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The magnitude of the disruption to the foodservice sector from the coronavirus is staggering.
The states of Washington, Maryland, Massachusetts, Illinois, Michigan, New York, Connecticut, New Jersey, Kentucky, Louisiana, Indiana, Ohio, Colorado, Minnesota and Pennsylvania have ordered that all bars and restaurants remain closed for dine-in service, but most can offer take-out or delivery. The same pattern is happening across other US cities and states, and around the world.
“Restaurants are dying a quick death.” This is how one seafood company executive summed up the impact the coronavirus is having on the US (and other countries’) foodservice sector.
This is particularly worrisome for seafood, since consumers generally like to eat their seafood in restaurants rather than cook it at home.
US consumers spent an estimated $102.2 billion (€93.2 billion) on fishery products in 2017, including $69.6 billion (€63.6 billion) at restaurants and other foodservice venues, and $32.5 billion (€29.7 billion) at retail.
US restaurants had sales of $450 billion (€408 billion) during the 12-month period ending in January, according to market analysts NPD. Just over 48 percent of this is from off-premise dining such as takeout or delivery.
It is worrisome to imagine where the restaurant industry devastation will eventually lead, but clearly many, many restaurants will not survive. Most of them are one-unit or small multi-unit operations without the financial fortitude to weather months of no or reduced business.
Chains should fair better, but some of the leading restaurant chains are already preparing Wall Street for the red ink that will surely stain their balance sheets over the next few quarters.
President Trump on Tuesday called the leaders of some of the top US restaurant chain to discuss the industry’s response to the coronavirus, thanking them for pivoting to off-premise operations.
And it could be some time before cruise lines, casinos, Disney parks and other large leisure facilities open again. Plenty of seafood moves through this segment of the foodservice industry. And the sector has been growing steadily.
Attendance at the top 20 US theme parks in 2018 was nearly 160 million visitors, up roughly a third since 2010, according to a presentation given at January's Global Seafood Market Conference. Eighteen percent of all revenue at these theme parks comes from food and beverage sales.
Add to this another 30 million in visitor capacity aboard cruise ships in 2019, a 57 percent increase in capacity since 2010, according to the presentation. And let's not forget the $4 billion (€3.6 billion) in annual food revenue at Nevada casinos.
The trickle-down effect on seafood from this contraction of the foodservice sector will be significant, and in its worst case it could lead to a rash of bankruptcies among seafood suppliers.
For those seafood companies overwhelmingly dependent on sales to restaurants and entertainment venues, cash flow, if it hasn’t already, will become a problem, which in turn will limit their ability to pay their vendors and employees. And for sure you will have seafood companies fighting for business from a shrinking pool of foodservice customers even when things begin to return to normal.
Everyone knows events surrounding the coronavirus are going to get worse before they get better. The foodservice landscape, in particular, will be forever changed by coronavirus.
And as this world of closed restaurants, work-from-home employees, social distancing and food hoarding become the new normal, the next challenge for the seafood sector will be to help rebuild the supply chain.
Any comments, complaints, retaliatory rants, please feel free to email me at john.fiorillo@intrafish.com.
