Measuring Foodservice Success: July COVID Recap

Things have changed. Especially in the foodservice industry. As of today, it’s been five months since the pandemic jumped into our personal and professional lives. 

Everyday there’s an opportunity to learn and grow… and face new obstacles that we haven’t had to overcome before.

Prior to March, if you asked folks in foodservice, “How is your business doing?” or “Do you expect to be on plan next month?”, they knew the answer. Predictable performance and historical data were reliable resources. 

Over the last five months, predictability has been a fickle foe and the answers aren’t so evident.

We’re traveling on a bumpy road. There is no clear end to the story and no simple way to forecast the future. 

Foodservice business is greatly impacted by specific market, product and geography dynamics.

Here at Blacksmith Applications, we have about 100 manufacturers managing north of $10 billion in pricing discounts and promotional allowances. Here are some key trends we’ve seen in our dataset:

Key Data Insights

• April: Dramatic loss on volume and spending.The sky was falling. On average, 60%+ decline versus 2019.
• May and June: Some reason for optimism. A bit of a bounce back in May that continued into June. Reopening started.
• July: Restrictions are coming back. We’re reversing on the trends and we’re in line with May numbers… giving back some of those gains.

There’s no certainty around what’s coming next or how to prepare for it. There’s no blueprint for how to manage your way through an extraordinary time like this.

Recently, I talked with foodservice experts to find out what they’re seeing in their businesses and how their perspective on the current industry recovery changes day to day. 

Keep reading for valuable perspectives from:

• Bill McCullough, Ventura Foods
• John Davie, Dining Alliance
• Tom Theis, Smucker
• Tom Walsh, Conagra

Comparing Data

“Our numbers echo Blacksmith’s data. We thought the world was coming to an end in April but it started to stabilize in June and July,” Tom Walsh, VP / GM of Foodservice at Conagra Brands says.

“Our patterns also look similar to Blacksmith’s data. We saw serious dips in April. Then, we saw a large replenishment recovery in June. In July, I’ve seen normalization,” adds Bill McCullough, VP of Revenue Management at Ventura Foods.

Rethinking Trade Funds

At Blacksmith, we’ve seen that our foodservice clients want to shift funding from fixed spend to rated. Before COVID, everyone attended conventions and shows… You’d pitch ideas and get sampling off the ground. 

Those food shows aren’t taking place now. 

I don’t think people want to spend less money, but they want to spend it more effectively. To the extent that we have money to promote or discount products to reward volume, we should give that to operators. It will drive value and help folks get through this.

Tom Theis, Director of Revenue Growth Management at Smucker’s adds, “Back in the spring, we went into our Blacksmith TPM system and pulled down all of our fixed spend. We evaluated everything based on what’s going on. We’re thinking about how to reapply dollars.” 

Early on, there was optimism that food shows and conferences would be pushed to the fall or winter. But those that haven’t been cancelled altogether are attempting virtual shows that may or may not pan out.

 Theis continues, “We have to think about how to deploy our funds to drive volume and cases… for our customers and us.”

McCullough says that Ventura Foods is taking a serious look at its expenses. “The transition to virtual food shows is real and we’ll start measuring the ROI on those,” he notes. 

Manufacturers are showing interest in investing more in ecommerce platforms. “With less feet on the street, really having more dollars allocated to distributor ordering platforms could be valuable. We’re shifting funds to where we’ll see the best ROI,” McCullough says.

Conagra has been asking this question for the last few years, says Walsh. “We’re rethinking trade funds. We’re not intending to take anything away, but we need to position ourselves for the future. I think digital will provide a better ROI than some traditional things we’ve seen in the past.”

The Foodservice Manufacturer Discussion

Increasing Forecasting Frequency 

“We’re now the department of re-forecasting,” says Theis. “However much time you spent before building the plans … it’s blown up.” 

The team at Smucker’s is spending more time in their systems. The landscape is changing so dramatically and is unpredictable week to week. 

After all, Theis adds, “What happened last month is probably obsolete today.”

“I echo Tom’s statement about forecasting,” notes McCullough. “My monthly demand planning meeting is now bi-weekly, and sometimes hourly. I check in with the demand team on a regular basis and focus on the SKU level so that we can track big swings in demand.”

And Walsh agrees, “forecasting seems to be on the calendar every day.” 

The panel recognizes that analysis is key. At Smucker, Theis says they’ve started to look at geography — “We’re so national, in many cases we paint with a broad brush on reporting and that has worked in the past, but now we have to be granular to really understand what’s going on in key states.” 

Deduction Management Delays

Deductions usually require an order and an invoice. 

In March and April, manufacturers extended terms for distributors. Extended terms have helped them through these times. Even if operators were buying, the payment to the manufacturer was stretched out as a result. 

If things that were sold in the spring, we didn’t have visibility until June or July. When in fact the new extended terms are due, the distributor would pay, and the deduction would get attached.

The visibility to purchases is incredibly delayed. It’s because of the mechanics of how we, as an industry, settle things. Distributors are buying less and have a longer time to pay than they did pre-COVID. 

We don’t see deductions as quickly as we used to (and it wasn’t awesome before…).

Tom Walsh explains that timing on deductions and claims is key. “We recognize that our customers are contending with layoffs and delays”. Even as manufacturers, we’re not processing as quickly as we did before. 

Theis adds that things once took for granted…things that went off like clockwork before, now take more effort. 

Sales Agency Strategies

Sales agencies are an extension of our own team, says Walsh. “We work with them closely. They’ve had challenging times and we’re partnering with them, keeping them on board in supporting us.”

Ventura is doing the same. “We leverage their insights and work with them. We want to keep the partnership strong,” McCullough mentions. 

Manufacturers can work with brokers to find emerging opportunities as things start to reopen.

“We also are trying to leverage their expertise,” says Theis. Brokers understand the uniqueness to sales calls that weren’t there in the past. In some instances, they’re having traditional sales calls, some are hybrid. “We want to know, What is success? How can we enable different calls and make sure all samples and information is ready?”

PARTNERING FOR PROFIT 

Tom Theis, The J.M. Smucker Company

Relative to recovery, one thing I’ve seen, and this hurts me personally and professionally, are the struggles of restaurants that focus on the breakfast daypart. Smucker’s launched its All Out for Breakfast campaign to remind everyone of the importance of getting out and supporting those dine-in breakfast operators. While take out seems to be going well for lunch and dinner.. It’s not getting a lot of traction for the breakfast daypart. Plus, no one is traveling for work and they’re not going into the office, so breakfast traffic is way down.

I think it’s important to check in with your partners… ask them: 

• What are you seeing? 
• How’s business going? 
• Do you have a need for a format or products that might have seen unnecessary before, that now with coronavirus, seem important?

One message we hear from operators: There’s additional costs for new resources, sanitation, PPE – regardless of channel, it’s more money. We’re hearing that the food budget will get pared back to absorb those costs.

REPORTING RIGOR

Bill McCullough, Ventura Foods

Something I’m doing now that’s become really important, is looking at new orders and cancelled orders on a daily basis. This is the best information for us to understand what’s happening with our foodservice customers. 

I’m also looking at data at the format level. This is critical. Portion control products have demand through the roof. Bulk item demand has diminished. Looking at the format lets us communicate with supply chain partners and ensure that they have the right ingredients and materials.

As operators reopen their doors, we want them to start with oil in the fryer. Through Blacksmith TPM, we can identify those operators that had been closed and are starting to see a resurgence.

WATCHING THE TRENDS

Tom Walsh, Conagra Brands

At Conagra, we’re fortunate to have a strong retail business in addition to our foodservice business, so we have a variety of data to leverage. One of the things we’ve done over the last five years is leverage behavior data for consumers and gain insights into those trends. 

We think about how we can remain creative and agile, how we relate to our customers. We want to get ahead of the curve from a production standpoint. 

The Operator Perspective

John Davie, Chief Executive Officer, Buyer’s Edge

Spend Trends

There’s still a ton of uncertainty as to what will happen in the next few months. Through June, we were feeling optimistic. 

We pulled data from 80,000 restaurant locations and tracked spend to be about $12 million per month pre-pandemic restrictions. In April, that was down about 60%. 

The recovery was swifter than we would have thought. We were about 70% back to normal in the month of June; increasing about 7% every week.

Father’s Day was a peak week; over 70% return. After that… the recovery started to slide off. Then, there was a significant drop on the week ending July 11… we saw a 15% dip.

According to Davie, operators are having different experiences. He says that this is a rollercoaster ride. Three weeks ago, we were all depressed as we watched the trends go down. 

Now, in the last couple of weeks, we’re creeping back up again!

The truth is coronavirus won’t disappear. Even though we expect to bounce back, it will be slower than those June recovery numbers.

School Segment

This is tough to predict. There’s crazy uncertainty in the education space. Obviously, we aren’t seeing any volume for K-12 or C&U right now.

Come fall, there’s going to be a mixture of schools that don’t open and those that operate on a  hybrid model. Manufacturers have to plan for schools to be down significantly at least for the first few months of that season. 

Schools usually place opening orders in early August and really ramp up at the end of August. We’ll have a better idea of volume in the next few weeks. Really, I’m not super optimistic on the volume here.

Predictions on Restaurants

I think many predictions are overstated. The operator is more resilient than they get credit for. I would have guessed something like 5% – 10% would close permanently… if you were doing badly before pandemic, you weren’t going to make it post-pandemic.

Ultimately, the consumer will revert back to their habits of eating out. 

The problem operators are experiencing is the restriction of opening at 25% – 50% capacity.  They hire staff and buy food, but if they can’t fill their restaurant, that’s when the concern comes in. It’s like burning money. Some are just choosing to not open because of that restriction.

According to Datassential, nearly two-thirds of operators think their venues will make it through the crisis, but they’re still worried.

The reclosing of states is a big concern. I don’t think it’ll be 100,000 restaurant closures… but it is a big problem.

How Can Manufacturers Support Operators?

Davie expresses his gratitude for manufacturers; “They’ve been amazing during this whole process. A number of foodservice manufacturers have stepped up to offer temporary incentives and discounts.” 

1. We’ve participated in lots of webinars between operators and manufacturers. The topics are focused on getting products that will     allow operators to adapt to a better takeout and/or delivery models.
2. There were concerns that manufacturers’ business would be off, so operators worried about them pulling back on programs and incentives. That has not been the case. 
3. Manufacturers add so much to the recovery. They’re finding items that work with less labor, as everyone struggles with labor shortages. For example, Denny’s can’t stay open 24 hours because they can’t get the staff. Any products that will take less labor or  products that travel well, are helping operators win. When things turn to normal, they could have a hand up.

Takeaways: The Road to Recovery

I want to repeat that this is a complicated time in the foodservice space. Everyone is wondering, what’s coming next, how can we be prepared?

I, along with this panel, think that changes will continue…

… Navigating into the recovery phase, you should focus on:

• Tracking trends in consumer behavior
• Working with your customers
• Analyzing data for insights

We will make it through this crisis. We’ll keep tackling any challenges that come our way and prepare our businesses for success with data analysis.

Our team at Blacksmith is committed to support you as much as possible. Reach out with questions.