What About Non-Commercial Foodservice? The Forgotten $230 Billion Sector.

Recently, we’ve written extensively on the impact of Covid on the foodservice industry. In fact, in March, we believed  the virus may shutter restaurants for a couple of months. The truth is, there is not a specific timeframe.

Restaurants Are Not The Only Victims

Most of the popular media focuses on the impact Covid-19 is having on commercial restaurants – such as QSR and Casual Dining – where one can find multiple accounts of operator challenges. However, about a third of the $750 billion U.S. foodservice industry is made up of the non-commercial side. Consider that K-12, College and University, Travel and Leisure, Business and Industry and Lodging are also negatively impacted.

Manufacturers and Distributors Also Rely on Foodservice Dollars

Entities that count on non-commercial foodservice specifically include manufacturers, foodservice management firms (such as Aramark and Compass), specialty distributors, distributor buying groups and even GPOs (perhaps there is less sentiment for the latter, but they are feeling the pain). The $750 billion U.S. Foodservice Industry (as of January 2020) has likely lost 30-40% of revenue already, considering Covid measures.

Five Steps Stakeholders Can Take

1. Prepare for smaller portions. Restaurateurs will look for methods to use fewer ingredients. See what ingredients can be used for multiple recipes.
2. Invest in packaging and pack sizes suitable for commissaries and central kitchens. Our recent study on central kitchens and cloud kitchens shows that a centralized location allows for monitored food handling and safety. These will thrive.
3. Pivot to healthcare – specifically senior living: This segment is growing by leaps and bounds right now and was already on an upward trajectory. 
4. Provide strong terms and “hardship” assistance to the hardest hit segments.  Loyalty goes a long way in this business. There is no doubt that Penn State, Boeing and the Chicago Cubs will return. If your company is able, softening payment terms and lending an consultative ear will go a long way. 
5. Become a conduit for facts. The news has featured the fear patrons will have returning to dining, even after Covid has passed. Once a vaccine or treatment is introduced, consumers should be treated fairly and with respect – and this means delivering facts that reduce hysteria or longer-term irrational fears similar to the Cold War Era. We can all play a part in disseminating facts, not anecdotes or fear.

As a stakeholder in foodservice, there are a number of options to consider during this time of social distancing and working at home. It is an excellent time to coordinate discussions with team members and strategize on innovative ways to transform your business.

THE BOTTOM LINE: The outlook of Coronavirus is unclear, but the ways organizations react to it should be based on facts and from a number of references prior to making any potentially risky decisions.

Looking for more strategic foodservice insights around the Covid-19 crisis? Contact us to learn about a special program that helps manufacturers protect their business during this unprecedented time.

Tim Powell is a Managing Principal of Foodservice IP. His responsibilities include recommending and developing business strategies, market sizing, designing qualitative and quantitative research methods, strategic planning and project management. Tim serves as a trusted foodservice adviser to management at several food companies.