Foodservice In Disruption

Foodservice In DisruptionFrom Technomic’s Lens

© 2020 Technomic, Inc.

SurvivalApril, May

StartGetting the industry

going again

StrengthenIndustry recovery

SurgeLong-term investment

and growth

WE ARE

HERE

THE ‘FOUR S’ PROCESS OF RECOVERY


Economy and Industry


Looming Economic Issues

• Employment improving

• Government intervention

averted disaster

• Unemployment still high

• 40% face income losses

• YOY GDP declines through 1Q 2021

• Huge debt load

• Stimulus effect wearing off

• 2nd wave of closures

Good News Not So Good News


2020 Scenario

Factor

Best Case Worst Case

Virus resurgence• Limited; localized reactivation of shelter-in-

place

• Widespread; multi-regional shelter-in-place reactivated in

the fall.

Dining in

• Dine in opening remains/reopenings continue

except for potential local-level closures due to

resurgence

• Warm fall season

• Widespread halting of reopenings/closures due to multi-

regional outbreaks

• Early winter outbreak

Economy

• Recessionary environment, however

employment, GDP and other key factors

show solid improvement quarter over quarter.

• Deeper recession situation, with volatile economic

indicator performance.

Stimulus

• Extension of unemployment

benefits/PPP/Stimulus 2.0 through end of

2020

• No/weak stimulus package

2021 Scenario

Factor

Best Case Worst Case

COVID medical advances

• In early 2021, vaccine developed, available

and administered and/or…

• Effective therapies developed to significantly

reduce COVID symptoms and effects

• Medical advances not available to general public until later

in 2021 or later.

Economy

• Strong year-over-year GDP growth returns

• Unemployment abates• Weak economic growth, with continued high

unemployment

Virus resurgence• Becomes not a major issue once medical

advances are made.

• Ongoing widespread and multi-regional shelter-in-place or

dine-in reclosures.

Scenarios


-8.1%

18.7%

-28.8%

-5.7%

21.1%

-26.6%

-3.3%

23.5%

-24.3%

2021 v. 2019 CAGR

2021

2020

FOODSERVICE INDUSTRY GROWTH FORECAST SCENARIOS—NOMINAL

Best Case Middle Case Worse Case


Source: Technomic

70

80

90

100

110

120

130

2019 2020 2021 2022 2023 2024 2025 2026

Nominal FS Recovery Outlook by Scenario2019 =100

Best Case Worst Case Mid Case

Full

Recovery

2022

One Year

Full

Recovery

2023

Two Years

Full

Recovery

2025

Five Years


Implications

• Much uncertainty still exists

• Expect up-and-down ride for the

foreseeable future

• Outdoor dining closures later in the year

could be a problem for FSR


Consumers


47%

43%

32%

27%

23%

15%

15%

12%

11%

11%

6%

Hanging out with friends/family

Going out to eat at a restaurant

Traveling

Going shopping at a store or shopping mall

Going to a movie

Going to a bar with friends, family, co-workers*

Going to a park

Going to a sporting event

Going back to my office or place of work

Attending a concert or play

Going to a museum

ACTIVITIES LOOKING FORWARD TO ENGAGE ONCE COVID IS RESOLVED (SELECT UP TO THREE)

10

*Among consumers 21+

Base: 1,000 Consumers

Q: After the coronavirus situation resolves itself and

social distancing restrictions are lifted, which of the

following activities do you most look forward to

engaging in again within a week or two? Select up to

three.

Pent Up Demand Remains


64%

62%

61%

44%

29%

Ordering from restaurants for takeout

Ordering from restaurants for curbside pickup

Ordering from restaurants for delivery

Dining outdoors/on the restaurant patio

Dining inside the restaurant

% OF CONSUMERS WHO FEEL SAFE OR VERY SAFE

11

Base: 1,500 consumers (June 26-July 6)

Q: How safe do you feel about the following? Please

answer on a scale of 1-5 where 1=not safe at all and

5=very safe.

Consumers Apprehensive


Vaccine Availability Is Key to Recovery

Source: Technomic Ignite consumer brand metrics data

21%

13% 12% 12%

9%

Vaccine approved and widely available

Number of new COVID-19 cases declines locally

High-profile medical officials (e.g., surgeon general, CDC,

etc.)

COVID-19 has been completely

contained

The World Health Organization

(WHO)

Top 5 Signals to Return to Dine In


Heavier Users Cutting Back the Most

51%

23%26%

0%

34%

24%

34%

8%

More than once aweek

Once a week Less than once aweek

Never

Restaurant Occasion Frequency

Pre-COVID-19 Since COVID-19

Base: 27,233 consumers


Source: Technomic Survey of 1,500 consumers

59%

48%

32% 32%

24%

66%

60%

43%

39% 39%

Drive Thru Take Out RestaurantDelivery

3rd Party Delivery Curbside Pickup

Use Monthly +

Pre-Covid Now

Dining Has Shifted To Off-Premise


Implications

• Consumers want to go back to AFH

food activities

• Don’t expect dine-in segments to begin

recovery until medical advances in

place.

• COVID situation has accelerated the

consumer movement toward off

premise


Operator


46%

53%

33%

May June July

% Restaurants Confident in Survival

Greater Survival Pessimism

© 2020 Technomic, Inc. 18

Note: If the vast majority of the state is at a certain capacity, then the whole state is colored as such

RESTAURANT CAPACITY LIMITS—CONTINENTAL

U.S.

■ No restrictions

■ 75%

■ 66-60%

■ 50%

■ 25%

■ Outdoor only

■ 6ft apart

Varies by region

■ State not fully open for dine-in

Capacity Limits An Issue


Emphasis on Confidence Building

Follow/exceed guidelines

Result

Hyper-sanitization

Overt safety measures Self serve out

Employee + customer Employee serve in

Minimize touch

No cash

New labor burdens

Maximize frictionless

Increased costs

New PPE costs


Segment Position

• QSR/fast food

• Healthcare

• Supermarket foodservice

• Full service (especially WTC, breakfast-oriented concepts)

• Travel & Leisure

• K-12

• Colleges

• Business & Industry

• Bars & Taverns

Solid Struggling


Chicken, Pizza Are Winning

Source: Technomic Same-Store Sales Tracker

-63%

-57%

-39%

-33%

-19%

-10%

-10%

-9%

-4%

5%

7%

16%

28%

29%

32%

-80% -60% -40% -20% 0% 20% 40%

Capital Grille

Denny's

Olive Garden

Outback

Dunkin'

Burger King

Chipotle

McDonald's

Wendy's

Pizza Hut

KFC

Dominos

Papa John's

Popeyes

Wingstop

US 2nd Quarter YOY Same-Store Sales Growth


Off-Premise Shift Accelerating

● Recalibration of delivery models

● Bolsters LSR, sustains FSR

● Chains expand self-delivery

⎯ Curbside pickup conundrum

⎯ Consumer appeal

⎯ Operational and cost

concerns

● Active M&A environment


Future: New Operational Footprints Front-of-House

● More planned outdoor space

● Flexible seating options

● Separate pickup areas

● FSR, Fast Casual drive thru

Back-of-House

● Modular kitchens

● Separate off-premise production

lines

● Off-site production/Ghost

Kitchen


Implications

• COVID adding costs for operators in

topline challenged environment

• 3Ds critical in today’s market – delivery,

drive thru, digital

• Off premise shift is real, here to stay

• COVID has accelerated innovation in

the industry

Final Words

© 2020 Technomic, Inc. | Planning Program 2020


Thoughts for the Meat Industry

• Industry relies heavily on meat industry

• Shoring up supply chain, availability critical

• Opportunities exist to support struggling partners:

• Off premise applicability

• Menu/business-building ideas

• Reinforce safety measures

• Foodservice will be back!

• Return to pre-COVID volumes may take time


Joe PawlakManaging Principal,

Technomic, Inc.

Thank You!

312-876-0004 | [email protected] | technomic.com

Documents

Foodservice In Disruption