Grocery gains will not cover producers’ restaurant losses

Good times for the grocery industry don’t make up for devastation in the restaurant and bar industry.

That’s one of the conclusions of Kevin Grier, a long-time food industry analyst, about the impact of COVID-19.

The financial losses for restaurants, bars, food trucks and other prepared food providers are likely to be only partially compensated by increased spending at grocery stores.

“Total lost sales (for food service providers from March to December might be about $30 to $32 billion,)” wrote Grier in a mid-April report entitled Coronavirus Sales Impact at Foodservice and Grocery.

“This does not mean that grocery sales will increase by $30 billion.”Grier estimated the grocery sale increase would be $10 to $15 billion due to the COVID-19 lockdown, which is half or less than half of the losses being felt in the food service sector. Booming sales at Walmart and Costco aren’t included in that total because they also sell other goods, but Grier does not expect to see grocery sales pick up all the dollars not being spent at restaurants, bars and other food providers.

Food at restaurants costs more than at grocery stores, so even similar food being sold will bring in less. People also order different types of food at restaurants. The exact shifts within food categories is hard to estimate.

“So, there is not going to be dollar for dollar loss and gain,” said Grier.

Sit-down restaurants are trying to stay alive by delivering food, but they will have trouble replacing 20 percent of their usual sales that way, Grier thinks. Fast food might do better, with 40 to 60 percent of their sales continuing through take-out and delivery. Bars will do very little.

But it looks to be a good year for grocery stores, even if they won’t pick up all the sales dropped by food service.

Before COVID-19 struck, Grier was predicting a tighter year for grocery stores this year than last due to increased competition and already elevated grocery prices.

He’s now revised that, seeing booming sales allowing for higher prices and less competition between grocery chains.

In March, there was much stockpiling of food at home by scared consumers, and that is tailing off now. But sales might remain elevated by about 20 percent all the way into the fall, Grier said.

Consumers will probably see higher prices now that grocers don’t need to chase their dollars.

“That competitive environment has dramatically changed as a result of the virus,” concluded Grier.

“I see less need for grocers to compete with the expected level of intensity. If the retail price increase forecast was in the two to three percent range at the start of the year, it is looking more like four to five percent now.”

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