Emerging Capital PartnersSupply Chain

Tips for Restaurants Navigating an Upended Supply Chain

In a matter of months, the COVID-19 pandemic has managed to upend the nation’s entire food supply chain—from farmers to processors to distributors—no part of the industry has been untouched.

So, just what does this mean to restaurants that are currently reopening their doors after two or more months of going dark?

For many, it means revamping their menus and changing prices.

The Food Supply Disruption

As the world came to a screeching halt, so too did the demand for food. While the grocery store shelves appeared to portray a panicked public buying spree, other buyers such as restaurants, hotels, schools, stores, and global exports abruptly ended, as March saw states and cities go into lockdown.

As April came into view, it was evident that, while grocery stores were faced with empty shelves, farmers were faced with a diminished market. Pictures began to emerge across the internet and news—dairy farmers dumping milk, animals being euthanized, and produce decaying in fields.

Processing plants such as Tyson Foods, Smithfield, and JBS began reporting closures due to COVID-19 as numerous employees began coming down with the disease. By the end of April, Tyson Foods put out a warning: “The food supply chain is breaking.”  According to Board Chairman, John Tyson, “Millions of animals—chickens, pigs and cattle—will be depopulated because of the closure of our processing facilities.”

According to The Pig Site, pork and beef production is down approximately 35 percent when compared to the same time last year. In the second quarter, hog producers will be euthanizing as many as 7 million pigs. Grocery stores have already started rationing meat sales.

At the same time, farmers have been plowing under produce worth millions of dollars because there is no market for them. Lettuce, peppers, beans, and a host of other fruits and vegetables were plowed under as the demand abruptly fell. Before the pandemic struck, $285 million dollars of produce, just from California, went to restaurants, schools, and hotels every week.

The beginning of March saw distributors continuing to deliver the billions of cases of product they transport every year across the nation. As March turned into April, the demand plummeted and distributors lost anywhere from 60 to 90 percent of their business.

What Does the Disrupted Food Supply Chain Mean to Restaurants?

Navigating through the pandemic has been a restaurateur’s biggest nightmare. Now, as states release restrictions, they find themselves in a world far different than the one they left just a few months ago.

With skyrocketing food costs, restaurateurs, already faced with reduced capacity due to social distancing, have been forced to raise their prices or add COVID-19 surcharges. Business Insider reported on one restaurant that experienced backlash after their receipt, tweeted to show a 5 percent COVID-19 surcharge, went viral. The owner responded by raising prices and removing the surcharge.

One has to wonder, with the price of meat going up and the price at grocery stores raising 2.6 percent, on average, in April alone, how is it that restaurants, one of the hardest hit industries, are expected to maintain the status quo?

Modern Restaurant Management recently interviewed Andy Rosenbloom, VP of Marketing at Buyer’s Edge Platform, one of the largest Group Purchasing Networks of tech-enabled GPOs, SaaS companies, and supply chain consultants with $7 billion in purchasing power. A few key takeaways regarding supply chain considerations as restaurants open their doors included the following:

  • Due to limited availability of some products, Rosenbloom recommends working with distributors and suppliers “as soon as you have a targeted opening date and start working toward forecasting expected purchase volumes and order guide products.”
  • Modify your menu, keeping focused on high-profit items, cross-utilization (think Taco Bell’s core ingredients that make up most of their items), and guest’s favorites.
  • Keep an “Open communication with your distributor partners in terms of payment plans.” This includes the balance owed pre-pandemic. Distributors may have payment options that you have not considered.

In addition to discovering what one virus can do to our nation’s food supply chain, we also were reminded about the problems that existed pre-COVID-19 but were magnified a thousand-fold. We were reminded that food often travels some 1,500 miles to get to our plate, and that the food waste in America is a problem that needs a solution. Did you know that, if one-third of our food waste could be distributed to those in need, we could end food insecurity in our country? Perhaps, as with most disasters, this one will bear some benefits as we navigate through the issues and look toward a more sustainable future.

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