From the July 2020 issue of Produce Business.
Nation’s top restaurants, distributors and industry experts adapt to new realities.
Americans eat out more than they eat in. This tide turned a decade ago, when spending on food away from home figured at more than half of U.S. households’ food budgets, according to the USDA Economic Research Service 2018-released report, America’s Eating Habits: Food Away from Home.
Fast forward, and the February 27-published 2020 State of the Restaurant Industry Report from the Washington, D.C.-headquartered National Restaurant Association (NRA) projected a nearly trillion-dollar industry, with the foodservice sector in the U.S. predicted to hit $899 billion. One month later, as the COVID-19 pandemic swept the nation, safer at home, shelter in place and quarantine orders cut foodservice sales by 47% nationwide. As of June, despite some states allowing limited dine-in service, the industry has not rebounded to its pre-virus rate or revenues.
Considering that 45% to 48% of total fresh produce tonnage in the U.S. goes to foodservice — according to the Newark, DE-headquartered Produce Marketing Association — and that this sector also includes restaurants as well as education, healthcare, sports and entertainment, business and government dining, this has, and continues to have, huge repercussions for the fresh fruit and vegetable industry.
We asked foodservice professionals across the spectrum of the industry for their insights on the key impacts of COVID-19 and what this means moving forward.
1. OPERATOR SHUTDOWNS & SLOWDOWNS
As of the end of March, 58% of restaurant operators had or expected to permanently or temporarily close as of the end of March, according to a March 25-published report by the NRA of a survey of 5,000 restaurant owners and operators nationwide. This promoted menu changes.
“It’s hard to find foodservice operators that haven’t changed their offerings since the pandemic began for a variety of reasons,” says Mike Kostyo, senior managing editor and trendologist at Chicago-based foodservice market research firm, Datassential.
“My guess is that operators will focus on the fruits and vegetables in their key/best-selling items and keep purchasing these as fresh, and then make swaps for value-added options like fresh-cut, frozen, etc., in other applications.”Maeve Webster, Menu Matters
“In early April, restaurant operators told us that fresh produce was the number one category they were cutting back on. There are several reasons for that, including operators not wanting to purchase large amounts of foods that could spoil in an uncertain time.”
A quarter of operators say they are purchasing more frozen items, and the same percentage says they are purchasing more pre-packaged and grab-and-go ready items, according to One Table, Operator Insights and the Path Forward, a May-published keynote report from Datassential. Twenty-two percent say they are purchasing more shelf-stable items and 16% say they are purchasing more canned goods. Overall, 60% of operators say they are purchasing less frequently than usual, and many are ordering smaller case sizes, particularly on the limited-service side.
“My guess, though I have no data to support this, is that operators will focus on the fruits and vegetables in their key/best-selling items and keep purchasing these as fresh, and then make swaps for value-added options like fresh-cut, frozen, etc., in other applications,” says Maeve Webster, the Arlington, VT-based president of foodservice consultancy, Menu Matters. “Some of that is likely to continue, as operators try to maximize profitability amid ongoing mitigation restrictions, labor short-ages, etc. Ultimately, operators will likely skew toward fresh but if they’ve found value-added products that meet their needs, are consistently available, and help them cut costs/increase profits then they are likely to stick with at least some of those options going forward.”
2. RESTAURANTS AS RETAILERS
PHOTO COURTESY OF CHEESECAKE FACTORY
Inventory imbalance was one reason why some restaurants added retail operations. Twenty-seven percent of operators surveyed for Datassential’s One Table report said they had shortages on some items and overages on others, while 21% said they had too much inventory. Secondly, some restaurant operators opted to sell retail items, such as fresh produce, to offset their fall in dining revenue. Third, still other operators such as the St. Louis-headquartered Panera Bread Co. saw an opportunity to offer customers items like apples, avocados, blueberries, red grapes and vine ripe tomatoes that they couldn’t access at the grocery.
“We were uniquely suited to bring fresh produce to guests grocery-style, given the depth of our pantry and the fresh, wholesome ingredients we use each day at our cafes,” says Gregg Waterman, chief supply chain officer for the 2,100-plus location fast-casual chain. “We will continue to follow the customer’s lead on whether this remains a need for them in the future.”
“Recently, we’ve been selling 10-pound pre-pack boxes of fresh produce like apples, oranges and grapes for $25 at hospitals. This way, the staff doesn’t have to stop at the supermarket on their way home.”Mathew Tate, Avendra, LLC
Higher education and healthcare are two additional foodservice venues where produce is finding a home at retail.
“We’re seeing more demand in campus dining for products like Mann’s Nourish Bowls that students can buy and take back to their dorm to eat,” says Mathew Tate, director of strategic sourcing and category strategy leader for produce at Philadelphia-headquartered Avendra, LLC, one of the country’s largest hotel procurement and hospitality suppliers. “Recently, we’ve been selling 10-pound pre-pack boxes of fresh produce like apples, oranges and grapes for $25 at hospitals. This way, the staff doesn’t have to stop at the supermarket on their way home.”
Several operators say they will keep their grocery or market offerings for the foreseeable future, particularly independent operators, according to Datassential’s One Table report. These options score well with consumers, with fresh produce coming in second only to fresh bakery items as a grocery option that consumers are interested in purchasing from restaurants. In fact, 70% of consumers surveyed said they were interested in buying fresh produce from restaurants, and that number jumps to 80% for Gen Zs and Millennials.
3. TAKE-OUT & DELIVERY SKYROCKETS
The customers’ appetite for restaurant fare is definitely there. At the beginning of May, while 22% of operators asked were closed and 2% catering to dine in, a whopping 75% were open for take-outs, according to Datassential’s One Table. Likewise, 76% of operators surveyed either have offered or started anew to provide curbside pick-up since March, with 66% expressing they will continue this service even when COVID-19 restrictions are lifted.
“We’ve seen strong seasonal pull on all mushrooms and alliums, especially ramps, during the last few weeks. Pasta and pizza make for great vehicles to highlight specialty seasonal produce.”
Michael Muzyk, Baldor Specialty Foods Inc.
“In the last three months, we’ve seen our takeout business grow from 40% to 80%,” says Michael Manzo, chief operating officer for Manasquan, NJ-based Jersey Mike’s Franchise Systems, Inc., which operates over 1,600 Jersey Mike’s Sub sandwich shops.
What’s changed for many foodservice operators is optimizing their offerings for delivery.
“Fresh green salads do not transport particularly well and are relatively easy to prepare at home, thus we expect to see fewer food-service purchases of leafy greens,” according to Candace MacDonald, co-founder and managing director of Carbonate/Creative Strategy & Brand Communications, in Cincinnati, OH. “Kale or cabbage hold up much better to delivery and are good substitutes. We’re also seeing the elimination of salad bars and other self-service vehicles, so that will also impact the purchase of those items typically featured there.”
Pizza and pasta are surging on restaurant menus.
“These are great dishes that are great for profitability and hold up well for delivery,” says Michael Muzyk, president of Baldor Specialty Foods Inc. in The Bronx, NY. “We’ve seen strong seasonal pull on all mushrooms and alliums, especially ramps, during the last few weeks. Pasta and pizza make for great vehicles to highlight specialty seasonal produce.”
Desserts are less frequent in take-out and many desserts can’t stand up to delivery.
“We expect foodservice to purchase much fewer berries, which previously garnished a lot of desserts, and will be replaced by more economical frozen ones in cooked desserts (pie) or sauces,” says Carbonate’s MacDonald.
4. SEALED = SAFE THE IMPORTANCE OF PACKAGING
Taste has long been the number one factor consumers considered when it came to desire to purchase. This has now changed with COVID, according to Datassential’s Kostyo. “Options like sustainability, healthy items, affordability and taste all take a back seat to safety right now. Touchpoints and food that is ‘exposed’ to the environment continue to be a concern for consumers. In fact, nearly a quarter of consumers said they were throwing away or refusing to eat raw produce in the early days of the pandemic.”
In addition, a change in delivery systems is altering how food is served.
“It would be great to be able to purchase more pre-packaged fresh produce from our suppliers, for example items like baby carrots and sliced apples in ½-cup portions. Or products like single-serve carrots with hummus or apples with nut butter. Or another plus would be lettuce and tomato packaged separately with a sandwich so students could add the produce when they were ready to eat.”Lisa Feldman, Sodexo USA
“The biggest change we’ve seen is that everything has to be packaged so it can be handed out through a car window,” says Lisa Feldman, director of recipe management for North America for Gaithersburg, MD-based Sodexo USA, which provides food services to institutions from schools to senior living communities. “There’s an increased labor expense to packing everything out, especially when you consider we serve 2 to 2.5 million school meals a day. It would be great to be able to purchase more pre-packaged fresh produce from our suppliers, for example items like baby carrots and sliced apples in ½-cup portions. Or products like single-serve carrots with hummus or apples with nut butter. Or another plus would be lettuce and tomato packaged separately with a sandwich so students could add the produce when they were ready to eat. Right now, that’s cost-prohibitive.”
5. MINIMIZED MENUS
The biggest menu change operators have made in the wake of the COVID-19 pandemic is paring down their menus, with 43% of operators saying they are offering fewer choices, according to Datassential’s One Table report. This phenomenon has happened across the board, from fine dining operators shifting to fewer yet family-size options to QSR’s like McDonald’s eliminating its all-day menu. This menu trim is driven by operators looking to offer either signature dishes or those items easiest to make with a drastically reduced staff as well as inconsistent customer traffic.
“To keep our operations running as smoothly as possible, we simplified our menu to streamline the process at our cafes, which provides a fast and safety-oriented level of service; but no menu reductions have been focused on fresh produce. As we get into the summer months, you will see some additional items more centered around produce make their way onto our menu,” says Panera’s Waterman.
“As we get into the summer months, you will see some additional items more centered around produce make their way onto our menu.”Gregg Waterman, Panera Bread
This downsizing isn’t necessarily a bad thing, according to Dan Coudreaut, managing director of Naperville, IL-based Coudreaut & Associates, who served as the vice president of culinary innovation and executive chef at McDonald’s from 2004 to 2018. “It’s starting to feel like there is a menu correction going on, a right-sizing rather than bloating of the menu. For years, there’s been a drumbeat to expand menus. For example, in 2013 at McDonald’s, we introduced 32 new items. I think operators now are moving to fewer complex menus and prioritizing their core items. For produce, when it comes to burgers, for example, there may be a lot more call for mushrooms and coleslaw over capers and sundried tomatoes.”
6. COMFORT VERSUS INDULGENT
In response to uncertainty and the stress of social isolation, consumers are seeking familiar comfort foods on menus—from chili rellenos at their favorite Mexican restaurant to a blooming onion and T-bone at their go-to steakhouse,” says Mary Humann, principal of the Loveland, CO-based food marketing and public relations firm, The Humann Factor LLC.
Comfort foods reigned supreme in March when stay-at-home orders were first being enacted across the country, says Datassential’s Kostyo. “We asked consumers what they wanted, and the top choices were all comfort foods: pizza, burgers and sandwiches, meaty entrees, pasta, in that order. Even as restaurants start to open consumers say they want indulgent dishes, with 68% saying they will choose something indulgent the first time they go back to a dine-in restaurant. That’s not to say produce doesn’t have a place in these items, but that operators should consider how they position them. A rich fresh strawberry shortcake may sound a little more appealing right now than a strawberry yogurt bowl.”
“As restaurants start to open, consumers say they want indulgent dishes, with 68% saying they will choose something indulgent the first time they go back to a dine-in restaurant. A rich fresh strawberry shortcake may sound a little more appealing right now than a strawberry yogurt bowl.”Mike Kostyo, Datassential
Of note, however, is that Americans’ concept of comfort has changed.
“While pizza and burgers are part of the overall comfort food category, consumers—particularly younger consumers—have a far wider definition of comfort that encompasses everything from pho to poke,” says Menu Matters’ Webster.
Additionally, surveys from Datassential show that currently the foods consumers crave most from restaurants are Mexican, Asian and pizza.
“This may help drive sales of Asian greens, jalapeño peppers, avocado, fresh tomatoes and other ingredients often used in these cuisines,” says Carbonate’s MacDonald.
7. PUSH PLANT-BASED CUISINE
Vegetarian and plant-based diets were on the upswing when COVID-19 hit. Now the pandemic will further this trend in two key respects, says MacDonald. “First, it is driving the costs of meat up due to plant closures, while at the same time, the virus health scare will increase interest in wellness.”
When consumers were asked for their opinions regarding potential meat shortages as part of Datassential’s One Table report, 47% said they would switch to more plant-based meats and meat alternatives. This was particularly true for younger generations, with 62% of Gen Z responding that they will eat more plant-based options. There is even greater potential in this category. While only 22% of consumers said they ate plant-based burgers regularly before COVID-19, over half of the consumers mentioned said they’ll be interested in eating them after.
Beyond this, adds Datassential’s Kostyo, “this is a unique time where it’s not just a recession that is impacting consumer food choices, but a pandemic that directly impacts consumer health. Over half of consumers told us they wish all restaurants offered immunity-boosting ingredients, for instance, and they rate options like citrus fruits, dark leafy greens, superfruits and broccoli as the top foods that boost immunity.”
“There’s currently lots of innovation on plant-based tech foods like burgers. But if that’s the sole focus, and fresh fruits and vegetables are left out, that’s not a win for the produce industry or Americans’ health.”— Greg Drescher, Culinary Institute of America
Onions provide a variety of flavors to menus and have unique qualities that help not only boost the immune system, but help prevent heart disease, diabetes and even some cancers, according to René Hardwick, director of public relations for the National Onion Association, based in Greeley, CO. “We are very excited to see the new creations coming from this ever-changing environment, and we hope the onion with its nutritional power plays a starring role.”
During the past several years, the Cheesecake Factory, a nearly 300-restaurant chain headquartered in Calabasas Hills, CA, has developed vegetarian dishes primarily as salads on its menus, says Chef Robert Okura, vice president of culinary development and corporate executive chef. “We’re also continually looking into stronger vegetable options for our accompaniment applications. A recent example would be eliminating a starch from our branzino recipes and serving it with two different vegetables, one being asparagus and the other being the newly-introduced caulilini.”
“Most guests come to us because our food is delicious and comforting,” says John Karangis, executive chef and vice president of culinary innovation at Shake Shack, a New York-headquartered burger chain with 280-plus locations throughout the U.S. “That said, we are testing a new vegetarian burger that we started to develop late last year and now are testing at two locations, Manhattan’s West Village and Paramus, NJ.
“The burger has 14 different vegetables as well as grains and herbs, and celebrates fresh ingredients. Some of the vegetables include carrots, onions, garlic, kale, sweet potatoes and mushrooms,” he says. “Fava beans, quinoa and a grainy mustard are part of the flavorings. We have a manufacturer that makes the burgers in the scale we need. They are served on a whole wheat bun, with roasted tomatoes, shredded lettuce and sliced avocado. I can tell you that we put the same thought, care and love into this new burger as we did our other menu items.”
The growth and interest in plant-based offerings, according to Menu Matters’ Webster, is likely to accelerate beyond the growth seen pre-COVID-19.
Ideally, this includes not only meat substitutes, but fruits and vegetables integrated into all aspects of the menu, says Greg Drescher, vice president of strategic initiatives and industry leadership for the Hyde Park, NY-headquartered Culinary Institute of America. “There’s currently lots of innovation on plant-based tech foods like burgers. But if that’s the sole focus, and fresh fruits and vegetables are left out, that’s not a win for the produce industry or Americans’ health.”