The retail sales figures released this week painted a grim picture of consumer spending and the state of the economy amid the mounting human and economic toll of the coronavirus. But a deeper look at the data reveals some profound changes taking place that will most likely endure once the pandemic passes.
While retail sales fell off the table with an 8.7% decline in one month, the food and beverage sector showed 25.6% growth and nonstore retail sales, a proxy for e-commerce sales, grew 3.1% over the same period.
The success of these two sectors has larger implications for the food and beverage ecosystem when we do emerge from the recession created by the pandemic.
Grocery stores gain
To begin with, grocery store sales have surged as fearful consumers have stocked up on food and supplies to ride out the shelter-in-place orders and to limit their contact with the broader public. If anything, grocery stores and their partners throughout the food and beverage supply chain have been dealing with a different challenge: They can’t keep up with surging demand.
Those grocers and suppliers that meet the needs of consumers today may also be better positioned for success when the pandemic ends.
Those grocers and suppliers that meet the needs of consumers today may also be better positioned for success when it ends.
It’s no secret why some food retailers have succeeded. Those that invested in scalable technology solutions or created them during the crisis have been able to adapt and capture the demand surge. As e-commerce becomes a larger part of the food and beverage ecosystem, the same solutions will allow smaller retailers to capture more market share as they won’t be confined to seat counts and store size.
Still, it has not been seamless. In some cases, long online wait times and limited product availability have frustrated some consumers, forcing them to consider other options.
Restaurants adapt
That’s where restaurants and their distributors have joined the fight for consumer dollars. With shelter-in-place and other similar orders in effect in most areas of the country, dining at a restaurant is not an option. As a result, both restaurants and their suppliers have attempted to pivot quickly to offer both prepared and unprepared foods direct to consumers.
In addition to traditional takeout, some restaurants are offering groceries or bundled meal kits to attract customers. Similarly, food distributors that have traditionally sold exclusively to restaurants, schools and other institutions have started to market and deliver directly to consumers. This sets up a battle for consumers that will most likely continue through the pandemic and after it has passed.
A rethinking
These changes to the fundamental ways that the food and beverage ecosystem operates are the result of changing consumer demands that have been evolving for years, only to be accelerated by the Covid-19 pandemic.
Of course, many, if not most, restaurants are simply struggling to survive and are devoting their energies to developing short-term plans to weather the storm and survive the pandemic. But as the number of new cases begins to ebb in some areas, many have now started to think about plans to get back to business.
One thing is certain: New consumer habits will emerge from this period of isolation, and businesses will need to adapt to a changed landscape.
Even as liquidity remains a challenge for many in the short term, it doesn’t require cash to create smart, forward-looking business plans. What will the restaurants, grocery stores or food distributors of the future look like? Those that find the right answer to that question, and plan to structure their business to take advantage of it will succeed in the long run.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
