Economic Tidbits

Food Service Sales Recovering

Food Service and Drinking Places Sales

The closings in March of restaurants, hotels, bars, and schools had profound impacts on food consumption. Prior to COVID, over 50 percent of the food consumed in the U.S. was sold for consumption outside the home. The rapid COVID induced closings created major snafus up and down supply chains as the chains are unique and distinct for the hotel, restaurant, and institutional food sector (HRI) versus the retail grocery sector.

When the HRI sector shut down, not only did a major demand segment go missing, but much of the food consumption which typically occurs through these venues shifted to the retail grocery sector. Supply chains were scrambling to meet the increased demand in the retail sector, causing temporary supply disruptions, while at the same trying to redirect supplies already in the chain for the HRI sector.

A recent Daily Livestock Report (DLR) shows the impacts of these dramatic shifts. According to DLR, “Adjusted food and beverage store sales were $497.4 billion through the first seven months of 2020, a 12.1% increase from the same period a year ago.” However, “food services and drinking places saw year-to-date sales drop 21.2% from 2019 with a total of $348.5 billion.” A couple observations can be made from the data. First, while food sales through the HRI sector are off compared to last year, and off compared to the 2014-18 average (Figure 1), sales are improving and are markedly better compared to March and April levels. This would indicate consumers are venturing out more. Second, a dollar-to-dollar shift in food consumption from the HRI sector to the retail grocery sector has not occurred—food purchases have fallen likely due to a financial insecurity and a loss in consumer incomes.

The opening of schools and the slow emergence of the HRI sector as people start to venture out will help food supply chains return to some sense of normalcy. However, the impacts of COVID to food supply chains and consumption patterns are likely to be felt for many years to come.

Figure 1. Food Service & Drinking Places Sales

Food Service and Drinking Places Sales

Source: U.S. Census; published in Daily Livestock Report, Steiner Consulting Group, August 20, 2020

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