A primary beneficiary from the coronavirus pandemic is the food delivery industry, particularly in the delivery of ready-to-eat food and meal kit subscriptions. Delivery platform giants UberEats and Deliveroo have witnessed a surge in both customer demand and the signing-up of new restaurants while meal kit providers like HelloFresh, Marley Spoon and Blue Apron, have seen huge spikes in active customers, curbing the long-time skepticism from Silicon Valley elites. As a result, the stock prices of meal kit providers such as HelloFresh, Marley Spoon and Blue Apron have soared in a bear market that has seen crippling stock price declines, increasing 79%, 329% and 450% respectively.
The recently imposed social distancing rules are the main catalysts for the unusual change in people’s eating habits. On one hand, the draconian social distancing rules along with the national lockdown in most countries impairs the public’s ability to freely visit restaurants with most shut down with the ones that are still open merely offering takeaway options, which prevents the dining out experience. Compared to on-site pickups, ordering meals or groceries online is also more convenient and reduces the potential exposure to infection, making it seem like a no-brainer.
While there has been a trend towards home cooking at the expense of visiting restaurants, this has also meant a dramatic shift in the food supply chains along with supply chain breakdowns. Tyson Foods, one of America’s largest meat producers for example, has warned that the ‘food supply chain is breaking’ and cautioned ‘there will be limited supply’ amid the coronavirus crisis. This is due to their factories being forced to shut down, since many of their workers have tested positive to the virus. It is estimated that “millions of pounds of meat will disappear from the supply chain” by the time the closed facilities are reopened, even if they are closed for short periods of time since the shelf life of fresh meat products is especially finite. This has, and will continue to directly impact the farmers who do not have buyers to sell their livestock to, which further shows how threatening effects of the coronavirus to the food supply chain.
The breakdown of food supply is even more prominent in Africa. This dry continent is highly dependent on imports to guarantee its food supply, but its externally sourced foods have dried up since the coronavirus where major suppliers such as India, Vietnam and Cambodia have banned the exporting of rice to ensure that their own countries are fed. As a result, the increased scarcity has contributed to price increases, making a staple beyond the reach of many people in Africa who have grown dependent on rice as a key staple.
Around the world, it is the small businesses operating in the hospitality industry that are damaged the most from this pandemic. As social distancing restrictions have become a part of our lives in the past month (for better or worse), we have gotten used to a world where we only leave our homes if absolutely necessary. Without people leaving their homes to visit restaurants and cafes, these businesses will not survive. Even if the lockdown were to end it could take months or possibly years for people to embrace eating out again like they used to and open up their wallets (or Apple Pay if that’s your thing). Many small businesses in the hospitality industry don’t survive the good boom periods, and in a period where cash flows have dramatically fallen and the economy has ceased to a standstill, bankruptcy is only more likely. In such an uncertain time, these businesses must rethink and adapt.
A potential long-term impact of this pandemic is that many cafes and restaurants may accelerate their investment into food delivery at the expense of cultivating an in-store experience. Maybe one day we will only have restaurants that deliver and offer takeaway, with the in-store experiences reserved for the rich. Ultimately, while Australia’s relationship with how they eat food is likely to change, perhaps this is not a bad thing, as home cooking can encourage more health conscious thinking.
The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.
Henry is a third-year Bachelor of Commerce student who will be majoring in Finance and Accounting at the University of Melbourne. He is interested in topics that help to explain asset price fluctuations as well as other issues that provide insights into the future.
Lan is a postgraduate accounting student at Unimelb with international experience across three countries and diverse industry exposure ranging from educational services to energy. In her spare time, you can always find her cooking or baking in the kitchen to satisfy her taste buds.
Vickram is a third year Bachelor of Commerce student majoring in Accounting and Management. In his spare time, Vickram can be found in the gym, trying his hand in the kitchen or watching football (soccer).