Lots to consider before lockdown relaxes – Bielby
Is it too early to be talking about restarting the hospitality sector and returning to something like normal trading conditions for our foodservice wholesalers? Perhaps, but it’s certainly not too soon to be thinking about it.
The first point to consider is that ‘restart’ will not mean ‘return’ in the sense of continuing where we left off; when the lights go back on in restaurants, cafes, pubs and hotels, everything will have changed, from consumer behaviour to disposable income, and from working practices to purchasing preferences.
Estimates vary but as many as a third of our members’ hospitality customers may not re-open at all. Others might liquidate and re-emerge, leaving bad debts to wholesalers behind them. Many will attempt to honour their pre-Covid commitments to their supply chain partners, but the economics of paying debts while also buying new stock – and perhaps being constricted by social distancing measures that limit covers – may make opening up again unprofitable.
If wholesalers are going to be there to serve their customers when the lockdown lifts, they will need two tranches of government support; one to survive the downtime and another to restock for restart.
We also believe it’s critical that government underwrites those bad debts, with the removal of the trade credit insurance market. If not, it will be the wholesalers who pay the price of shutdown.
Wholesalers will also need advance notice of which hospitality businesses will open when, as is anticipated, the release from lockdown is phased in gradually. Different customer groups require different stock, therefore a full plan of the scheduled openings is an absolute necessity.
Getting this staggered approach right is particularly important for a distribution network that relies on constant flow of goods in one direction and cash in the other. One theory being discussed is a ‘pressure cooker’ release to give the public a brief respite from lockdown. A two-week holiday before a second wave of infections and a return to harsher restrictions might have social, mental health and even economic benefits, but start-stop isn’t how food supply chains work.
A phased return will require gradual re-introduction of employees, which will require a partial extension or tapering of the furlough scheme, or alternatively a subsidy of workforce costs. While that may seem a long shot, investment in what it has already designated as key workers is likely to be a more attractive proposition to government than the unemployment and increased benefit costs that would follow non-intervention.
We would also need government to consider what other demands are in play as the markets re-emerge from hibernation. We want schools open as soon as possible, certainly by the start of the new year in September, but re-introducing hospitality customers at the same time would cause distribution issues, unless there’s sufficient notice and support for purchasing stock and bringing staff back from furlough.
Another consideration is that Devolved Authorities will have their own restart strategies – Scotland has already indicated it is forging ahead with its own plans without consulting the UK government.
Through all this, we will be taking advantage of the experience of countries that are further advanced than the UK in the recovery process.
I have no doubt the government will support the food and drink sector. It’s not an industry that can be allowed to fail, nor is it one where competition and pricing can be left in the hands of a few very large players.
But let’s go back to my original question and look at what ‘normal trading conditions’ will be, in six months or two years from now. The answer of course is that we don’t know, but we can start to make some assumptions.
There will be fewer eating-out options as businesses will not re-open. Consumers themselves may well re-evaluate the value of out-of-home dining, both financially and experiencially. There is already research to suggest this might be the case, based on expectation of reduced income but also perhaps a lingering nervousness about exposure to crowded environments.
If this crisis has had any winners it’s those who have embraced home delivery, of both grocery and professionally-prepared meals. In just a few weeks the options and availability here have soared. With a little ingenuity and innovation, the convenience of food-to-your-door is surely here to stay.
All our heads are in the present at the moment and I think that’s inevitable, and the correct
priority. But when we do look up, it should not be with a view to going back to normal. We need to be clear that that’s not possible and probably not even desirable.
Forward to normal; that’s our mission now.column coronavirus covid-19 Foodservice FWD James Bielby