Tag Archives: Food industry

Yanking The Chain

Earlier today I prepped some chicken thighs for dinner. They’re the last of a 10-pound bag which was part of a 40-pound box we bought at the start of the pandemic. It was more of an opportunistic buy than panic buying. Many of the food distributors were getting rid of the boxes they would ordinarily sell to the restaurants which had been forced to close. We have a freezer and who doesn’t love a great deal? No, I’m not cooking 10-pounds of thighs this evening but I’ll admit that it’s been thigh week (bacon-wrapped thighs, chicken and black bean soup, and chicken enchiladas if you are curious as to where the other 8 pounds went) here.

Why do I bring that up this Foodie Friday? Because my opportunity buying was the result of a disruption in the supply chain. At the same time as I was getting chicken thighs, other folks were buying boxes of burgers and pork chops. What was unusual was that the same items we were getting dirt cheap were often unavailable in the supermarkets. That pesky supply chain again.

You’re probably aware of the toilet paper shortages. With people staying home, the paper made for institutions and offices was in lesser demand while people panic-bought the home version. The same thing happened with food and, in fact, is still happening if my trip to the market yesterday was any indication. There was nary a canned vegetable to be found other than the really large cans that might have otherwise gone to a commercial kitchen.

This from Bloomberg:

As consumers cook more at home, driving up grocery store sales, they’re steering clear of restaurants, which has big implications for how suppliers package and sell their meats and produce — and for demand. Restaurant portions are bigger, and meat, cheese, and butter, in particular, are consumed in higher quantities at restaurants, but so are vegetables.  Before the pandemic, Americans spent more than half their food budgets on dining out. Over the next 12 months, 70% of consumers plan to significantly decrease spending on restaurants, according to a Bank of America survey.

How does this apply to your business? It’s a reminder that every business needs to think hard about and prepare for disruption. It means doing things differently. As an example, I would never have considered a 40-pound box of thighs, even at the wholesale food price prior to the pandemic. The great price coupled with the uncertainty of the food supply chain at the time changed my mind.

The funny thing is that the food supply is quite plentiful. The issue is that the distribution system between the producer and demand is out of whack, which is causing massive headaches for every person involved: farmers, packagers, distributors, retailers, and end-users. While it’s the rare business that can bypass that broken system altogether, every business needs to make alternative plans just in case. Backups for your backups, I guess. Make sense?

 

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Filed under food, Thinking Aloud, What's Going On

Dealing With Disaster

Another Foodie Friday in the midst of a pandemic. We’ve all been affected and no business sector more than restaurants and bars. Many bars are still shut down and the places where bars have reopened have seen COVID cases rise dramatically, prompting some areas to shut them down again. Restaurants are gradually reopening but business is very different. I want to look at how and see if we can learn anything.

When you make a business plan, part of what you do is to project sales. In the restaurant business, you’d look at how many meals (covers) you’re serving each night, how often you’re turning tables, and how full that makes your restaurant. In most cases, any plan that indicated 50% capacity would be marginal and no plan would see 25% capacity as even a remotely feasible option.

If you’ve got a giant dining room (think Cheesecake Factory), 25% of capacity may still be a large enough number to make the business a small profit. Now throw in the need to keep your customers separated by six-feet, which may make the actual capacity below even the 25%. It’s impossible.

Restaurants area putting up plastic barriers to provide separation. My guess is that they’ll need to address their air filtering at some point as both customers and health officials find out more about how the virus spreads. Buffet? Bye-bye. Menus are being reduced, printed, and used once. More expenses, as are the costs of having staffers who do nothing but sanitize tables and everything else after parties have left. It’s a low-margin business to begin with and what we see happening now is just destroying the business completely.

A well-known celebrity chef moved here a year ago and opened a successful restaurant. He closed it the other day. Yes, he was doing takeout but as he said, that wasn’t what diners wanted from a restaurant known for its live experiences. Is the business experience the same in a closed-in booth? I’ve had very good takeout from several places during the last few months but even the best of it isn’t as good as the same food coming right out of the kitchen. Neither is the experience.

So what can we learn? I’m amazed at how the industry is adapting. Ghost kitchens, which I’ve written about, are going to be a part of the future. So is the takeout business, lesser experience or not. Even with restaurants reopening, the takeout business isn’t declining. Are there lessons for non-food businesses? I think so.

First, don’t be afraid to consider the most far-fetched things in your disaster planning (“oh come on – no one is going to shut down the entire economy…”). Second, that plan needs to focus on customers’ needs. The takeout business isn’t something the restaurateurs planned for but customer demand necessitated it. Third, don’t assume that the disaster plan will apply only to a temporary condition. I don’t think we’re ever getting back to anything but a new normal, do you? Think about change being permanent and plan accordingly. Make sense?

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Filed under Consulting, food, Reality checks

Fewer Oreos, More Profit

It’s always good that Foodie Friday follows my shopping day, which is Thursday (gotta get that senior discount – Thursday only!). If you aren’t the primary shopper in your house and you haven’t been to a grocery store lately, you probably haven’t noticed that the shelves are less-full than usual. It’s not just the meat case (you’ve probably heard about the issues with meatpacking plants during the pandemic) or the toilet paper aisles that are on the empty side either. I’ve noticed lots of gaps.

It turns out that while it’s due to the current crisis, it might not be for the reasons you think. As CNN reported:

It’s also because major food companies — the ones that make our cookies, chips, and canned soups — have been paring down their product offerings. When stay-at-home orders went into effect this spring, Mondelez, General Mills, PepsiCo, J.M. Smucker, Campbell, Coca-Cola, and others saw a massive spike in demand for some products. To help meet that increase, they sped up production lines on their most popular items -— and that meant cutting back on more fringe offerings. That translates to fewer varieties of Jif peanut butter, Oreo cookies, and Frito-Lay chips at the store.

In other words, they reverted to the Pareto Principle and focused on the items that brought them the most revenue and profits and didn’t worry much about line extensions or the varieties that filled the shelves but not the corporate pockets, at least not as much as the main lines do.

Restaurants are doing much the same thing. Many places have trimmed their menus way back to focus on the most popular and profitable items. For example, Dave & Buster’s reduced its 40-item menu to 15 offerings and McDonald’s has cut salads, bagels, yogurt parfaits, and all-day breakfast during the crisis. IHOP used to have a 12-page menu. Now it’s giving guests a 2-page, disposable menu. This should improve economies of scale, simplify ordering supplies, make it easier on the staff, etc. 

Less can be more and the exercise that these businesses have conducted to deal with a crisis is something that your business might consider as well. What services are you providing that are less attractive or less profitable? Is your product line overextended? Is it better to focus on the more profitable sectors even if it costs you a few customers? Something to think about this weekend!

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Filed under food, Helpful Hints