What will the food and drink sector look like post-COVID-19?

The coronavirus pandemic has led to a huge shift in consumer behaviour, and now a new report seeks to gauge the impact of COVID-19 on the UK food and drink market with four possible scenarios for the future.

The Eating In Vs Dining Out report has been produced by IGD Retail Analysis in collaboration with foodservice consultant Peter Backman, and aims to help companies in the food retail and foodservice sectors to plan for the future. It comes after lockdown led to the closure of all non-essential shops, pubs, restaurants and cafes, which led to a dramatic change in consumer habits and spend.

In 2019, UK consumers spent £200bn on food and drink, 36% of which was spent in foodservice outlets and 64% in retail. However, the ongoing pandemic has affected this balance.

Whilst the future is still uncertain as restrictions ease and businesses slowly go ‘back to normal’, IGD’s report lays out four potential scenarios that address two main variables: the potential path of the virus and the performance of the economy.

The first hypothetical scenario – The Great Reset – is the least impactful, and sees food and drink consumption largely undertaken at home. Retail sales would remain high but flatten out as lockdown lifts and people begin eating out. Safety and hygiene would have a higher value for consumers as they decide where to eat or drink. Eating out would also return to 2019 levels.

The second hypothetical scenario – Decade of Drift – sees the economy taking longer to recover, having a great financial impact on households and businesses. Companies “accelerate cost-cutting and efficiency programmes to demonstrate value to consumers”, which leads to lower levels of product development. Whilst demand for eating out is high, many are unable to afford it.

Technical Isolation, the third scenario, sees the virus drive a technical response by both businesses and consumers, where shopping online is seen as the safest option. Businesses divert investment from stores, whilst eating out is also constrained. Stores and foodservice businesses that are unable to repurpose and adapt to online will close.

The final and most severe scenario – Globalisation Reversed – sees globalisation regress, which in turn places added pressure on supply chains. Supply chains will be rebuilt, ranges will become seasonal or disappear entirely. Deliveries and takeaway services become the only option for commercial foodservice owing to increased costs and operational difficulties.

In its report, IGD stressed the importance for the industry to prepare in order to better respond to events quickly and efficiently. Retailers should consider which changes in consumer behaviour will become permanent in order to identify solutions, whilst foodservice companies should re-write business plans that balance customer focus with practical operational issues.