How Restaurants & Caterers Can Prevent Coronavirus Food Shortages And Stay Afloat.
A strategy to get people food when the markets are empty, and to keep restaurants and caterers in business.
Summary
As we are seeing in the U.K. and Italy, Coronavirus will bring unprecedented disruption to the U.S. food industry resulting in food shortages, and with that will come several risks to the public, including families going without food, unnecessary increased exposure to the virus as people crowd stores, and violence as people fight for food. We are seeing U.S. supermarket shortages and violence already and most of the country isn’t even taking this seriously yet. It’s about to get a lot worse for people and restaurants, but with a few small changes by restaurants and caterers, we can keep people safe and fed, and keep restaurants in business.
Why Supermarkets Will Likely Have Further Shortages…
Supermarket supply chains are already getting backed up, and most people in the country aren’t taking this seriously yet. As the virus grows exponentially over the next 1–3 weeks, the effects below will grow exponentially as well. If supermarket leadership reflects anything like the general public, then at least some of them are underestimating the coming impact as the majority of people shift to a hoarding mindset and raid markets to stock up.
The grocery supply chains will be taking a double hit: First, all restaurant demand will switch to grocery demand overnight, overwhelming the grocery supply. According to a Zagat survey, Americans eat out on average 4.9 times per week, which translates into approximately 23.8% of meals (5/21 meals per week). Switching this to supermarkets results in a 31.2% increase in grocery demand, though in cities, where people eat out more, this will be much higher.
This first increase doesn’t sound like much, but the problem is that most homes likely only normally keep 1–2 weeks of food in supply, and we should expect to see people looking to buy 3–4 weeks of supply, or more. This translates into an additional doubling of demand, for a total demand increase of 162.5%, or ~3.44x regular demand. This demand shock will then be multiplied in the supply chain by something called the “bullwhip” effect, which you can learn about here. If you happen to work in the grocery supply chain industry, please comment on this so readers can learn more about how easy or difficult it will be for food companies to manage these shocks.
The above analysis also doesn’t factor in the potential impact of workers in food manufacturing facilities getting Coronavirus and how that will stall food production. Read more about that here.
While Restaurants Will Be Empty…
Opentable data shows that restaurant demand is already down 32% and decreasing every day. No one wants to be around other people right now, or touching utensils and food prepared by restaurant workers. They will also be reluctant to order delivery as they will still be concerned about who prepared their food and whether or not that person was exposed to the virus. Ultimately, restaurants may be forced to close as they have in Italy. Additionally, all events are being cancelled, so caterers will also be sitting idle with no business.
And The Extra Food Supply Will Be Sitting In The Wrong Channel
This means that restaurants and food distributors will wind up with tons of food on their shelves and in their freezers, with no one to buy it. Manufacturers will respond to the shift in channel demand and be shipping all of their product to supermarkets, but there will still be a bunch of food inventory sitting with restaurant distributors and wholesalers that is already there.
Much of this food is actually not packaged for consumer sale and it often comes in large sizes, such as #10 Cans (109 oz.) or 50 lb. bags of flour. Moreover, many restaurant distributors specialize and don’t sell to supermarkets. To address the grocery shortage, we need to move this product to the consumer and also find a way to generate revenue for restaurants.
A Solution
Restaurants and caterers should change their model in the short term and resell packaged supplies that they get from distributors in three (3) forms:
Form 1: These should be packaged foods in cans, cardboard, or plastic (I know, it’s terrible, but a necessary evil in the short term) that can be sold as-is in large packages (like Costco) or broken down into smaller (prepackaged) portions for consumers and repackaged in plastic, jars, or other materials that are easy to wipe clean. This means reselling pasta, rice, potatoes, packages of frozen chicken, veggies, etc. that restaurants would buy from their distributors and then sell directly to the consumer. This should be done with a transparent and reasonable markup (e.g. 10%) that is communicated clearly to consumers so that the restaurant can pay workers and stay open. People will understand as long as your are upfront and not gouging.
Form 2: Restaurants and caterers can prepare and cook foods or individual meals if they are in plastic and can be wiped down by the consumer and then heated at home. These could be prepared meals that are fully enclosed, but people will likely not want to eat a salad, sandwich, or other cold items prepared by a person who could have been exposed.
Form 3: You could combine items from 1 and 2 to prepare “1-week” meal bundles for families of different sizes. It might include 3 lbs of pasta sauce, oatmeal, soups, veggies, tuna, etc — a set menu for a week. There might a vegetarian option, etc.
Restaurants are already using online delivery services like Postmates, Doordash, etc, and they could just change their online menu to add these new public safety meal bundles. Otherwise, people could order and pay via phone or online directly with the restaurant or catering compaany, and then pick up their orders outside the restaurant from their car.
Restaurants and caterers could message to the local community that they are doing this via Nextdoor, Craigslist, Twitter, Facebook, etc and word will spread fast. They will keep revenue coming in, be able to pay their employees, and help shift food from the B2B supply chain to the consumer supply chain, as people will need it.
As restaurant traffic continues to go down and catering demand dries up, they will have nothing to lose in trying this. I am already working with one neighborhood restaurant to implement this in our area, and I will be calling others. Please share with restaurant owners in your area. Thanks.
