When the COVID-19 pandemic hit the world, there were moments of grave concern about the potential impacts on the global food supply chain.
Many agriculture producers had trouble getting supplies. Border shutdowns and restrictions on travel threatened the movement of food across the planet. Virus outbreaks at food processing plants created bottlenecks. Then, to top it all off, restaurants and other food service operations closed down (in some cases for good), creating even more strain on normal distribution channels. The situation looked pretty grim.
And yet in spite of all this, we’re a year into the global pandemic and the end is finally in sight. Vaccine production and distribution is ramping up. And the global food supply chain has not collapsed. This is a story of resilience and rapid adaptation to changing conditions as we go about feeding the world—a story of how a global health crisis has not become a widespread global food crisis.
The Food Supply Chain: A Complex Web of Stages
The global food supply chain is an interconnected web of people and activities that result in food getting to where it needs to go. Think of it as a process involving five different stages:
- Agriculture production
- Postharvest handling
- Food processing
A chain is only as strong as its weakest link, and each one of these five stages is vulnerable to pandemic disruption. Among these links in the chain, the biggest shifts of all have been in stages 4 and 5, the where and how of people getting their food and consuming it.
Food Service Hit Hard by the Pandemic
Everyone is aware of how hard the pandemic hit restaurants in the US and elsewhere. But the statistics are even more shocking when you look at them up close.
The pandemic has forced more than 110,000 restaurants to close their doors for good – and that’s just in the United Sates. Before the pandemic, 2020 was set to be a banner year for restaurants and bars, with a sales forecast of $899 billion. The reality was $659 billion, a decline of nearly 27%. A year ago there were 12.2 million people working in restaurants and bars – today that figure stands at only 9.8 million.
In pre-pandemic times, what people were spending on “food away from home” (FAFH) was rising much faster than spending on “food at home” (FAH). According to the US Department of Agriculture (USDA) Economic Research Service, people were consuming about a third of all their dietary intake through meals away from home. Remember that food away from home includes the food consumed in school cafeterias, higher education dining services, hotels, catering, workplaces, and other kinds of institutional food service.
The two biggest food service supply companies, Aramark and Sysco, saw their stock prices decline sharply through April of 2020, and although both have bounced back to some extent, they’re still down from pre-pandemic values.
Sysco SYY (NYSE) 5-Year
This situation of rapid decline in demand for food products is a big concern for the agricultural sector, which depends on it for price stability and a constant, steady demand for agricultural products.
Shifts in Consumer Demand: Everyone Still has to Eat
The global food supply chain benefits from the fact everyone still has to eat, which is why the demand for many basic food products remains constant. But there have been monumental shifts in the consumer demand landscape in terms of how consumers are feeding themselves.
Yes, restaurant closures are disturbing. Yes, many meals are not happening away from home the way they were before the pandemic. But many restaurants are still doing a brisk business because they pivoted to take-out service only. In other cases those that already did home delivery service are busier than ever. In yet other cases, restaurants have signed up to be a part of third-party food delivery services.
The Rise of Third-Party Food Delivery Services
You probably haven’t even heard of World Wide Waiter, which was the first third-party restaurant food delivery service in the US, launched all the way back in 1995. It still operates today as Waiter.com, but has been eclipsed by the three big players in the US market today: DoorDash (launched in 2013), UberEats (launched in 2014), and Grubhub (launched in 2004). Those three account for 80% of the sector’s revenues.
DoorDash went public in the midst of the pandemic in December 2020, with initial estimates putting share prices at around $93, but the stock has been pretty consistently about twice that amount since then.
Two-Year Growth in Stock Prices of Third-Party Restaurant Food Delivery Services
Uber’s stock price declined sharply in March 2020 when stay-at-home orders were put in place across the nation, but now is the highest it’s ever been thanks to the demand for Uber Eats food delivery. Uber Eats is making way more money right now than the ride-hailing service of Uber, and the company thinks demand will remain high even after the pandemic. Uber Eats has experienced a 190% increase in its use.
Another related food delivery service that has seen a huge spike is grocery store orders. Many consumers switched to online grocery shopping, either for curb-side pickup or home delivery. There are still many people who simply don’t feel safe doing their grocery shopping in-person at supermarkets.
The Bottom Line: Resilience and Adaptation are the Key to Stability
When you think about it, all this goes to show that the food supply chain is surprisingly resilient and able to adapt to change. People still needed to eat, but it was happening in a very different way from how it was happening before the pandemic.
It remains to be seen to what extent the monumental shifts in consumer demand will stay in place as the pandemic is ultimately resolved with effective vaccines. And if (or when) something like this happens again, hopefully we’ll remember that we can weather a perfect storm if we work together to nimbly adapt the food supply chain in response to rapidly changing conditions.