Foodservice Industry Important disclosures can be found in Appendix - - PowerPoint PPT Presentation
COVID-19 Economic Implications & Recovery Strategies on the June 1, 2020 Foodservice Industry Important disclosures can be found in Appendix 1 Helping you establish a competitive edge in your moment of truth decisions Top-ranked
June 1, 2020
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Important disclosures can be found in Appendix
Top-ranked independent research company founded in 2006 Serving 300 of the best manufacturers across consumer retail Experts in Consumer, Industrial, Technology, and Healthcare Actionable Insights delivered via reports, events, and 1 on 1 engagement
Helping you establish a competitive edge in your “moment of truth” decisions
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1. Review of the Last 2-3 Months 2. Recovery Pace & Outlook 3. What Does the Future Look Like? 4. Key Considerations 5. Q & A
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Insights to plan & forecast your business in the current environment Thought leadership on the “new normal” and where to pivot your business & products as the industry evolves Recovery strategies to be planning for
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20 40 60 80 100 120 140 160 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Consumer Confidence
Conference Board University of Michigan
Source: Conference Board / University of Michigan / Bloomberg
May '20 5 10 15 20 25 30 35 40 45 2015 2016 2017 2018 2019 2020
Unemployment Rate
SA, y/y %
Total Unemployment Rate Leisure & Hospitality
Source: BLS, FRED
Apr '20
2% 12% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Food Service & Drinking Places
y/y % change in 3M-moving-avg Apr '20
Source: US Census / Bloomberg
80 85 90 95 100 105 110 115 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
NFIB Small Business Optimism Index
Monthly, SA
Source: NFIB / Bloomberg
Apr '20
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March/early April
showing week/week improvement
feared with recovery starting sooner than expected
0% 10% 3/1 3/8 3/15 3/22 3/29 4/5 4/12 4/19 4/26 5/3 5/10 5/17 Week Ending
Casual Dining Segment Same-store Sales Trends
Average across public companies
Source: Company reports
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0% 20% 40% 60%
Y-Y Change in Miles Driven
n = 30 markets
Source: StreetLight Data, CRC Estimates
headcount/SG&A cost cuts, extended payment terms from suppliers, and selling into retail/grocery.
by segment). US Foods and PFG saw 50%+ Y/Y declines in total case growth during April.
starting to come back faster than expected.
pop may moderate as inventory is right-sized.
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0% 50% 100% 150% 200% 250% 300% WE 3/8 WE 3/15 WE 3/22 WE 3/29 WE 4/5 WE 4/12 WE 4/19 WE 4/26 WE 5/3 Week Ending
Casual Dining Off-Premise Growth vs Pre-COVID
Weekly Sales per Unit
Source: Company reports, Average across public companies
4% 8% March 19, 2020 April 7, 2020 May 7, 2020
How has your usage of restaurant delivery changed as a result of coronavirus? (net change)
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March 19, 2020 April 7, 2020 May 7, 2020
How has your usage of restaurant takeout or drive- thru changed as a result of coronavirus? (net change)
Source: CRC Consumer Survey | May 2020 (n= 600)
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Same-store Sales Outlook Scenarios by Segment 1Q April May June 2Q July Aug Sept 3Q 4Q Casual Dining Good
Base
Bad
Quick-Serve Good
5%
5% 5% 5% 5% 7% Base
0% 0% 0% 0% 0% Bad
Local Good
Base
Bad
Total Good
Base
Bad
Source: CRC Estimates
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capacity restraints
(many at 25% or 50% capacity, social distancing measures)
adding social distancing markers
limited capacity is a key watch-out
restaurants are not profitable below 65-75% capacity (even with good off-premise business)
Dining Room Reopening by State Alaska 25% 4/24 Arkansas 33%, Parties < 10 5/11 California Social distancing measures County-by-county Connecticut
Outdoor only, capacity TBD
5/20 Florida 25% 5/4 Georgia 10 diners/500 sq ft 4/27 Indiana 50% 5/11 Iowa 50% 5/1 Kansas Parties <10, 6 ft apart 5/4 Kentucky 33% 5/22 Louisiana Outdoor only 5/1 Maine Social distancing measures 5/18 (some counties) Mississippi 50% 5/4 Missouri Social distancing measures 5/4 Montana 50% 5/4 Nebraska 50% 5/4 Nevada 50% 5/9 New Hampshire Outdoor only 5/18 Minnesota Outdoor only 6/1 North Dakota 50% 5/1 Ohio Social distancing measures 5/15 patio, 5/21 inside Oklahoma Parties <10, 6 ft apart 5/1 South Carolina Social distancing measures 5/11 South Dakota Social distancing measures No stay at home order Tennessee 50% 4/27 Texas 25% 5/1 Utah 50% 5/1 Washington 50%, Parties <5 5/12 (some counties) West Virginia Outdoor only 5/4 Wyoming
Source: Public Information
Capacity at Reopen Reopen Date
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19% 22% 19% 4% 34% 1% 1st half of May 2nd half of May June July Unknown; not sure at this point We do not plan to reopen
When do you plan to reopen your restaurant(s)?
Source: Independent Restaurant Survey, May 2020 (n= 275)
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Year-over-Year Change in Diners for Early Re-Open States
Source: OpenTable
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0% 20%
Georgia Y-Y Change in Diners
GA US
Source: OpenTable
0% 20%
Florida Y-Y Change in Diners
FL US
Source: OpenTable
0% 20%
Texas Y-Y Change in Diners
TX US
Source: OpenTable
0% 20%
South Carolina Y-Y Change in Diners
SC US
Source: OpenTable
buffets/salad bars, condiment stations)
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down ~65-70% in April
month/month
30% of local restaurants closing permanently
11% 9%
Jan Feb March April May Estimate June Estimate
Independent Restaurant Monthly Same-store Sales Trends
Source: Independent Restaurant Survey, May 2020 (n= 275)
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COVID-19
simplify menu as dining rooms reopen
important for the remainder of the year
87% 85% 77% 72% 71% 66% 65% Hand sanitizer stations Reducing dining room seating capacity Screening employees for illnesses Employees to wear gloves Employees to wear masks In-store signage of COVID best practices Social distancing markers
Are you implementing any of the following once your restaurant(s) opens back up?
Source: Independent Restaurant Survey, May 2020 (n= 275)
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cleaning, and supplying PPE; overall holding up well given more patients offset by less visitors in hospitals.
reducing catering and overall volumes. Manufacturing and pharma sectors remain in operation.
C&U; some K-12 school districts still serving meals.
attractions, and conference centers.
seasons and postponement of concerts/events.
place orders and lack of business/personal travel.
Estimated End Market Breakdown Y-Y Sales Bottom Last ~4 Week Trend Pizza: Flattish Up ~5%+ Healthcare: Down 0-5% Down 0-5% Quick Serve: Down 30%-40% Down 0-20% C-store F&B: Down 30-40% Down 30% B&I: Down 50% or more Down 50% or more Casual Dining: Down 60-90% Down 30-85% Independent Restaurants: Down 60-90% Down 30-85% Education: Down 75% Down 75% Hospitality Dining: Down 90% Down 80% Sports & Entertainment: Down 80-100% Down 80-100% Source: CRC estimates
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states resuming elective surgeries.
employers likely bring people back to offices gradually and potentially move to smaller offices and more work from home long term.
schools and colleges reopening; concerns around enrollment at C&U.
segments given COVID-19/economic impact (business/personal travel resuming unclear).
how social distancing guidelines will be applied (plus consumer hesitancy around large groups).
Pizza chains Healthcare C-store Foodservice Chains B&I Independents Hospitality Education Sports/Entertainment
Suppliers: What is your Y/Y case volume growth expectation for the next 1-2 months across foodservice channels?
Source: CRC Coronavirus Survey, May 2020 (N=22) Feedback from manufacturers representing over $10B in annual foodservice sales
scale and diversified portfolio.
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26 19% 51% 63% 72% 13% 43% 57% 77% 28% 66% 75% 83% 17% 51% 63% 77% 0% 20% 40% 60% 80% 100% May June July August September October November December Sometime in 2021
When do you expect to do the following?
Cumulative over time
Go to a Mall Go on Vacation Dine-In at a Restaurant Go to a Movie
Note: Cumulative figures do not reach a hundred as portion indicated they are “unsure” when they plan to do those activities. Source: CRC Consumer Survey | May 2, 2020 600 respondents
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post-COVID world
have cut sales force by ~10-15%+
called on in person by DSR
sales reps to still call on street customers wearing PPE; 30% anticipate doing more virtually
49% 20% 11% 18% 2% No change vs. pre- COVID Still in person, but wear PPE More virtual meetings / trainings More phone calls Other
Independent Restaurants: How would you prefer a foodservice salesperson to engage with you moving forward?
Source: Independent Restaurant Survey, May 2020 (n= 275)
43% 29% 14% 14% Still in person, but wear PPE More virtual meetings / trainings No change vs. pre- COVID Other
Regional Distributors: How do you anticipate your sales reps calling on street customers will look like following COVID-19?
Source: CRC Distributor Survey, May 2020 (n=8)
appeal to families likely continue to outperform
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Expect to see slimmer menus
Core menu focus near term Expect more value and LTO activity to win back guests New product development on hold Single-serve and grab-and-go increasingly important Off-premise will continue to outpace dine-in sales growth
Private label and lower-cost solutions likely to become more important for operators in a lower demand and tight labor environment Invest in eCommerce tools, capabilities, and people
Digital will be a bigger role in selling going forward Have content online for operator research / ordering
As much as <30% of local restaurants and ~10-15% of chain doors may not reopen (worst-case)
Next 1-2 Months Next 3-4 Months Next 6-12 Months
Supplier Case Volume Outlook for U.S. Foodservice
Source: CRC Coronavirus Survey, May 2020 (N=22)
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Best positioned distributors have a strong sales force, solid digital platform, and broader offering Sales model likely looks different given sales force reduction, local restaurant closures, and greater eCommerce sales
Still need balance between digital and sales reps
See further opportunity to increase private label penetration given:
1) Limited product availability (easier to switch operators) 2) Greater need for operators to lower costs
Selling into retail/grocery likely not a long-term strategy
Opportunities may exist to service groceraunts
Next 1-2 Months Next 3-4 Months Next 6-12 Months
Regional Distributor Total Case Volume Outlook
Next 1-2 Months Next 3-4 Months Next 6-12 Months
Regional Distributor Independent Case Volume Outlook
Source: CRC Distributor Survey, May 2020 (n=8)
Local restaurant operators seem hesitant to reopen dining rooms at 50% capacity due to profitability
rooms.
Chain restaurants seem to be willing to reopen at lower seating capacity (share opportunity).
Value is expected to be a bigger driver over the coming six months as restaurants battle to regain customers against a tougher economic backdrop. Off-premise sales likely continue to outpace dine-in sales even as dining rooms reopen. Menus likely remain smaller long term given greater off-premise sales, labor/execution concerns, and product availability (operators have been more efficient/profitable with smaller menus during COVID). Labor is expected to be a headwind for the next several months given unemployment benefits. There is concern that ~10-20% of restaurant customers may not return to prior habits for a year or more.
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ADRIENNE MONCRIEF
amoncrief@cleveland-research.com
STEVE GOJAK
sgojak@cleveland-research.com
NICK FISCHIETTO
nfischietto@cleveland-research.com
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