Industry Insiders: COVID-19 Pushes Restaurants to Innovate Menus
Restaurant menus – like so much of society amid the pandemic – have undergone a whirlwind of change in recent months. The coronavirus has required as much, with restaurants having to deal with supply uncertainties and offer items that lend themselves to off-premises dining.
With that in mind, DMA's recent webinar assessed the future of menus and projected changes that may soon impact restaurant operators, suppliers and distributors. Technomic senior research manager Lizzy Freier led a panel discussion with Lily Jan, a Cornell University lecturer, and Stephen Loftis, VP of marketing for Firebirds Wood Fired Grill.
"The pandemic obviously has had – and will have – some lasting impacts on menus," Freier said. "But we're also going to see some new trends in the year ahead, given the unprecedented nature of these times."
The event (a link to which can be found here), co-hosted by The Food Institute, examined how menus may evolve in the months ahead, in terms of both cost and complexity.
Jan noted early in the webinar that:
"This year has given people a chance to reflect on themselves, [and] I think it's important to do that for your business, as well. You know your brand, and you know what's true for your brand. Identifying holes in your menu, and ways to fill those holes, is really important."
While Jan predicted big things on the horizon for unique items like mushroom-based products, Freier said that several trends have already taken root at many American restaurants of late.
Some of the noteworthy trends include:
Restaurant operators are simplifying menus, largely due to COVID-related challenges. According to a Technomic poll, 36% of operators plan to adopt smaller menus that focus on core items. It's worth noting, too, that Datassential research shows restaurant menus shrank by 10.2% during the first year of the pandemic.
Many operators are doubling down on limited-time offers, Freier said. According to Technomic data, the total number of LTOs offered at top 500 chains has increased steadily in recent years, from less than 13,000 in 2018 to 16,070 in 2020. LTO growth at top 500 chains was up 9% in the past year.
Consumers have become more comfortable with tech ordering during the pandemic. Case in point: in 2020, Technomic research showed 48% of customers at family-style restaurants considered themselves comfortable with the thought of using a tableside tablet to order or pay.
Predictions from the Panel
Technomic predicts big things for items like oat milk and plant-based meat in the next two years. The firm expects oat milk to see a 187% growth in penetration through 2023, with plant-based poultry (181%) not far behind.
Freier also expects to see more restaurants adopt menu items like "pigless" bacon.
The panelists also expect an uptick in menu items such as:
Global coffees like Spanish iced coffee and Vietnamese iced coffee
Globally spiced fries featuring condiments like sriracha ketchup and harissa mayo
"New-mami" cocktails featuring miso, mushrooms or meat stock
Despite their projections, the panelists also said restaurants must be careful to consider their staff's capacity for implementing such items. After all, many establishments are finding hiring harder than ever and, as a result, have fewer employees than usual.
"During COVID ... we didn't want to overcomplicate operations," said Firebirds' Loftis.
"My suggestion for operators," Jan said, "is make the very best, most consistent menu items that you can, based on the labor situation and supply chain that you have right now." Food Institute Focus
Restaurant Sales are Booming, But for How Long?
The restaurant industry continued to regain its financial footing in June, but pandemic aftershocks have yet to subside.
"The industry right now is extremely strong and is surging. For many operators, they have more business than they can handle," Joseph Pawlak, managing principal at Technomic told The Food Institute. "But on the negative side, commodity prices are soaring due to shortages and the labor shortage is a major problem that is restricting capacity in the industry."
Dining Out is Back In
Restaurant sales reached $70.6 billion in June, surpassing May figures by 2.3% and reaching an all-time high for the fourth month in a row, according to data from the U.S. Census Bureau.
Customer traffic almost matched pre-pandemic numbers, as well. According to a study by Placer.ai, traffic at casual-dining restaurants pulled within 3.8% of June 2019 levels, reported Restaurant Business (July 16). Full Story
Recently, Yum Brands Inc. and McDonald's Corp. reported second-quarter earnings that beat Wall Street estimates. According to Marketwatch, McDonald's net income totaled $2.219 billion, up from $483.8 million in 2020, while net income for YUM reached $391 million, marking a $185 million increase year over year (July 29). Full Story
Furthermore, increased lunchtime spending at Chipotle Mexican Grill suggests a return to pre-pandemic meal routines for the daypart. The fast-casual chain reported a 70% recovery of in-store sales last week along with 80% retention of digital sales, MarketWatch noted.
Persistent Inflation Ahead
While promising, a significant portion of the recent gain in industry sales dollars has been due to higher pricing. Year over year, inflation was up 5.4% in June.
Data from Numerator indicates that bars and restaurants are the most popular target for discretionary spending cuts regardless of purchasing power. If inflation continues, 74% of consumers plan to reduce their spending accordingly, reported The Packer (July 20). Full Story
A recent survey by the National Association for Business Economics suggests that lingering supply chain and labor market constraints will cause inflationary pressures to persist for the foreseeable future, reported Bloomberg (July 26). Full Story
Pawlak notes that persistent port congestion "debacles" and a magnified shortage of truck drivers are critical supply chain issues that could extend this timeline.
"Even though an actual food product and its ingredients are in plentiful supply, finding materials and the packaging for those products are a major problem," Pawlak said. "So higher inflation is probably here for a while."
Navigating Labor Issues
On top of perpetual staffing shortages, many restaurant workers across the country have become targets for verbal abuse and legal threats from frustrated customers, reported The Washington Post (July 15). Furthermore, "breakthrough" infections of the Delta variant in recent weeks are pushing some restaurants to rethink reopening plans or require proof of vaccination. Full Story
The pandemic has also fueled a growing awareness of the wage disparity between food service workers and those in other industries. According to the 2020 State of Restaurant Workers Report, food service employees are more than twice as likely to live in poverty as general workers and the vast majority work without rights to family or medical leave.
In addition to prioritizing wage competitiveness, Pawlak believes there are other strategies that operators can initiate to not only recruit talent, but also retain the staff they have.
"One [tactic] is showing them a true career path within the industry or their companies, and how rapidly someone can advance from a production worker to general manager," Pawlak said. Other incentives include flexible work hours, health benefits and, overall, "offering each of them a voice in how to most effectively do their jobs." Food Institute Focus
Low Vaccination Rates in U.S. South Could Renew Supply Chain Woes
A rise in cases linked to the highly infectious Delta coronavirus variant could result in a new wave of disruptions for the U.S. food industry, particularly in the U.S. Southeast.
Less than 35% of the population in Alabama and Mississippi had been fully vaccinated against COVID-19 as of July 19, according to data reported by their state health departments. Alabama had the lowest vaccination rate in the U.S. among adults, averaging about 33.4%. Arkansas and Louisiana are also among the top five states with low vaccination rates, with little more than 35% of adults vaccinated against COVID-19, according to state health data, reported The Tennessean (July 20). Full Story
"We have always said that this virus is an opportunist, and in areas where we still have rates of low vaccination, that is where the virus is likely to take hold," Centers for Disease Control and Prevention Director Dr. Rochelle Walensky recently said on the Today show.
Further, White House Chief Medical Adviser Dr. Anthony Fauci warned that the U.S. is heading in the "wrong direction" as COVID-19 cases driven by unvaccinated people continue to surge across the nation.
"I'm not so sure it would be the worst-case scenario, but it's not going to be good. We're going in the wrong direction," Fauci said on CNN's "State of Union" when asked about a model predicting that the country could reach 4,000 virus-related deaths a day if vaccination rates don't improve, reported New York Post (July 25). Full Story
With that, low vaccination rates in the Southeast could have a significant impact on the poultry industry, as new variants might lead to a fresh round of closures and labor shortages in Arkansas, Alabama and Mississippi, three of the top five broiler producing states.
A look overseas and at other regions of the U.S. may also be a harbinger of things to come for the Southeast.
A recent Food Institute study found that, among G20 economies, countries with higher COVID-19 infection rates are experiencing higher inflation – which, in turn, could reflect similar troubles for low-vaccination states going forward.
After excluding outliers, countries with high COVID-19 cases had an average inflation rate of 5.31%, and countries with low cases had an average inflation rate of 1.68%. In other words, consumer price increases among high-infection countries were more than triple those of low-infection countries. Moreover, when compared to 2019 (i.e. pre-pandemic), high-COVID-rate countries experienced an increase in inflation by 1.52%, while low-COVID-rate countries experienced a decrease in inflation by 0.28%.
French Vaccine Passports and Australia Protests
While there are few indications (outside of California, perhaps) that the U.S. will follow France's lead on so-called "vaccine passports", low-vaccination countries across the globe are stepping up other restrictions, foreshadowing potential issues for low-vaccination U.S. states.
Australia, for example, has half of its population in lockdown again as the Delta variant pushes cases higher. With only 13.1% of its population fully vaccinated, thousands of citizens participated in anti-lockdown protest last weekend that turned violent.
Restrictions in Other Areas in the U.S.
In California, Los Angeles County residents are again required to wear masks indoors amid a spike in COVID-19 cases, most of them the highly transmissible delta variant that has proliferated since California fully reopened its economy on June 15.
"Breakthrough" U.S. infections of the Delta variant in fully-vaccinated people are also pushing some establishments to rethink reopening plans. A number of restaurants in Provincetown, Massachusetts, for example, are requiring proof of vaccination and reinstating dropped safety protocols. Another restaurant in the San Francisco area is closing temporarily in response to the pandemic-related rise in meat prices.
With these restrictions in mind, restaurants and suppliers in low-vaccination states could be facing a new round of operational challenges as infection rates rise. Food Institute Focus
Lunchtime at Chipotle Mexican Grill is picking up, a sign that workers are heading back to offices and resuming midday meal routines. The fast-casual chain has recovered 70% of in-store sales while holding on to 80% of digital sales, reported MarketWatch (July 27). Full Story
Japanese restaurant concept Kura Sushi attracted nearly $57 million during a public offeringand will use the proceeds for general corporate purposes. Full Story
McDonald's has created a new team to focus on customer experiences as COVID-19 upends the way consumers engage with restaurants. The team brings together its global marketing, global restaurant development and restaurant solutions, data analytics and digital customer engagement teams, reported Forbes (July 26). Full Story
Meanwhile,McDonald's has replaced BTS with hip-hop artist Saweetie for its next celebrity meal. On August 9, the "Saweetie Meal" debuted in the U.S., including a Big Mac, four-piece Chicken McNuggets, medium fries, a medium Sprite, and barbecue sauce that's being named Saweetie ‘N Sour, reported CNN Business. Full Story
In 2022, all Church's Chicken support staff will transition to a hybrid schedule with three days in-office and two days working remotely, to advance the work-life balance. Full Story
Nekter Juice Bar will enter seven new markets this year, including Chicago and St. Louis, and San Antonio. Full Story
Starbucks will exit a $2 billion joint venture in South Koreaby selling stakes to local partner E-Mart Inc. and Singapore sovereign wealth fund GIC. Although Starbucks operates 1,500 stores across the country, it is not seen as a high-growth market and the company plans to invest in faster growth countries like China, reported Reuters (July 27). Full Story
Dickey's Barbecue Pit opened a restaurant in Lahore, Pakistan, the first of 20 planned for the country over the next 10 years. Full Story
Taco Bell has announced plans to expand its rewards program. Loyalty members will get more ways to earn points as the chain leans further into digital ordering, reported Restaurant Business (July 29). Full Story
Meanwhile, Taco Bell will soon unveil a prototype with four drive-thru lanes. Taco Bell franchisee Border Foods is building a new restaurant that the chain said will be a faster way to get its food: a two-story, technology-heavy facility in Brooklyn Park, Minnesota, reported Restaurant Business (Aug. 12). Full Story
Tocaya, a modern Mexican brand, and Tender Greens, a better-for-you-comfort concept, merged to form One Table Restaurant Brands, which now has 45 locations across California and Arizona. Full Story
Church's Chicken opened its 100th Mexico location in Ciudad del Carmen. Full Story
Burger King is largely banking on remodels to regain its momentum. The chain, which has underperformed compared to competitors in recent years, is investing in speedier remodels along with more digital and balanced marketing, reported Restaurant Business (Aug. 1). Full Story
Saladworks will expand in Ohio with new locations. Full Story
Wendy's announced plans to open 700 "dark kitchens" across the U.S., U.K., and Canada. The addition of delivery-only sites has increased the company's target number of new locations to 2,200 by 2025, reported CNBC (Aug. 11. Full Story
IHOP is testing alcoholic offerings at three restaurants in California and New Mexico. The "Bubbles, Wine & Brews" menu, which compliments the brand's lunch and dinner dayparts, will expand to additional markets in the coming months, reported Forbes (Aug. 12). Full Story
Blackbox Intelligence invites you to The State of the Workforce Webinar, an event developed to bring you up to date on restaurant workforce conditions, including information on staffing, turnover, compensation, benefits, diversity, inclusion, training and more.
In addition, we'll give you a look at topline trends collected from the Black Box Intelligence 2021 Total Rewards Survey, covering employee rewards practices in the restaurant industry. This includes base pay and incentives for all employee levels within the restaurant and the corporate office, as well as how companies are crafting attractive benefits packages for their employees. For more on this year's special edition survey tailored to cover present-day challenges, and to participate, see: https://blackboxintelligence.com/total-rewards-survey/.
This webinar is open to all restaurant operators and current sponsor partners. Please use your company email address to register. Personal email addresses such as Gmail, Hotmail, iCloud etc... will not be approved. You can attend this webinar session ONLY if you are a restaurant operator or current client of Black Box Intelligence™ (subscribed to Workforce, Financial and/or Guest Intelligence). For questions, contact firstname.lastname@example.org.
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SUPPLY CHAIN NEWS
Shipping Quagmire Persists and Could Stretch Well into 2022
While much of the U.S. economy seems to be humming along, one of the significant pain points from the start of the pandemic continues: port backups and delays are causing major issues for importers, exporters, food companies, and consumers.
Backlogs at Ports and Shipping Depots
Tom Greene, president of Bainbridge Island, Washington-based Interpack Northwest Frozen Foods, has a unique perspective on the global shipping situation. He said "an army of fully-loaded ships from Asia [were] parked all over Puget Sound waiting for berths" in an e-mail to The Food Institute.
Global Trade Magazine noted in a Aug. 10 article that backups in Tacoma and Seattle continued, with the U.S. Coast Guard helping to redirect some vessels as they waited weeks to unload. Additionally, these offloading delays could cause a container shortage for new freight.
Greene, who previously worked with global shipping company K-Line, noted the situation was further complicated by backlogs at cold storage facilities, which were sometimes booked out more than two weeks. Meanwhile, shipping rates for trucks within the U.S. were skyrocketing.
"Cross country freight is now hovering around $12,500, which a couple years ago was maybe $7,000 to $9,000 depending on the time of year," he said.
Container Shortage Causing Bottlenecks
Although container factories are expected to produce a record 5.4 million 20-foot-equivalent (TEU) shipping containers in 2021, "container dislocation" continued to push prices up and hamper global shipping efforts, according to Drewry Shipping Consultants Ltd. Drewry's executive John Fossey said there were enough TEUs in principle, but inventories were not broadly distributed across the globe, reported The Wall Street Journal (Aug. 4). Full Story
Meanwhile, China-U.S. container shipping rates hit a new record high on Aug. 11, based on figures from the global container freight index. For the first time, the number surpassed $20,000 per twenty-foot equivalent unit, up from $16,000 on Aug. 2, reported China Daily (Aug. 12). Full Story
The Wall Street Journal noted factories that create containers were concentrated almost exclusively in China, and a years-long decline in production led into 2019 as global trade growth slowed and economic uncertainty grew.
Lars Jensen of Denmark-based shopping consultant Vespucci Maritime spoke with the Journal and said that in the early months of the pandemic, consumer demand slumped and shipping lines cancelled routes, leaving thousands of empty containers stuck in the U.S. Additionally, the blockage of the Suez Canal and a shutdown at a key southern Chinese port only compounded issues.
Problems to Persist Longer in 2022
Any hopes of the global shipping situation easing in early 2022 appear unlikely.
Josh Gellert, president of global food importer Camerican International, said logistics will continue to pose a challenge. " We are entering the holiday shopping [period] so that puts extra strain on a severely strained global freight situation," he wrote.
Michael Murphy, Camerican's senior director of global supply chain, added: "As the situation becomes more difficult now in 2021 for shippers, the forecast for 2022 becomes easier to predict: the crisis will not ease for trans-Pacific freight until at least mid-2022," he noted.
Gellert said the Delta variant added uncertainty, making it even harder to make supply chain projections. Food Institute Focus
Restaurant same-store sales were up 8.1% in July when compared to the same month in 2019 despite a 3.69% decline in comparable traffic, according to Blackbox Intelligence. The month featured the best results in years, extending well beyond the start of the COVID-19 pandemic. Full Story
Meanwhile, the U.S. restaurant industry recovery through the second quarter has been slow and steady, according to research from NPD Group. Consumer spending at restaurants was up 32% in the April-May-June 2021 quarter compared to the same quarter last year, and flat compared to the same quarter in 2019. Full Story
Additionally, U.S. restaurant job growth surged again in July. The industry added 253,200 workers during the month – the largest gain since February – reported Restaurant Business (Aug. 6). Full Story
McDonald's reported that the chain's Crispy Chicken Sandwich and its "famous orders" promotion with K-pop group BTS helped U.S. same-store sales outpace 2019 levels by double digits.U.S. same-store sales climbed 25.9% in the quarter and 14.9% on a two-year basis. Net sales rose 57% to $5.89 billion, topping expectations of $5.6 billion, reported CNBC (July 28). Full Story
Starbucks reported soaring cold drink sales in the U.S, fueling an earnings and revenue beat for the company. But the coffee chain also warned of a slower recovery in China, its second-largest market. It lowered its full-year forecast for the country's same-store sales growth, despite raising its overall outlook for fiscal 2021 earnings per share. Net sales in the quarter rose 78% to $7.5 billion, beating expectations of $7.29 billion, reported CNBC (July 27).Full Story
Yum Brands Inc. posted a 23% increase in same-store sales for the April-June period when compared to the prior year, while U.S. same store sales jumped 19% when compared to 2019 levels, reported CBS News (July 29). Full Story
Restaurant Brands International reported quarterly results that topped Wall Street's expectations,fueled in part by strong growth of digital sales in its brands' home markets. Net salesrose 37% to $1.44 billion, beating expectations of $1.36 billion, reported CNBC (July 30).Full Story
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