Food Fights

With restaurants providing only delivery or takeout during the pandemic, consumers turn to retailers and grocers to fill the gap. The impact on the food industry varies both by state and by sales channel, with fresh meat leading the increase in dollar sales (see chart), reports Hilco Global. Other trends in the report include:

Food retail: The boom started in February 2020 in the United States as awareness of COVID-19 increased. Retailers were not prepared for the volume surge, and had inventory levels consistent with approximately two weeks’ supply on average. Costco saw sales increases of 12%, which escalated to 28% by the end of February. Kroger saw an increase of 30% in March 2020. While a lot can be attributed to stockpiling, significantly more people now eat at home.

Food delivery: Services such as Instacart, Shipt, Walmart Grocery, Target, and their associated apps saw significantly increased volume and new user adoption, as consumers look for more delivered foods to minimize their risk of exposure.

Food service: Pre-pandemic, U.S. food service was a $280 billion industry. Sysco and US Foods experienced massive sales reductions since the start of the crisis due to closures and lower volume. Many distributors pivoted to support the retail market via their relationships; for example US Foods partnered with grocery supplier C&S Wholesale Grocers.

Some drive revenue in creative ways to help pay rent and support staff. Panera Bread, for example, sells groceries that it used to prepare for dine-in customers via its digital platforms or Grubhub. Even with this additional volume, however, sales are expected to decrease.

Packaging and distribution: Food producers face challenges in acquiring the materials and personnel to produce, package, and distribute products. Milk retail sales increased 53% the week of March 21, 2020, and its average retail price was up 11.2%, according to Nielson. However, the dairy industry is one of the most negatively impacted because the products are highly perishable. The Dairy Farmers of America and Land O’Lakes had many farmers dump their milk due to the inability to ship it quickly enough.