The Greatest Challenges Facing Food Industry

Thanks to the ongoing vaccine rollout and the long-awaited beginning of the warm season, Covid restrictions have finally relaxed. The global economy has also shown its first encouraging signs of recovery. Great news, right?

Unfortunately, not everyone is hurrying to rejoice. Despite this hopeful ambiance and the fact that NYC restaurants have been allowed to operate at maximum capacity since mid-May, the truth is that most hospitality businesses continue to struggle. It’s projected that it may take them months or even years to make a full recovery. But why is that?

High Cost of Logistics

Food manufacturers, wholesalers, and restaurants have been facing widespread logistics issues. Let’s break them down.

Warehousing

Before it gets anywhere else, warehouses typically deposit food on wooden pallets. They might not be the most sustainable alternative, but studies have shown that wood is significantly more hygienic than plastic. This is why cold-chain logistics (proper transportation for foods that require refrigeration throughout the entire supply chain) heavily rely on it as well.

However, the U.S. has been facing a historic lumber shortage: in 2021, costs have quickly skyrocketed, hitting an all-time high in May. Although they have finally started to dip, prices are still up over 300%. As it is increasingly difficult to acquire wooden pallets, food warehousing and transportation expenses have also gone up.

Transportation Logistics

When it comes to transportation, there’s more to the problem than extremely expensive lumber. The Covid-fueled labor shortage has made it extremely difficult to hire experienced truck drivers. As a result, late deliveries are more and more common nowadays. Wholesalers condense their orders in a single truck that has to reach more regions in one go. Unsurprisingly, some companies have even completely cut down deliveries to certain areas. The same crisis has also forced most wholesale businesses to raise the minimum orders.

Last but not least, these delayed and problematic deliveries lead to a regrettable drop in food quality, which ultimately affects all of us.

Overdue Rent

Unpaid rent is yet another complex issue. Even though restaurants have been unable to operate at maximum capacity for a long time, owners still had to cover their rent and administrative expenses each and every month during the Covid lockdown. Back in December 2020, the NYC Hospitality Alliance surveyed some 400 businesses and found out that over 90% of them have failed to keep up with these payments.

Fortunately, the state of NYC has once again extended its eviction mortarium for small food service businesses until the end of August 2021, but this is, after all, a mere delay before they must face the consequences of their debt.

Labor Shortages

Where are the workers?

As we’ve already hinted, current challenges go way beyond supply chain logistics. As of now, the labor shortage continues to be the greatest challenge facing our industry. It is a well well-known fact that our entire sector depends on arduous, high-effort labor.

Warehouse workers are essential to wholesale suppliers. Certainly, enormous amounts of food have to be packed up, carried around, and loaded in the food trucks. Timely deliveries rely on experienced drivers. Similarly, running a restaurant requires heaps of work and people qualified to do it: chefs, line cooks, kitchen assistants, waiters, dishwashers, cleaners, and delivery personnel. Unfortunately, all these occupations have suffered significant Covid-related shortages.

Who’s to blame for the labor shortages?

It seems like childcare, fear of infection, and unemployment benefits are some of the main catalysts behind the crisis. And rightfully so. A study conducted by the University of California in February this year shows that risk ratios for mortality comparing pandemic time to non-pandemic time were highest among cooks. Although it could be argued that vaccines are here to save the day, shot hesitancy across the U.S. has specialists holding back on hopes of attaining herd immunity this year.
It seems we can no longer reduce this problem to the argument that nobody wants to work anymore. The painful truth is that nobody wants to work in a high-risk, high-effort environment on a wage that’s lower than the current unemployment benefits.

What can be done?

Firstly, some wholesale suppliers and restaurant chains additional benefits (such as sign-on bonuses, higher salaries, and extra paid leave) to reattract their workers. But this is hardly achievable to smaller local businesses, which are still in a downward spiral and lack the resources to provide their employees with extra benefits.

Ben Friedman, CEO at Riviera, has spoken to DineMarket about the industry-wide labor shortage: “We can’t find anybody. A competitor offers a $3,000 sign-on bonus for drivers. Amazon has a $1,000 sign-on bonus for their 75,000 warehouse job openings and is still experiencing problems. Is this where the robots come in to save the day?”

Amidst the global uncertainty, the foodservice industry is notoriously pressed for time to embark on reform. As businesses struggle to make ends meet from one month to the other, all of these issues urgently call for a long-term sustainable approach.

Ghost Kitchens & The Digital Aid

It’s a well-known fact that COVID-19 only accelerated the already compelling trend of digitalization. During the past year, certain technologies have come to the aid of our industry. While these ingenious solutions are far from being brand-new additions, the pandemic has urged them forward. Thousands of businesses resorted to eCommerce and looked for novel ways of simplifying their logistics.

With so many restaurants operating as “ghost kitchens” (delivery-only), it’s no wonder that expanding one’s online business is on everyone’s front burner. DineMarket, too, is constantly pursuing innovative ways of aiding foodservice businesses and devised an all-inclusive and personalized online growth program: Start. Grow. Manage.

Finally, make sure to check out the COVID-19 guidance & resources for a list of the currently available SBA relief options.