Food systems impacts of COVID 19
Food systems impacts of COVID 19
Posted by Steve Guilbert
28 October 2020
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 Retail, Evening 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%)