As we head into the start of the third year of a global pandemic, restaurateurs may wonder if there is a light at the end of this very long, very dark tunnel.
A shrinking labor pool and unpredictable supply chain have eroded optimism, and as the Omicron variant proliferates and looms into winter, that shouldn’t change anytime soon.
Jack Li, founder and CEO of restaurant analytics firm Datassential, is particularly concerned about this element of the supply chain. The shortage has pushed inflation to nearly 40-year highs, as operators pay almost 60% more for beef and grains than just a year ago.
As if that weren’t a big enough challenge, operators also face the highest labor costs in 20 years and an unprecedented quit rate in the industry.
“The consensus is that it will take a year to 18 months, maybe more, to relieve the supply chain. Along with the labor shortage, these are significant challenges and what operators are most focused on right now, ”Li said in a recent interview. “Our data showed a sharp drop in restaurant openings during COVID, and then it started to recover. It has since stabilized and followed a downward trend. It surprised us and I think it has everything to do with the fact that people cannot open restaurants because of the supply chain or the workforce. This is the reality now and I think it will be the reality for a while.
This inability to open restaurants stems from the fact that the industry is about 10% smaller than it was before COVID. If there’s a silver lining to all of this, it essentially gives consumers less choice than just spending more money on dining out.
As such, the traffic and sales numbers have generally been high. However, traffic looks a little different than it was two years ago as offsite opportunities remain stable as restaurants return. Li expects this to be the new standard, which could pose additional challenges for operators.
“There are huge queues and it will be exacerbated, especially with less manpower. Because of this, I think we’ll see an even bigger battle with grocery shopping for in-home occasions, with third-party pickup and delivery. Now is the time for the industry to make plans to reach consumers at home, because more traffic will be at home, ”Li said.
These plans mean providing more offsite options and streamlining them through digital infrastructure, as well as reconfiguring product and packaging needs to go the distance. We’re starting to see beginnings here, as brands experiment with more insulated and more eco-friendly packaging, or even modify their products to travel better, as is the case with the new ‘hot and crispy’ fries.
Innovation and creativity
There’s a lot of innovation in Wendy’s “reinvented” fries, which have been designed specifically to cater to a growing number of off-premises consumers. However, the company had these plans in motion before the pandemic. During the crisis, innovation came to a standstill in the industry as chains went into survival mode and downsized their menus to streamline operations and focus on the essentials.
The creative wheel has started to spin again, and Li expects 2022 to mark a “significant” boom in new products.
“Every indication we see in our data is that innovation will accelerate to at least pre-pandemic levels, if not more. There is a lot of pent-up demand for something other than the comfort foods that consumers have relied on during the pandemic, ”Li said.“ The spirit of innovation is in full swing from top to bottom.
He expects global flavors to see a slight uptick on menus and that prediction is reflected in the National Restaurant Association’s annual “What’s Hot” report. The top five regions expected to influence menus in 2022 are Southeast Asia, South America, the Caribbean, North Africa and West Africa.
Li also expects a big herbal space game, not only with meat-like products, but also with creative uses of vegetables and plants.
“We are in Plant 2.0, which is an expansion of meat substitutes. The biggest revelation from the first wave of herbal products is that we made the herbal idea cool for consumers. It’s huge… and there is a long trail of creative ideas, ”he said.
Herbal products also score high in the NRA report at all times of the day. In particular, the category satisfies more than a simple request for diversified menu options. It is also perceived to be more environmentally friendly, which is very important for consumers. A recent study found that almost 80% of people are more likely to buy a product considered environmentally friendly, for example.
“The importance of personal values in the future will be a very important element in food messages. Historically, consumers have made food decisions based on convenience, price and taste. We believe the area of personal values is the next big food motivator, ”Li said.“ Seventy-one percent of consumers report making food choices based on their personal values and this number is increasing with younger generations. The area that will continue to grow is climate change. I cannot stress enough how big it is and the industry is already starting to respond.
Indeed, that’s when you consider recent announcements from industry giants like McDonald’s
Li also predicts that consumers will pay more attention to foods that offer health benefits – functional foods that provide “positive nutrition.”
“COVID has accelerated our thinking, mainly in the area of immunity. We think it’s going to continue and accelerate and that consumers will focus on foods that give you more energy, that put your brain in the right space, ”he said. “The pandemic has done horrible things to people’s psyches and businesses see mental health as something that we can pursue with food. It’s pretty early on, but we think there will be movement here.