Will selling groceries help restaurants ride out COVID-19?

Discussion
Photo: RetailWire
Apr 09, 2020
Matthew Stern

Grocery stores are slammed with customers and restaurants are closed for dine-in patrons as the coronavirus pandemic continues to play havoc with business operations. For restaurants, the loss of dine-in sales has been devastating. Some are looking for other options during the current downturn, including adding groceries to their pickup and delivery menus.

Panera Bread began offering groceries for pickup and delivery (through Grubhub) on Monday, according to CNBC. The selections available include bread, bagels, milk, yogurt, cream cheese and fresh produce. The chain lost half its business when bans on in-restaurant dining began.

Independent and small chain restaurants nationwide have pursued similar approaches as the epidemic has worn on.

In Tampa, FL, the Tampa Bay Times gives a list of 10 local restaurants offering groceries, many selling commodities used as ingredients in their menu items, like beef, fresh fish, eggs and vegetables, alongside full takeout menus. Restaurants are offering not just food staples, but toiletries, kitchen products and cleaning products that have grown hard to find.

In Tucson, AZ, the mayor of the city has explicitly authorized restaurants to temporarily act as pop-up grocery stores, according to a report by KGUN9 Tucson.

The emerging model offers hope not just for restaurants to maintain steady business while their primary offering is shut down, but for customers facing staple shortages along with delivery and pickup bottlenecks at their regular grocery stores.

Although food as a whole remains available, grocers have been experiencing shortages of some staple items as demand has surged.

While bread, meat, dairy and fresh produce are remaining well-stocked, there are other products that have gotten harder for shoppers to find, including dry goods, baking supplies, frozen vegetables and eggs, the Portland Press Herald reports. Some locations with smaller backrooms have had difficulty resupplying shelves as they empty of product.

Retailers have experienced similar capacity difficulties with last-mile logistics. Stores have been unable to meet the demand for online grocery orders and workers at major third-party delivery services, including Shipt and Instacart, have staged walkouts and even strikes over safety concerns.

DISCUSSION QUESTIONS: Do you see grocery sales as a viable means for independent and chain restaurants to partially offset the loss of dine-in sales while Americans stay at home? Do you see better ways to bring relief to the delivery bottlenecks grocers are experiencing?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Restaurant wholesalers have access to paper goods and cleaning supplies that are not available in stores, so there’s not much to say here other than this is a brilliant pivot."
"I’m also seeing a trend the other way: grocery stores selling items from local restaurants (HEB is a good example)."
"There is a ton of business theory that would guide these decisions. From Jobs-to-be-done, to customer value chain analysis."

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28 Comments on "Will selling groceries help restaurants ride out COVID-19?"


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Art Suriano
Guest

Any idea to help these struggling businesses right now is worth pursuing. However, I don’t see this as a big win. Getting the word out is the first problem for those restaurants attempting to sell groceries, and most people are creatures of habit and will continue shopping at their local grocers. If restaurants were offering the items that consumers can’t find, they would have a better opportunity. But of course, that’s not feasible. Most of them will succeed in doing some business, but this is not going to be the big game-changer that will help make up for their losses. I feel bad for all the companies today that are forced to watch their business being destroyed with no end or solution in sight. Hopefully this virus is contained soon, and we can begin to rebuild our economy and our country.

Suresh Chaganti
BrainTrust
Suresh Chaganti
Co-Founder and Executive Partner, VectorScient
5 months 13 days ago

Obviously it isn’t going to completely bridge the gap, but every bit helps. Most importantly, it would help restaurants to stay in the minds of their consumers and increase the takeout orders.

Mark Ryski
BrainTrust

This is a testament to the resourcefulness of restaurant operators. While I doubt this will materially offset losses, every little bit helps. And beyond bringing in a little much needed revenue, these restaurant operators are keeping themselves busy and at least some of their employees working, which is vitally important.

Georganne Bender
BrainTrust

Restaurant wholesalers have access to paper goods and cleaning supplies that are not available in stores, so there’s not much to say here other than this is a brilliant pivot. You’d better believe that consumers will remember these restaurants long after the pandemic is over. Mr. Rogers said “Look for the helpers.” He was right.

Jeff Weidauer
BrainTrust

We have an independent restaurant here that specializes in using local organic products. They have shifted to selling the ingredients, posting available products each day on Instagram. And they have TP! In this case it works because this restaurant has a devoted customer base and a point of difference, but it’s not a solution for all.

Nikki Baird
BrainTrust

I will say, I thought at first it was just a way for restaurants to get around some of the closure orders. However, having learned a lot about the food supply chain in the last few weeks, I have completely changed my mind. It is not easy to switch producers and the supply chain that delivers food to restaurants over to being able to deliver food to retail. So having restaurants sell groceries is actually critical right now to keeping food moving to consumers. There is already a shocking amount of waste happening on the commercial side of food delivery, and that needs to stop as soon as possible. On a personal front, I’m buying flour and chicken from my local tapas restaurant – it’s the only place I can get those things, and it helps them keep paying employees, which is goodness all around.

Stephen Rector
BrainTrust

I have seen this happen at local restaurants in my community and I applaud those small business owners for thinking creatively to offset their sales loss. I also know there are food distributors for restaurants that are doing the same thing where they can offer bulk food at reasonable prices to customers. Everyone must keep thinking about different ways to hang on to their businesses until things return to “normal.”

Richard Hernandez
BrainTrust

While this is not enough to close the gap, this was a godsend to me and the people in my apartment complex. it’s hard to find the basics — milk, lunch meat, eggs, etc. where I live (by the time I leave work, most of the larger retailers are already out), The restaurant in my complex opened up a food pantry to sell those items and more. If anything they built a relationship with residents who have never been there and will support the restaurant when things get back to a normal state.

Ralph Jacobson
BrainTrust

I suggested this opportunity in my comments on March 30. Although this most likely will not replace lost revenue, it definitely could help keep the lights on as well as provide a great service to the community.

Shep Hyken
BrainTrust

I had a friend in the restaurant business who pivoted to a food market the first week of quarantine. It has more positive impact on his ability to keep people employed and stay open than it does on the bottleneck grocers are experiencing. Keeping any business open and people employed is good. In times like these, we must be creative and come up with different/alternative business models.

Cathy Hotka
BrainTrust

This is having an impact in my city. Getting the word out is all-important, so we’re seeing flyers on telephone poles, notices on neighborhood listservs, etc. Let’s hope that the increase in foot traffic from the stir crazy homebound can increase awareness. Oh, and big signs on the fronts of restaurants are helping too.

Patricia Vekich Waldron
Staff

Consumers are looking for a one-stop shop for food and supplies. Smaller venues (like local restaurants) for pick-up and/or delivery are all a bonus.

Brian Cluster
BrainTrust

This is the time for restaurants to creatively find new ways to serve their customers. It is a time to test things and ask for feedback from customers. It starts with the takeout menu, gaining an understanding of what is selling and why. How we eat is changing with virtually no quick bites happening on the road. Providing unique or hard-to-find grocery items is certainly another avenue as restaurants may have access to certain products and ethnic brands that are harder to find in the grocery channels. There is also an opportunity to expand the restaurant’s digital presence by providing quick cooking tips or offering online community cooking classes.

Lee Peterson
BrainTrust

Talk about grasping for straws. When the consumer thinks of you as one thing, and you want to change that, you’d better have a long-term plan in place — one that includes patience. Filling in as a needs-based substitute during hard times is an idea that’s a time-tested faux pas. Why not sell utensils and glassware too? TP?

Peter Charness
BrainTrust

I think consumers will think of these restaurant/food distributors as helpful good citizens which will build loyalty for the “post-COVID-19” world when things head back to a new normal. In times of need, this helps the needy. It also reduces a lot of waste in terms of parallel supply chains that normally don’t cross over (retail vs. industrial food chains).

Ricardo Belmar
BrainTrust

There is a lot to like about this approach! Not only does it help keep restaurants operating, including workers, it also helps move food supply from closed restaurants into consumers’ homes when grocery stores are often in short supply. Restaurant suppliers are now sitting on food stocks that they can’t deliver due to closed restaurants operating on reduced pickup and delivery service only. I’ve heard of many of these suppliers pivoting to sell directly to consumers but having an option to continue supplying their restaurant customers who in turn sell to consumers is brilliant. One missing piece here is what H-E-B has started doing in their regions by selling packaged local restaurant menu items in their stores. I would love to see more grocery brands implement this nationwide to help keep those local restaurants in operation and to provide more food options to consumers staying at home!

Richard J. George, Ph.D.
BrainTrust

Unfortunately, restaurants have been extremely hard hit during this pandemic. Plus, while QSRs with drive-thru services may rebound fairly quickly, the same cannot be said for casual and fine dining. Therefore these efforts are purely defensive, in addition to expressing restaurants’ concern and care for their communities.

Fortunately, the foodservice supply chain in the ilk of Sysco, US Foods and others has shown to be very resilient and has really supported these struggling operators.

Kudos to the foodservice industry for all of its efforts to help Americans during these trying times.

Ed Rosenbaum
BrainTrust

Anything a retailer can do to maintain sales and keep a few people working will help. A concern I see is it means going to another place for a few items and increasing the possibility of being exposed to the virus. Yes it can be delivered. That is understood. My concern is for those people who will spend too much time away from the safety of their home.

Ryan Mathews
BrainTrust

Look, any income is better than no income, but the issue is the degree of the offset. Mobilizing foodservice supply chains is a great idea, but with no predictable end in sight the truth is many undercapitalized restaurants are going to fail no matter what they do.

George Anderson
Staff

I went online to do a test order and found most of the produce items out-of-stock, which raised a number of questions. Did the local Panera not have enough stock on hand to include these ingredients wth its regular foodservice orders? Is it holding back stock so that it doesn’t run out of tomatoes, as an example, to place on sandwiches? This is a nice idea and a way to show consumers that Panera is trying to help out during a tough time. Of course, if it really can’t help out that much, the distance the goodwill will travel will be decidedly shorter.

Ryan Mathews
BrainTrust

It’s a different business model and there is no reason to believe that restauranteurs will be any better selling bulk food than retailers are when they tackle foodservice.

Shawn Harris
BrainTrust

There is a ton of business theory that would guide these decisions. From Jobs-to-be-done, to customer value chain analysis. When your business is disrupted there are several ways to respond. In this case restaurants choosing to decouple themselves makes sense. Sell ingredients and supplies, broadcast preparation tips and tricks on YouTube, offer live cooking classes, offer virtual personal chef services via Zoom…

James Tenser
BrainTrust
I read about this in my local (Tucson) newspaper this morning before firing up RetailWire, and I must say, I’m feeling a twinge of pride toward our newly-elected mayor Regina Romero, who authorized this practice. There are several reasons this is a fine idea. First it leverages the existing food service supply chain in a creative way. We’ve heard about U.S. Foods offering food service goods to supermarkets, but there are serious operational challenges associated with introducing entirely new SKUs to finely tuned inventory management systems. Not to mention the invoicing. Not to mention discontinuing the items later. Second, it helps keep more restaurant establishments afloat while their dining rooms are closed. Could help reduce layoffs a bit too. Third, it supports the current objective of social distancing, by providing a click-and-collect pickup alternative. In urban neighborhoods, this can even serve walk-up shoppers, not just people in cars. Fourth, it taps into existing inventories of some sought-after products. Will this result in lasting widespread change in business models? Hard to say, but I’d wager at… Read more »
Cynthia Holcomb
BrainTrust

Panera Grocery is compelling. Pickup or contactless pickup is great. Ever try to order from the large grocery chains using 3rd party shoppers and delivery companies? A frustrating and cumbersome experience. A lot of inventory is not available online. Wait times up to a week.

The idea of 3rd party shoppers lacking protection masks and gloves, visiting many grocery stores a day, to pick orders and then they use their own coolers to keep grocery orders cool until they deliver to my front door. I would rather take my chances and be in control of my own supply chain by shopping myself and ordering from folks like Panera. Be safe.

Craig Sundstrom
Guest

I see this having limited viability. Presumably the restaurants are able to sell (what is now) excess stores, but I’m not sure it makes sense to divert future deliveries to them. It’s simply too hard to communicate what’s available.

I think the better solution is to reduce panic/excess buying, which IMHO has been worsened by conflicting or “helpful” advice from authorities (“have two weeks supplies,” “limit your trips,” etc.); no we don’t want everyone going every day, but once a month isn’t a solution either. Had people just maintained their normal buying behavior — maybe just adjusting WHEN they shop — many of the shortages could have been avoided.

Nikki Baird
BrainTrust
My challenge with that is that when I look at the number of meals my family eats at home now vs. before, now I have to buy for and produce 21 meals x 5 basically full-grown adults = 105 meals. Before, my son and my father-in-law were out 2-3 nights per week, both my kids were eating lunch at school, I was traveling 3-4 nights per week, my husband and I had a standing date night out … we were fielding roughly 50-60 meals at home, max. The retail side of food delivery was built on the back of this level of demand across many, many households. Now, it’s facing twice as much demand and no immediate way to tap into more supply easily. We NEED restaurants to be part of the food supply chain, and if we want them to be there when this is over, we need to do what we can to keep them on their feet — rather than make the structural changes to shift over so much restaurant supply to… Read more »
Craig Sundstrom
Guest

Thanks Nikki. I live alone, so we’re definitely approaching this from opposite ends of the demand spectrum; and my “meals out” were almost all lunch, which I’ve been able to maintain (from the same restaurants via “takeout”). So I think between us we’ve covered the possible takes on this concept … which I guess is the beauty of RW’s comment format.

Sterling Hawkins
BrainTrust

I’m also seeing a trend the other way: grocery stores selling items from local restaurants (HEB is a good example). Either way, I see it as helping, but it won’t offset (at least any time soon) lost revenue from venue closures. These new models may even be a play in the mid to long term as well as retailers/restaurants support their communities and deepen relationships.

wpDiscuz
Braintrust
"Restaurant wholesalers have access to paper goods and cleaning supplies that are not available in stores, so there’s not much to say here other than this is a brilliant pivot."
"I’m also seeing a trend the other way: grocery stores selling items from local restaurants (HEB is a good example)."
"There is a ton of business theory that would guide these decisions. From Jobs-to-be-done, to customer value chain analysis."

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