By Dan Bolton
Regardless of regulations, consumer behavior, expressed mainly as fear, determines tea sales' fate in foodservice.
As reported by the Conference Board, consumer confidence slipped to a three-month low in November with “future expectations” of better days ahead at 89.5%, down from 98.2% ― even after receiving the word that coronavirus vaccines will be widely available by next summer.
Before the pandemic, the foodservice segment accounted for 20% of tea revenue. Market forecaster Technavio estimates “best case” growth of less than 1% in US foodservice in 2020. McKinsey & Co. reports that even with the virus contained, due to economic disruptions, a rebound to pre-crisis growth could take four years, according to a survey of global executives.
"Each segment faces its unique challenges," writes Datassential analyst Jaclyn Marks. "Lodging, K-12, and college and university dining have seen big hits due to the decrease in travel and the move to virtual learning. Dining establishments from QSRs (quick-service restaurants) to fine dining have entirely changed their operations to provide contactless delivery. Meanwhile, only one segment has grown from 2019 to 2020.
Sales of ready meals and sides prepared at grocery deli counters increased, according to Datassential, which is monitoring openings and closings of 600,000 restaurants in the US and Canada. Food sales at the drive-thru window have returned to pre-pandemic levels in the US, but meals for takeout, curbside pickup, and delivery to homes generally do not include tea. This is because the kitchen refrigerator is nearby and usually well-stocked with cold tea. A surge of tea sales in grocery and online have filled home pantries with more choices than restaurant menus, and preparing a hot cuppa that tastes “just right” takes little time.
Home cooking is here to stay, according to Morning Consult: “Nearly a third of US adults said they plan to cook at home even more than they do now once stay-at-home recommendations have lifted.”
Restaurants have embraced take out and delivery and are building new drive-thru formats. Source: Datassential Firefly
The response is highest among Gen Z (born after 1997): “A full 43% of Gen Z respondents, or those born in 1997 or later, said they planned to cook at home more after the virus versus just 9% who said they’d cook less,” according to Bloomberg News.
Globally there are signs of optimism. Where the contagion's threat has declined, people return to eating out (but prefer dining outdoors). They are far more comfortable ordering curbside pickup, waiting in drive-thru lanes, and ordering for delivery.
Since March, Datassential CEO Jack Li has tracked consumer sentiment across every US restaurant segment. Predictably, last spring when the pandemic was newly advancing 67% said they were “very concerned" about Coronavirus and said they would “definitely avoid” eating out. Concerns rose to a peak of 68% during the first week of April, trending gradually downward in May and June before spiking briefly in July (51%) and again in September (51%). Fears ebbed in October as 40% of those surveyed said they would avoid eating out. Now the numbers are climbing again, observes Li. In November, 54% of respondents reported they are “very concerned” about Coronavirus.
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Researchers say Restaurants are High Risk
Public health experts estimate indoor venues accounted for 8 in 10 new infections during the early months of the pandemic, consumer fears are justified.
According to researchers using cell phone data to track the movement of 98 million people in the ten largest metro areas in the US, a crowded full-service restaurant is the most dangerous place. The peer-reviewed study, published in the journal Nature, concluded, "restaurants are by far the riskiest places for new infections. The study ranked fitness centers, cafes and snack bars, hotels, limited-service restaurants, religious organizations, physicians’ offices, stores, gas stations as the next most problematic places for contracting the virus. Waiting in line is unsafe. Grocery shopping is a concern.
The study doesn’t mean that restaurants must close, according to the New York Times. “Reducing dining room capacity to 20% would reduce new infections there by 80% while preserving some 60% of customers,” the newspaper reported.
The recent surge, which Thanksgiving gatherings exacerbated, is expected to crest well above spring total when the US reported 33,000 new cases daily, measured as a seven-day rolling average. In November, that count had risen to 1.2 million cases with 90,00 hospitalized and 2,000+ deaths per day, more than double the first week of November, according to a report in The Atlantic magazine.
Masks became politicized, but given the circumstances, consumers still want them. “Masks aren’t as controversial as you might think: 82% of consumers support a national mask mandate. “Restaurants should not be afraid to enforce mask mandates and other safety protocols for fear that it will deter customers; in fact, failure to do so will likely hurt business,” according to Datassential.
Australia’s Restaurants Rebound
OpenTable calculates seated diners from reservations in seven countries. During the last week of November, seatings were down 58% globally (based on reports from Canada, Germany, Ireland, Mexico, the UK, and the US.
In Germany, which recently re-imposed lockdowns, seatings during the third week of November were 98% less than during the same period in 2019. Seatings were down 94% in the UK and 57% in the US that same week.
In stark contrast, Australia reported a 41% increase in seatings the week of Nov. 25. Australia, which has fewer than 100 cases COVID-19 cases nationwide, is the only major country tracked by OpenTable to show a return to normal. The country has experienced 907 deaths in 2020. The US death toll is approaching 265,000.
In September, Yelp reported 32,109 US restaurants were closed (61% permanently), and 6,451 bars were closed (54% permanently) among the 163,000 total retail closures. Closures increased by 23% between July and September. Breakfast and lunch places located near formerly bustling city centers are the hardest hit.
Restaurants are not doomed, writes Li, “consumers have been craving food items they cannot make at home, or that they may not even know about yet, and will turn to you for culinary excitement. Your competition isn’t other foodservice operations, but rather people opting to cook at home.”