Impact of the 2019–20 coronavirus pandemic on the food industry

The 2019–20 coronavirus pandemic affects the global food industry as governments close down restaurants and bars to slow the spread of the virus. Across the world, restaurants' daily traffic dropped precipitously compared to the same period in 2019.[1] Closures of restaurants caused a ripple effect among related industries such as food production, liquor, wine, and beer production, food and beverage shipping, fishing, and farming.[2][3][4]

The issues were particularly disruptive in industrialized areas where large proportions of entire categories of food are typically imported using just-in-time logistics.

Global impactEdit

Global food security expert Peter Alexander of the University of Edinburgh said that the free-market, just-in-time logistical systems common in industrialized areas are very good at dealing with disruptions in one place or sudden shortages of one commodity but are more vulnerable to systemic shock because there is no slack in the system and no supply reserves to fall back on.[4]

In many places there was panic buying with resulting shortages. There were some supply chain disruptions for some products; for instance, many hand pumps for hand sanitizer bottles are imported into the US from China and were in shorter supply.[5] For most food products in the US normal resupply happened, but panic buying causing empty shelves contributed to consumers' impulse to stock up and hoard.[6] A US food retail trade group advised retailers to accelerate ordering and consider rationing in order to prevent empty shelves.[6] Food retailers were "among the most affected by the coronavirus, but one of the few businesses that might actually benefit," at least in the short term according to Cheddar.[7] Some areas saw price gouging.[5]

AustraliaEdit

In Melbourne, city officials announced a relief package for the Queen Victoria Market.[8] According to Eater, petitions were circulating urging the state government to rescue the industry.[8]

BrazilEdit

On March 23, 2020, the Brazilian Association of Bars and Restaurants (Abrasel) reported that more than 3 million workers could lose their jobs over the next 40 days.[8]

ChinaEdit

Starbucks, KFC, Pizza Hut, and McDonald's had closed restaurants in Wuhan or Hubei by January 27.[9] Because the closings came just before the Lunar New Year celebrations, they came "at probably the worst time for China," according to Jude Blanchette, head of China studies at the Center for Strategic and International Studies.[9] The Lunar New Year as of 2020 was considered China's single most important economic event, with 2019 spending of US$150 billion.[9] The service sector in 2020 represented 52% of China's economy.[9]

By March 24 Starbucks had reopened 95% of the 2000 restaurants that had closed, including some in Wuhan.[10][11] Starbucks announced it expected a $400 million or more in lowered revenues for the fiscal second quarter because of the China closures.[10]

FranceEdit

According to Eater, "The whole French food chain may become less individual and more corporate as only big restaurant groups like Alain Ducasse and major industrial food producers survive."[8]

GermanyEdit

Fast casual chain Vapiano announced March 20 that it was insolvent and might have to declare bankruptcy, asking the German government for help.[12]

HungaryEdit

According to Eater, restaurants in Budapest depend heavily on tourism, and will likely not survive.[8]

IndiaEdit

On March 23, 2020, the National Restaurants Association of India asked the Finance Ministry for a bailout for the industry. The economic value of the industry is estimated at ₹4,23,865 crore.[13]

ItalyEdit

According to Eater, much of Italy's artisanal food production depends heavily on tourism, both directly and indirectly via restaurants, and may not survive.[8]

New ZealandEdit

In New Zealand on March 25, 2020 butcher shops were declared non-essential businesses by the government.[14] According to the 2017 version of the New Zealand Pandemic Plan, Retail Meat New Zealand and other organizations will coordinate with the government to maintain essential food supplies to point of sale.[15]

PhilippinesEdit

Select outlets of fast food and restaurant chains across Luzon remained operational during the Luzon enhanced community quarantine. The outlets that remained open continue to accept take out and delivery orders. Food delivery services such as GrabFood and FoodPanda temporarily halted but eventually resumed operations in Luzon during the quarantine period.[16]

SwedenEdit

According to Eater, in the restaurant industry in Sweden "there is a feeling of utter despair" but also high levels of camaraderie among restaurateurs, who are trying out new ideas in an attempt to survive.[8]

United KingdomEdit

UK Prime Minister Boris Johnson on March 16 recommended the public stay away from bars, clubs, and restaurants.[17] The restaurant industry is the UK's third-largest employer.[17] A relief package for workers was announced March 20 but funds would not be available until the end of April.[17]

According to The Guardian, restaurants "scrambled to reinvent themselves" by pivoting their business models to adapt to the realities of government restrictions.[18] Restaurants became "takeaways, bottle shops, delicatessens. Others [were] selling hampers, fresh meal-kits or offering cookery courses."[18]

On March 23, McDonald's closed all restaurants in the UK and Ireland.[19]

On March 24, Greggs announced that it would close all of its around 2,000 stores. This is despite having converted into a takeaway shop following the call for all restaurants and cafes to close.[20]

Nearly half of the UK food supply is imported.[4]

Multiple suppliers to restaurants switched to direct-to-consumer models.[21]

United StatesEdit

 
Sign noting the closure of Screen Door in Portland, Oregon, because of the pandemic

The 2020 coronavirus pandemic impacted the US restaurant industry via government closures, resulting in layoffs of workers and loss of income for restaurants and owners.[22] It impacted retail groceries with panic buying noted as early as March 2 in some areas.[6]

According to NPR's Yuki Noguchi, "Just about every restaurant nationwide has been hit hard at once, making this disaster unique."[22] Industry experts warned that many small businesses would not be able to recover from closures without help from the government.[3] Impact on the greater economy was as of March 17 expected to be large as Americans have in recent years spent more at restaurants than at grocery stores.[3] Lester Jones, chief economist of the National Beer Wholesalers Association, said “This is a very significant and traumatic event for the restaurants, bars, taverns and the industry in general."[3] Chris Swonger, CED of the Distilled Spirits Council of the United States, said "The impact on our industry is going to be really, really difficult. It's going to be a real challenge economically for not only the distillers of the United States, but certainly small businesses, restaurants, and bars."[3] Sean Kennedy of the National Restaurant Association on March 19 called the closures a "perfect storm" for the industry, saying the three primary challenges for restaurateurs are short-term access to cash, medium and long-term access to credit, and tax relief when the closures are ended.[23] An investor in two New York City restaurants told the New York Post:[24]

This situation is apocalyptic for the restaurant business. How sad would the city be if the only places that survived were chains? It makes me depressed to even think about it.”

— Mark Amadei

The New York Times on March 20 reported that industry analysts were predicting that two-thirds of restaurants would not survive, and as many as 75% of independents.[25] On March 26, 11 percent of restaurants anticipated permanently closing within the next 30 days.[26]

The US restaurant industry was projected at $899 billion in sales for 2020 by the National Restaurant Association, the main trade association for the industry in the United States.[27][28] An estimated 99% of companies in the industry are family-owned small businesses with fewer than 50 employees.[3] The industry as a whole as of February 2020 employed more than 15 million people, representing 10% of the workforce directly.[27] It is the nation's second largest private employer and the third largest employer overall.[22][29] It indirectly employed close to another 10% when dependent businesses such as food producers, trucking, and delivery services were factored in, according to Ohio restaurateur Britney Ruby Miller.[27] In Delaware and Massachusetts, one in ten workers is employed in the restaurant industry.[30][31] In North Carolina, 11% of workers are employed by the industry.[32] In Texas, 12% of workers were employed by the industry as of 2016.[33]

Forbes on March 19 estimated the job losses in the restaurant industry to be in the millions.[28] The National Restaurant Association estimated probable job losses to be five to seven million.[28]

Industry experts on March 18 forecasted $225 billion in direct losses and a full economic impact of $675 billion because of additional revenues generated elsewhere in the economy when customers patronize restaurants.[34]

TimelineEdit

In a February 28 story about how restaurants could prepare for the possibility of a pandemic, Restaurant Business quoted Roslyn Stone, COO of a firm that provides crisis response for restaurants, who said "The prospect of a global pandemic has already put a spotlight on restaurants and the tendency for employees to come in sick. Though more chains have started giving employees sick time as the supply of labor has tightened, it’s increasingly important for companies to change their culture to ensure employees aren't working while sick."[35]

A March 3 story in Nation's Restaurant News characterized the industry as being braced for impact from the virus.[36]

On Sunday, March 15, Ohio Governor Mike DeWine and Ohio Health Department director Amy Acton ordered the closure of all bars and restaurants to help slow the spread of the virus, saying the government "encouraged restaurants to offer carryout or delivery service, but they would not be allowed to have people congregating in the businesses."[37][38][39] DeWine said he'd made the decision "after being contacted by citizens around the state sharing photos and stories of crowded bars Saturday night, despite warnings of social distancing and the governor’s edict limiting crowds to no larger than 100 people."[40] The city of Los Angeles closed all restaurants and bars later that evening and New York City announced all restaurants and bars would close by the following Tuesday, both cities also allowing exceptions for takeout and delivery.[41]

The next day, Illinois, New Jersey, New York state, Connecticut, Kentucky, Pennsylvania, Maryland and Washington DC followed suit.[37][42] On March 18, the National Restaurant Association asked the federal government to provide relief to restaurants and restaurant workers.[43] By March 21, at least 25 states had closed restaurants and bars.[44] By March 22, the number had risen to 38.[45] In other states, major cities had closed bars and restaurants to sit-down diners and limited to takeout orders and delivery.[46]

Industry fallout and reactionsEdit

The partial rather than full closings of restaurants meant that the closings failed to trigger business interruption insurance for many restaurants;[22] other policies had clauses excluding coverage in the case of epidemics, action by civil authority, or requiring restaurants to have physical damage to property.[47] Many employees were laid off, and more employees lacked sick leave in the sector compared to similar sectors.[48][49] The New York Times characterized the closures as affecting "all strata of the industry, from the owners and their celebrity chefs to the waiters and waitresses, bar-backs and busboys, who effectively are facing layoffs and may be unable to pay their rent."[50]

Government responseEdit

Multiple state and local governments offered relief packages for workers and restaurants. US President Trump met via phone on March 19 with leaders of chain restaurant companies, but no independent restaurateurs were included.[51] Participants included Domino's Pizza, McDonald's, Wendy's, Yum Brands and Darden Restaurants and representatives from the International Franchise Association and the National Retail Federation.[3]

ReferencesEdit

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