The Covid-19 crisis that is currently sweeping the world is going to have a lasting impact on our society. From the way we do business to the way we interact with each other and from the way we communicate to the way we socialize. The lockdowns, social distancing and restrictions on movement that are in place across the world are causing businesses to suffer today. One industry that is going to see lasting changes is the Food & Beverages sector, with respect to both in-home consumption as well as out of home consumption.
No one in their wildest imagination could have imagined or anticipated the scale of changes that we are witnessing today. Additionally, there is no certainty (even amongst the experts) as to when the things will return to normalcy, if at all they will or what the new normal will be. With the number of unknown factors about the Covid-19 pandemic and its implications, it is not possible to comment with certainty on how the industry landscape, customer habits and customer attitudes will evolve in a post-Covid-19 world. However, there are certain changes that we can definitely expect to see.
What does this monumental disruption mean for the out of home consumption restaurant Industry? Below, I have organized my thoughts on the Out of Home Consumption Sector. I would be happy to have your comments and opinions to add to the discussion such that we all march into the post corona world wiser and with clearer anticipation of what is in store.
The Out of Home Consumption Sector:
This sector is characterized by restaurants in their various forms – QSRs, Fine or Casual Dining, Cafés, Pubs & Bars, Ice Cream Parlors and Dessert Stations. Man was, is and will always be a social animal and these locations provided the third place outside of home and office to meet, interact, mingle and socialize. Now with social distancing being the norm, there is an inherent fear for people to step out and get together the same way as they did earlier. So in the near future (till a foolproof vaccine/ cure etc. is found) there will be some hesitancy to come out in large numbers. A fear has set in, demand will certainly be a casualty.
Pre-corona, the industry was in a growth phase spurred on by the delivery aggregators and the cloud kitchen formats, with a large Millennial population armed with a smart phone, which enabled the industry to ride the consumerism wave and growing at a reasonably fast paced clip. All that came crashing to a grinding halt with the Government imposed shutdowns due to the corona crisis. As and when the restrictions are lifted, the restaurants will have to get back to welcoming customers back to their locations.
What can restaurants do to bring the customers back?
– Just as restaurants advertised their closures in the most creative of ways – respecting consumer sentiments, adhering to the Government directives and advisories, keeping employee and consumer safety in mind, they will have to now equally advertise saying “We are Open” and back in business. That will be the first stimulus that has to be sent out to inform customers about their reopening. This has to be done for both dine-in as well delivery, assuming the delivery aggregators are back in full swing.
– Apart from this, they will have to re-assure consumers on the additional Safety aspects that they have built in to safeguard the customers: This may include temperature checks of everyone entering the restaurants, Providing additional hygiene stations in each location, sanitizers/ dis-infectants will be the new de-facto normal, additional deep cleaning/ disinfecting all areas of operations, air purification and so on.
– Additional safety measures with regards to employees in the restaurants, both kitchen staff, service staff and also the utilities staff who help in ensuring the cleanliness and hygiene standards. This could include additional periodic hygiene checks, improved sanitation practices etc. Also, I won’t be surprised if the food safety authorities, FSSAI comes up with additional requirements/ licenses for restaurants to adhere to.
– Social distancing applied in seating may be implemented, by reducing the load on seating and increasing the distance between tables and so on. This will significantly impact cost of operations with lesser customers per square foot occupancy. Despite turnarounds, this reduction in seating capacity will impact overall volumes and revenue.
– In addition to bringing back the lapsed customer for whom fear has set in, monetary incentives in the form of a sizeable discount would be required to attract the customer sitting on the fence. Further, since the pandemic has affected many people financially, their spending ability will also have reduced considerably and that’s another reason to offer monetary incentives.
All the above suggestions will significantly increase the cost of operations unless there is a big change in the other fixed costs that goes into the restaurant operations. They could be in the form of:
– Re-alignment of Lease Rentals – Today at many locations we pay first world rentals whereas we get average realizations per customer which are second or third world. Clear discussions with the landlords to rope them in as partners is critical for the longer term sustenance of the industry.
– Reducing remuneration of bulk of employees does not seem to be a feasible option as many are already at the lower end of the spectrum, thus reduced manpower in the operations, both frontend service staff and the backend kitchen staff could be a distinct possibility.
Implications of Reducing Staff:
– Backend: By reducing manpower, this will give a big impetus to the foodservice industry to deliver more tailormade processed food solutions which are manufactured in plants with exacting food safety standards and assembled/ cooked as per the menu requirements in the restaurant kitchens, instead of making every dish from scratch in the kitchens. We could thus see a lot more innovations in products like cooking sauces and grravies, marinades, dressings and condiments, frozen foods etc that would take its pride of place in restaurant kitchens.
(a)By reducing manpower, this would certainly lead to more self-service and less pampering of the guests, ensuring social distancing is followed to a limited extent! This is going to be a difficult one for the demanding customers where historically the way to the heart is through the mouth and the stomach and the service provided.
(b)This would also give a huge impetus to take-away and home delivery. Consumers still yearn for the restaurant type food at home which they have been largely deprived of during the lockdown as they have not been able to step out of home. Restaurants should craft a more widespread take away/ home delivery menu which is easier to deliver through the aggregators and at the same time helps in creating an equivalent experience at home. We can expect to see a lot of innovation in menu options, packaging and so on for the take-away and home delivery segment.
(c)A further kick in the arm for the Cloud, Ghost or Delivery kitchens as they are called. We can see increased activity in this area and more of the mainstream brands are also joining this bandwagon. The pace will be accelerated!
(d)We will also possibly see restaurants offering meal-kits for the take-away/ delivery sector to mimic the dining experience of the restaurant, now at home. A few highly successful QSR chains in China have already started offering such menu options.
(e)There could also be more home style food options on offer, either as a complete meal or few main dishes which can be easily delivered and thus supplement the food made at home to complete the dining experience.
As regards the menu options in restaurants in the post-corona era – menu upgradations would be required to bring in the new customer. The customer now walking-in, is more informed about safety and hygiene, whether that is through legitimate sources or Whatsapp university. Customers may thus expect menu items that help them ride over these concerns:
– A range of immunity boosting foods and beverages could be in whatever form, from the new-age superfoods to items coming out of grandma’s kitchen, suitably modified to the cuisine/ formats being served.
– Healthier food was a mega-Trend in the F&B industry over the last few years with healthy connoting different things to different people. The Covid-19 pandemic will add a new dimension to what is healthier and we will see many more ‘healthy’ options to attract the consumer and their wallets
– The whole range of plant-based foods will get a big leg-up and will see a whole range of innovations in this category.
– More of one pot meals that involves less of handling, touch, mixing, blending etc. Easy to eat out of the pot and complete the experience. This will be a key trend to have individualized smaller portions and avoid the sharing that happens widely today.
All in all it is going to be a roller coaster ride for the Industry, facing huge losses due to the shutdowns, loss of trained manpower many of whom have migrated back to their abodes, plus a more knowledgeable and finicky customer, added complexity in terms of hygiene and safety, will all keep the Restaurant kettle boiling.