Covid-19 and how it will transform the food industry

Published in

Digital Literacy for Decision Makers @ Columbia B-School

5 min readApr 6, 2020

December 31st, 2019 and the Chinese authorities inform the World Health Organization about a group of 41 patients suffering from a mysterious pneumonia. This was the beginning of the novel coronavirus also known as covid-19. February 29th, 2020 and US informs about the first death on US soil[1]. This would probably the first big event transforming the way we are living until now. As a measure to try to stop the spread of the covid-19, Governor Cuomo signed PAUSE (Policies Assure Uniform Safety Everyone) on march 20, 2020. The Governor also announced a 90-day moratorium on any residential or commercial evictions[2].

If you have been in New York City you might have noticed the many number of restaurants, there are approximately 24.000 restaurants in NYC and according to the United States Census, approximately 8.4 million people live in New York City[3]. In Manhattan the number of restaurants is 10.000 and with Manhattan having a population of approximately 1.6 million people, that leaves it as one of the places in the world with the highest number of restaurants per capita.

After the covid-19 arrival to the US and the announcement made by governor Cuomo, people could no longer go to restaurants and had to transform the way they would eat on a daily basis as a response to the new scenario, so food delivery has been seeing a rise since these changes happened. Some restaurants actually are thriving with this new scenario. Examples of this are Papa John’s or Domino’s Pizza, which already have an infrastructure that allows them to succeed in a delivery format[4].

With people not having the opportunity to eat at a restaurant, they would either start cooking themselves or will take the best delivery alternatives. This means that restaurants besides struggling with having to develop a cost-effective delivery system will have to provide delivery experiences that add more value than cooking at home. Having this capacity is something that restaurants will either have to develop or will die before the covid-19 wave has passes. A restaurant that is currently struggling with these effects is Shake Shack, which has seen how their sales have gone down 70% and has also laid off 20% of the staff at its corporate headquarters[5].

The current scenario has brought new challenges to restaurants, but has also reinforced the bets of other companies that had developed an infrastructure that is made for situations like this one. Examples of these food delivery companies such as Grubhub, Blue Apron and Uber Eats. All of these companies have seen an increasing on their stock sales since the novel coronavirus struck the world.[6]

In order to be able to provide a good food delivery experience, restaurants will have to invest in developing the infrastructure and production skills that would allow this to happen. As mentioned before, most of the restaurants don’t have the infrastructure and have been conceived to deliver at store experiences. One part of the solution will have to do with taking the orders and provide an environment that customers enjoy when deciding what they will eat. Food delivery companies have been pretty successful in allowing this to happen, but there is yet a lot that can be made so that restaurants find this proposal attractive enough to have it as a sales strategy in the long term.

Restaurants are currently either incorporating themselves to popular food delivery apps such as Grubhub, Uber Eats, DoorDash, and Seamless among others or are taking orders using old fashioned strategies such as taking orders by phone.[7] The latter one clearly has problems in managing a number of orders big enough so that the restaurants generate revenues that are enough to cover their costs. Another alternative is take-outs, which clearly has a cost on the experience of customers for having to pick up their orders as a way to reduce total purchase cost. This is an alternative that could be good for price sensitive customers but doesn’t seem to be an alternative that adds a too much value in the long term.

Source: https://www.icoderzsolutions.com/

Finally, it seems that the alternative that currently offers more value to restaurants is joining food delivery apps at the expense of the cost of the service fee that these apps charge. Once restaurants start doing this massively, this would generate an increase in competition on these apps to have visibility and allow customers to purchase from them. This shift will have to be really big if restaurants don’t want to close their doors permanently. The massive incorporation of restaurants to the delivery apps will generate a new market that customers have not seen before and the fight for these customers will bring competition that as we know, if not intervened, will offer customers new benefits on their purchasing experience.

[1] https://www.businessinsider.com/coronavirus-pandemic-timeline-history-major-events-2020-3

[2] https://www.governor.ny.gov/news/governor-cuomo-signs-new-york-state-pause-executive-order

[3]https://data.census.gov/cedsci/profile?q=New%20York%20city,%20New%20York&g=1600000US3651000

[4] https://www.fool.com/investing/2020/04/01/3-restaurant-stocks-could-thrive-after-covid-19.aspx

[5] https://www.restaurantbusinessonline.com/operations/shake-shack-reports-dire-impacts-covid-19-its-business

[6]https://finance.yahoo.com/news/5-food-delivery-stocks-seeing-223338009.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAHEcRlJkdTGiQHeXrPQ7i0fNATpF0ZoYLAaIluAcrNSQfl9e3DyMm3tKkY9oMhQtyNiT_qtImQI7gu-kh7MzA2flQLMqw545L7Tc6Ta4wGcE_8ZMZHtpMA-yLGrAmTB6Xuyr8XfTGAS9ymNSH1113rw4OAg6FWONGYkPkmtuxyR9

[7] https://www.npr.org/2020/03/22/819011691/as-restaurants-across-the-country-close-their-doors-deliveries-pick-up