Restaurants will be tempted, if not forced, to adopt tech innovations.
Who knew 2021 would be harder than 2020? While the pandemic shutdowns were a shock almost two years ago, it’s been the slow, delayed, reoccurring waves of near-recovery and then relapses back to restrictions that have worn on businesses and their customers. But now is not the time to throw in the towel and settle for a new normal! It’s a new year, and there are challenges to take on to re-energize budgets and bottom lines...
1. Restoring Lost Labor’s Love: Like housing, it’s been a seller’s market where there is less ‘inventory’ than demand. The “great resignation” is real, with quitting at an all-time high and workforce participation at a 40+ year low. The past year has been one of learning patience and flexibility, but how much longer will people put up with poor, slow service before they gravitate to brands that have figured out how to maintain customer satisfaction despite scarce labor?
The solution will involve testing the right balance between tech automation and personal touch. It will also require the hospitality industry to re-think how it attracts, trains, rewards and retains a labor pool that will be more costly but also more stable.
2. Managing the Tech Takeover: Technology platforms were the clear winner and beneficiary of a pandemic that influenced and accelerated tech adoption by both consumers and the industry struggling to adapt and survive. A company has actually mapped 16 categories and hundreds of companies supplying tech to the restaurant industry for things from Search, to Delivery, to Robotics, to Staffing to Inventory Systems.
Restaurants, especially chains, will be tempted if not forced to adopt self-ordering and pay platforms, AI voice technology, third-party delivery, and other substitutes for their own labor. This adoption will be costly, not only to capital budgets but also to the tenuous connection that brands maintain with their customers. The more ‘faceless’ interactions become, the more commoditized the transaction will be, reducing loyalty and increasing the likelihood to switch.
3. Not-So-Direct to Disintermediation: Manufacturers have dreamed for years of communicating and selling their products directly to customers, instead of going through a “middleman” distributor. The pandemic introduced new dynamics and shifted power bases in several ways to create opportunities for both camps. For example, despite the fact that leading foodservice distributors report more than 50 percent of orders are made directly online (without the aid of a sales rep), they re-established their relevance to operators by digging in and becoming their indispensable partner when things got rough. Brokers and manufacturer sales reps were pretty much locked out and unable to visit or troubleshoot, and have generally found themselves outside the circle of trust and relevance for at least the near future.
On the other side of the coin, product makers with established digital direct-to interfaces and marketing efforts experienced jumps in sales (and built a whole new direct customer base), as consumers and businesses shopped online for options and supplies they couldn’t find through previous suppliers or outlets.
Like technology, D2C and traditional distribution/retailing will continue to strike a balance between faceless and personal relationships, which every manufacturer will want to weigh and optimize where direct makes sense and where ‘middlemen’ are desirable.
4. Soothing Stretched Segments: Most are probably aware that certain restaurant sectors like quick-service managed to hold on to, or even increase, sales while full-service restaurants experienced an even faster slide on their already declining traffic counts. Many businesses were forced to make decisions they might have put off for a few more years, while others discovered new income streams (takeout, outdoor dining, family meals, groceries) they never would have spent time pursuing.
Noncommercial feeders also saw varying levels of disruption, from Healthcare which experienced the least decline in traffic counts, to B&I and Travel & Leisure being the most heavily hit. But even when things go back to normal in terms of restrictions and potential demand, it is clear recovery will look very different for everyone and require differing levels of response/support. Onsite recovery will be the most varied and unpredictable. As remote work stretches out and offices are only partially filled, B&I recovery (and restaurants that benefit from commuters or office workers) will be slow and uneven. And segments like Travel, C&U and K12 that continue to be hampered by a lack of labor will continue to require reduced hours/days of operation, flight cancellations, or coupons to allow students to dine at retail venues.
Chains and big companies generally have the most resources and levers to pull to weather storms. Armed with streams of data, they can quickly close units, pare inventories, bankroll necessary expenses or investments, and promote heavily to drive preference. So it’s independent venues that will struggle and continue to need intel, support, and advice to help them stay competitive and relevant as the ground continues to shift under them.
Companies large and small also need to consider what’s changed and that requires new ways of operating or selling. For example, will big pots of coffee at an OCS station still be appealing (if they ever were), or is now the time to convince customers of those alternatives previously too costly to consider? And will consumers accept the multi-use tabletop condiment containers that showcase a brand but are perceived as more unsanitary than ever?
5. Stabilizing Supply with Simplicity and Solutions: JIT was great until manufacturing and trucking hit a snag. Fresh foods were the best until demand dried up overnight. In an increasingly volatile world, people and businesses are beginning to realize that the need to be prepared for those ‘rainy days’ (or weeks, months, or years...) is more of an imperative than ever. This applies to manufacturers of products as well as warehousers, operators and consumers.
So, what are companies doing to help ensure themselves and their customers against the next inevitable disruption? Makers of shelf-stable (food) products have a more compelling business case than ever. Suppliers who racked up new prospect/customer names and emails shouldn’t let these connections lapse, ensuring customers know their supply alternatives and how to be prepared. Foodservice distributors found new customers in desperate retailers, and restaurants found new customers through groceries and different meal formats.
Not only was it necessary and inevitable that everyone cut back on SKUs and menu options to streamline operations during lockdowns, but it was probably long overdue. Everyone was accustomed to hyper-customization and an endless variety of options, which bloated and overwhelmed the system more than it probably created satisfaction. But moving forward, like everything else, simplification and customization will be a balancing act, open to new approaches. At the middle of it all, is an operator who needs simplicity and convenience, and a consumer who wants more options and flexibility.
For more than 20 years, Chris Wolf has been tracking emerging consumer opportunities and leveraging insights into strategy, innovation and brand development for multi-national companies including PepsiCo, Tyson Foods, McDonald’s, Nestle, Wal-Mart, Subway, Tesco, and Starbucks. He currently applies his food expertise on client projects at the Marlin Network, a subsidiary of Advantage Sales & Marketing.