Products that reduce calories, create satiety, and promote spring cleansing could be on track to stave off and mitigate weight gain and depression. 

When looking at plant-based meat, products like Beyond Meat are already available at retail stores and Impossible, which has quickly shifted to supply to groceries rather than food service, are still expensive. These meat analogs are still being purchased though perhaps not at the velocity as they could have been had their prices been lower than meat. This may also be because they have a longer perceived shelf life vs. meat, or because they were experiencing overwhelming benefit from PR over the past year as plant-based diets started to become more popular. 

Though meat analogs seem to be holding their own, meat sales have surged, with shoppers buying fresh meat or fully cooked meat. Though questions about the safety and scarcity are on the rise due to large beef and pork processors closing due to health and safety concerns of employees due to COVID-19 so where does that leave the 50/50 blended meat products? 

During this kind of panic buying, consumers tend to choose what is familiar. Since meat and vegetable patty or sausage combinations are so novel, we believe they will be the last choice for those consumers sticking to what they know. 

The current understanding is that COVID-19 originated in the wet markets of Wuhan, where the trade of exotic animal meat such as pangolins, tigers, foxes, etc. is commercialized – another reason consumers are wary of unknown or unfamiliar foods in general. Global and explorational food experiences may see a dip in popularity, but local sourcing and locavore diet may see an increase in consumption.

Restaurants and other food providers are also reeling from substantial changes resulting from social distancing. Restaurants are rapidly losing their business and it is predicted that over of all restaurants will not succeed in the long term post-COVID-19. Those that remain open now are making a mere 20% of their typical sales via takeout and delivery. Many restaurants are choosing to close down entirely for health and safety reasons of their employees and also because it’s hard to compete in the takeout and delivery space. 

Ghost kitchen concepts, food trucks, and even upscale restaurants are now offering takeout and delivery. Consumers are forgoing takeout and delivery due to the cost and risk of contamination and are cooking at home more than ever before, exploring online recipe channels and chef based recipes that are easy to make, quick, and that requires no expertise in cooking. 

A  push to combat some of the massive amount of single-use plastics and food waste happening now in the supply chain is spurring interest in raising and growing “package less” backyard food. Buying chickens for eggs, seeds, and seedlings for a garden and even increased composting and recycling efforts. 

The zero-waste movement that aims to eliminate the trash output completely in the packaged industries, restaurants, and kitchens – meaning no plastic, no wrappers, no garbage may see a dip due to the outbreak. Brands like Starbucks are becoming conscious about not using reusable containers so as to not spread the disease and instead are moving to disposable plastics that may not be recyclable.  

One in four Americans have either lost their jobs or have had their pay cut with more than 16 million having filed claims for unemployment. Saving money is their top priority right now, which also means, they are buying products that make sense from an economical point of view. 

Consumers will look to save money by buying in bulk and trying cheaper private-label branded offerings. Versatile pantry staples are also on the uptick. Cereal is popular again, and canned fruit, bottled water, dried pasta, dried beans, soups, and snack foods such as popcorn, pretzels are selling fast.

Consumers are looking to stock their pantries buying long shelf-life goods that they can afford to buy a lot of, which means food and beverage brands need to re-think about innovating and creating products that are appealing, copious and inexpensive. 

While dairy sales have been suffering and demand has seen a decline, there has been an uptick in oat-milk and plant-based shelf-stable milk analogs due to its long shelf life.

When it comes to grains, there is expected to be a big impact, with wheat and corn seeing a dip in farming and exports. Soybeans are also expected to see a dip in the coming months. Rice and quinoa have seen a huge increase as staples for the pantry. Ancient Harvest, a company that sells quinoa and quinoa-based products have also reported unprecedented demand.

The larger impact of COVID-19 is yet to be seen and it may be months or even years before the economy settles down. Food and beverage companies will need to take aggressive and decisive steps in order to mitigate the risk of a catastrophic loss from this crisis. They will need to be creative in their approach, for example repackaging in larger multi-serve packages or offering fewer SKUs. 

Brands such as Campbell Soup, Nestlé, Unilever, Tyson Foods, and Mondelez among others, have increased pay for frontline workers or added other benefits such as childcare or covering coronavirus testing to provide some peace of mind due to the pressure on companies to boost output in recent weeks. 

Emerging brands, on the other hand, will need to focus budgets on boosting online sales if they don’t yet have much of a retail presence, and look to ways to support the greater food ecosystem with messages of support and inclusion.

Many food manufacturers have foreign production facilities in China, Italy, and other locations where COVID-19 has hindered the workforce, and in turn the economies. And because the timeline on a meaningful dissipation of the outbreak is so uncertain, manufacturers, distributors, and retailers must prepare to engage in significant innovations in their current approach, by considering redirection to alternative or local sourcing locations, and an increased focus on inventory management. 

Meeting customers’ needs and expectations at a time like this is imperative, and this could either make or break your brand, which is why F&B companies need to focus on shifting to online (if they haven’t already) and create more opportunities to drive traffic to their website, thereby selling directly to the consumer. It is also the time to assess their marketing budgets, how they’d like to create brand messages and carefully consider what channels they should invest in. 

When it comes to innovation, brands should focus on creating and innovating products that are appealing, offer familiarity and comfort and that is inexpensive. Creating products that create satiety and promote spring cleansing could also prove beneficial for consumers at this point. Being creative by repackaging in larger multi-serve packages or offering fewer SKUs will be the need of the hour.

It’s fair to say that this situation is still evolving and so our goal is to continue to closely monitor new data and present our findings. Over the coming months we will be releasing a detailed analysis, and we will be updating our 2021 Food Trends report that we originally published in Q4 2019.

Co-Authored by Elizabeth Moskow – Leading Trendologist and Advisor at Spoonshot

Photo by John Cameron

Before you go, tell us how insightful was this article

Spread the love

Leave a Reply

Your email address will not be published. Required fields are marked *