Economic impacts, business confidence and local lockdowns

 

By Tim Wilkinson

In a month where Tesco’s posted rising profits, some of the economic impacts of the initial national lockdown are becoming clear. With local lockdowns now implemented, the ‘firebreak’ lockdown across Wales from 23rd October and the possibility of a ‘no deal’ Brexit rearing its head; it’s an interesting time to look at some of the economic impacts of Covid-19 on food businesses.

Tesco’s profits in the first half of the year (26 weeks to 28th Aug 2020) were widely reported as surging (see Essential RetailEvening Standard and The Telegraph) with pre-tax profits up 29% to £551 million. The tidal wave of shoppers opting to do a ‘big shop’, a huge uptick in online orders (up 69%) and the panic buying in March/April all contributed to an operating profit of 1.2bn in the UK retail arm. However, the bottom line was affected by lower sales and an operating loss for Tesco’s Bank, as well as poorer performance in Tesco’s European retail operations. Even so, this increase in profits is clearly significant, and illustrates the extent to which the pandemic has affected consumers buying habits and food choices. Of course, tides may already be changing, as shoppers return to the likes of Aldi and competition in the home delivery market rises.

Tesco may have profited, but the hospitality sector has suffered. Increased home cooking and Covid safe procedures limiting customer numbers, appear to be partly responsible for impacts in the casual dining sector. For instance, owners of Wagamama’s, Frankie & Benny’s and Garfunkel’s chain, The Restaurant Group, posted a pre-tax loss of £235 million (for 26 weeks to 28th June) – almost £150 million more than a loss made in June 2019.  There has, however, been higher sales between July and September 2020 , as restrictions relaxed and some people returned to eating out. Pub chain Wetherspoons reported a loss of £34 million for the year ending in July 2020 (down from a £103 million profit in 2019) – the first annual loss in 36 years . With sales of alcohol in grocery stores up 8% in September and 10pm closing times, there are clearly challenging times for pubs ahead. This month also saw a report of the closure of street food businesses, such as Street Feast, which traded at four sites in London, but struggled to operate under Covid restrictions. While the summer has offered possibilities for al fresco dining and drinking, as winter draws in, one wonders how consumers will respond. I noticed translucent pods outside a café in Exeter, which offered customers some respite from the weather, but clearly, capacity is limited. How far does new(ish) spaces like these, take food businesses?

Away from the financial performance of individual businesses, the Office of National Statistics Business Impact of Covid-19 Survey makes very interesting reading.  In the two weeks from 7th to 20th Sept, 2375 accommodation and food service businesses responded to the survey. Of these respondents, around 2% said business turnover and profit had increased by more than 20%, compared to what they would normally expect for this time of year.[1]  Meanwhile, over 40% of accommodation and food businesses reported that both turnover and profit had decreased by over 20% compared to normal expectations for this time of year.[2]  Such financial figures appear to translate into business confidence, with 30% of accommodation and food businesses reporting that they had low (25.4%), or no (4.6%), confidence that they would survive the next 3 months. While the picture for businesses overall (including all industries, not just accommodation and food) has improved since March, these figures highlight the continued extent of the economic impacts of Covid-19.

With local lockdowns and tiered restrictions in the UK, there is an increasingly pronounced geographical dimension to how these impacts will transform, going forwards. As restrictions alter the possibilities for the food service industry and probably customer preferences for food purchase, along administrative boundaries, existing regional differences in the food system, may well become more marked.

 

[1] Question: In the last two weeks, how has the coronavirus (COVID-19) pandemic affected turnover/profits, compared with normal expectations for this time of year? Statistics calculated through sum of turnover/profit categories ‘increased by 20-50%’ and ‘increased by over 50%’. Turnover total (2.5% plus unspecified amount less than 1%), profit total (1.9%)

[2] Question: In the last two weeks, how has the coronavirus (COVID-19) pandemic affected turnover/profits, compared with normal expectations for this time of year? Statistics calculated through sum of turnover/profit categories ‘decreased by 20-50%’ and ‘decreased by over 50%’. Turnover total (45.9%), profit total (40.3%)

Survey design as lockdown rules change

By Tim Wilkinson

This month we have been working on designing a questionnaire survey for food businesses. Our survey is exploring the impacts of Covid-19 restrictions and the strategies businesses have implemented in response. It has been challenging designing a survey that will capture the multiple and varied impacts of Covid on business operations, and which addresses the different phases of the lockdown restrictions, which have shaped the type and degree of those impacts. As with nearly all aspects of life at the moment, the process of survey design has been one of adjusting to new Covid restrictions – to make sure the survey works in a variety of lockdown contexts. We discussed a draft of the questionnaire with our Expert Panel last week, and we are currently working with their feedback to develop the survey. We will launch the survey, online, in November.

We are going to be seeking respondents from a range of businesses from different food sectors (e.g. fruit and vegetables, meat, dairy etc.) and from different stages of the supply chain. Having created a sampling frame, after much discussion, we decided to focus on several stages of the food supply chain – but not all. We are focussing on transporters of primary products, food processors, manufacturers, importers, exporters, wholesalers and distributors. We have chosen not to cover primary producers, hospitality or retailers in the survey – although they are important parts of the food system. This was partly because it was so challenging to write robust questions that individual businesses from across the whole food system could answer in a standard way. But also because there are excellent secondary data sources from market research, particularly for retail and hospitality. We will be exploring the impacts of Covid-19 on primary producers in our Centre for Rural Policy Research South West Farm Survey 2020, which we launched this month. We are also investigating the possibility of running a survey of tourism and hospitality businesses in the South West early next year to gather data on this sector.

As part of our background work in this part of the project, we reviewed existing surveys that look at the impacts of Covid-19 on businesses. There are, of course, a number of surveys doing this. We found 16, but not all were exclusively about food businesses (they covered a range of industries). Some surveys focussed on only one stage in the food supply chain (for example, only covering manufacturers or food processors). Other surveys only looked at businesses in one particular UK region or had geographical foci abroad. It is worth checking out the Office of National Statistics (ONS) Business Impact of Coronavirus Survey, which has tracked changes to business turnover, workforce, prices, trade and resilience every two weeks since 9th March. The ONS data set includes all industries, although some separate data are available for food and beverage importers and exporters.

Despite identifying a wide range of Covid-19 impact surveys, we found that a cross-sectoral look at the impacts of Covid-19 on food business specifically, both during and after the national lockdown in the UK, has not been made. In such a rapidly changing situation, we are discussing the possibility of repeating the survey at some point next year. However, we will use the data we collect in November to understand the food chain responses to shocks in 2020. We will be exploring our key findings in interviews with businesses in order to understand more of the story behind the incredible shifts in business practice. The outcomes of the research will be available to inform policy on food business resilience and preparedness for future shocks to the supply chain and food system.

Meat Again!

Four raw meat steaks on a wooden table

 

By Prof. Michael Winter

I found myself in Grimsby recently talking about meat! Well not literally on the east coast, for it was yet another virtual encounter.  The National Food Strategy invited me to be an ‘expert’ for one of their public dialogue events and a fascinating evening it proved to be. I have had a number of experiences of public engagement events over the years and this one was no exception in proving to be stimulating and fun with a touch of the unexpected thrown in. I can’t breach confidentiality by revealing the views of the Grimsby people I ‘met’. But I can say how impressed I was by their willingness to engage with the excellent material prepared by the NFS team and contribute to some stimulating debate on the issue of meat consumption. The debate was wide ranging and certainly not confined only to health and/or methane and climate change. I look forward to seeing what use the NFS makes of insights drawn from the public dialogues.

I drew particular satisfaction from the Grimsby conversations for two reasons: first the non- confrontational nature of the exchanges in contrast to other discussions on the topic I have on occasion been party to; and secondly, the novelty of some of the thinking.  There has not been a great deal new said on the meat debate in recent research publications that I have seen – the climate change and dietary arguments now follow a rather well-worn path. But I sat up when I saw the title of a new publication from the Global Food Security Programme, mainly because I didn’t initially understand it: ‘Low-agency population interventions to reduce meat consumption’ (Reynolds et al 2020).  It transpires that agency in this context refers to people’s ability or inclination to act, and therefore low-agency population interventions are those that require little or no engagement from the individuals affected.  Does this mark a shift from the behaviour change agenda that has been rather dominant for quite a while in debates about shifting people towards more sustainable and healthy lifestyles?  Well a single academic paper does not amount to a policy shift, so only time will tell whether the low-agency approach has traction.  But what exactly does it mean in practice?  The authors propose low-agency population interventions as a response to the intention-behaviour gap citing studies that have shown that a willingness amongst some consumers to reduce meat consumption may not lead to a change in levels of consumption.  This is usually put down to the widespread availability of meat, large portion sizes, marketing, and the low cost of less healthy foods. In this context it is ‘unlikely that the sole provision of information about the health and environmental risks associated with meat consumption will reduce its consumption’. The alternative low agency approach is where:

… food environments are designed to encourage individuals to make healthier and more sustainable food choices without limiting their freedom of choice. In these environments, extreme levels of self-control would not be required to avoid the overconsumption of meat. Instead, changes to the environment would guide individuals toward consuming less meat with minimal conscious engagement and may therefore be more effective and equitable than other strategies. This approach can also change norms; being provided with smaller portion sizes can lead to individuals choosing smaller portions in other settings.  Low-agency population interventions include taxes on less healthy foods or nudging strategies like changing the availability and placement of food products, reformulating food products and changing portion sizes. These approaches have been demonstrated to reduce individuals’ excess consumption of many types of food (e.g. chocolate, hot meals, crisps) and therefore have potential for reducing meat consumption.

The authors have systematically reviewed a wide range of literature to explore the various low agency options and are careful to point out how robust the evidence and data are for each option. Except that this careful objectivity slips in the conclusions where they say that ‘stakeholders working to produce and sell meat products throughout the food system are likely to oppose such interventions’. For this bold claim they cite a single reference which is a study of fast food vendors near secondary schools in disadvantaged Scottish neighbourhoods and is based on interviews with ten fast food shop managers. I would suggest that this rather specific source hardly provides sufficient evidence to make a claim about what might happen throughout the food system, a system which is highly complex and diverse and which our research is seeking to uncover and explain.

 

Reynolds J.P. Scalco A. Ejebu O. Toumpakari Z. Smith A. Lu F. Clark B. and Penney T.L. (2020) Low-agency population interventions to reduce meat consumption, Report produced for the Global Food Security Programme. September 2020.

It’s not just about COVID: Food in the news

 

By Prof. Michael Winter

There has been a spate of press coverage in recent days about food related issues and not all are about COVID impacts. The prospects of a no-deal Brexit at the end of the transition period may well have a more severe impact on food supplies, certainly in the short-term, than the impact of COVID in March and April. How COVID and Brexit combine to serve up a cocktail of challenges is the theme of an article in the Sunday Times on the 18th October entitled ‘Jingling tills won’t solve a tricky midwinter for supermarkets’. The supermarkets are expected to ‘benefit’ from the new restrictions on the hospitality sector, and delivery slots are already filling up. The big four – Tesco, Sainsbury’s, Asda and Morrisons – are reported to be preparing plans to extend hours, use virtual queueing apps and have awnings outside stores to give shelter to those queuing. On top of all this are the uncertainties associated with the end of the Brexit transition period. The Sunday Times piece speculates that ‘fear of border delays in the new year could spur shoppers to indulge in festive stockpiling, leaving supermarkets with empty shelves and warehouses’.

On a similar Brexit trade theme, the Financial Times reports on concerns that organic farmers in the UK may not be able to export to the EU after the Transition Period ends due to uncertainty around whether the EU will recognise the certification of UK goods with an organic label. The piece reports that UK exports worth up to £225m a year could be in peril and that EU businesses are already winding down orders from the UK as time for a trade deal runs out.

Returning to the COVID theme, the Guardian reports that major food companies have written to the Chancellor about the risk posed to food supplies to care homes, schools, hospitals and prisons as the loss of income associated with the decline of the hospitality sector has put some wholesalers at risk. The companies advocate more Government support for wholesalers. In contrast, an in-depth piece in the New Statesman claims that some wholesalers have benefitted unfairly from Government funding of food boxes for the vulnerable. Anoosh Chakelian in ‘Revealed: The £208m food box rip-off’ pulls no punches denouncing the poor nutritional quality of the contents of food boxes for the clinically extremely vulnerable and moreover claiming that the Government paid private contractors almost double the retail value for food parcels, through the £208 million contract. Kath Dalmeny, the chief executive of food and farming charity Sustain described the boxes as a ‘mixed picture of food quality’, and the scheme as ‘logistically impressive’ but ‘nutritionally questionable’. The reference to Sustain took me scurrying off to the Sustain website where I found a challenging piece by Kath Dalmeny calling for ‘a public inquiry into the Covid-19 emergency food response, to ensure that we don’t make the same mistakes again’. She sets out 7 key questions: Why did so many people go hungry before and during the Covid-19 pandemic?

  1. Why has it been so hard for Government to recognise and relieve financial hardship for those most in need?
  2. Why was it so hard to ensure children from very low-income families got the food they needed?
  3. Why did Sustain have to resort to legal action to secure government action on child holiday hunger?
  4. Why don’t we treat meals on wheels services more seriously?
  5. How do we stop supermarket shelves from emptying ahead of impending shocks to our supply chains?
  6. Why was so much public money given to supermarkets and not local shops and suppliers?

For more details on the above see: https://www.sustainweb.org/blogs/jul20_covid19_food_insecurity_mustnt_happen_again/

In August’s Bulletin, I talked about the National Food Strategy, which clearly provides one of the more promising routes to address at least some of these questions. Of course, the origins of the NFS pre-date COVID and so does food poverty, and so we finish with the starting point of this piece that there are food issues which are not just about COVID. Let me give the final word to someone who has been in the news a good deal recently, the footballer Marcus Rashford who on the 15th October launched his petition calling for an end to child poverty writing as follows:

‘For too long this conversation has been delayed. Child food poverty in the UK is not a result of COVID-19. We must act with urgency to stabilise the households of our vulnerable children. In 2020, no child in the UK should be going to bed hungry, nor should they be sat in classrooms concerned about how their younger siblings are going to eat that day, or how they are going to access food come the holidays. The school holidays used to be a highlight of the year for children. Today, it is met with anxiety from those as young as 7-years old. Many have said that education is the most effective means of combating poverty. I do not disagree with this statement, but education is only effective when children can engage in learning. Right now, a generation who have already been penalised during this pandemic with lack of access to educational resources are now back in school struggling to concentrate due to worry and the sound of their rumbling stomachs. Whatever your feeling, opinion, or judgement, food poverty is never the child’s fault. Let’s protect our young. Let’s wrap arms around each other and stand together to say that this is unacceptable, that we are united in protecting our children. Today, millions of children are finding themselves in the most vulnerable of environments and are beginning to question what it really means to be British. I’m calling on you all today to help me prove to them that being British is something to be proud of.’

Baking for stress-relief during a pandemic

 

By Veronica White

I don’t know about you, but I was very happy when I heard that The Great British Bake Off was returning this Autumn. In this year of lockdowns and social distancing, there’s something incredibly comforting about watching the bakers in their ‘Covid bubble’, where there’s no fear of a (Hollywood) handshake.

It’s not just watching Bake Off that lets me escape. Since the start of the pandemic, I have found peace in baking. When the stress of writing my master’s dissertation or job applications was too much, I would take the evening off to bake. As Instagram was flooded with photos tagged #covidbaking and #quarantinebaking, it was clear I wasn’t the only one turning to baking as a way of distracting myself from reality.

Home baking soared during the UK’s initial COVID lockdown, as people looked for ways to fill new ‘spare-time’, deal with stress and connect with others on social media. When supermarkets struggled with the high demand for flour and yeast, bakers got creative – turning towards flour-less bakes and sourdough. It wasn’t just individuals who got in on the baking trend: chains such as Pret and Greggs released the recipes for their beloved bakes, while chefs and restaurants hosted ‘cook-alongs’ on Instagram. Feel free to leave us a comment letting us know what you’ve been baking!

A quick look at Google trends for some key search terms highlights a significant increase in interest at the beginning of lockdown, gradually falling off again in the summer months. Yet interest appears to be growing again, perhaps due to a combination of tightening COVID restrictions and Bake Off coming back to our screens.In her essay for The Correspondent, Emily Dreyfuss writes about how sharing pictures of our bakes on social media helps remind us ‘we’re all in this, whatever this is, together’. The importance of feeling a part of a community is also discussed by Easterbrook-Smith (2020), who suggests that in addition to providing sustenance and stress-relief, baking allows us to demonstrate our skills on social media and connect virtually with people when face-to-face contact is limited.

A few weeks ago, I started baking my own bread. It’s still far from perfect, but I quickly realised how much money I can save by baking my own loaves. Following the financial crisis in 2008, Italians began baking more bread and pizza at home, while here in the UK, home baking also increased. According to the AHDB, a ‘third of consumers have had some change to their household employment status’ because of COVID-19 and will, therefore, likely be looking for ways to save money on food. Their survey found that 72% of consumers are cooking from scratch more in an attempt to save money. Future research should look specifically at whether home baking is being used as a method of reducing shopping costs.

Whether I’m curled up on the couch watching Bake Off or baking banana bread in the kitchen, it’s easy to forget what’s going on in the world outside our living room. Over the last few months, baking has offered many of us a much-needed break, a creative outlet. Will this interest in home baking continue in a post-pandemic world? For the sake of our mental health and our wallets, I hope so.