Foodservice, meat sector recoveries uneven: CoBank

The U.S. animal protein sector must remain flexible in service to its various customers as the foodservice industry continues to climb out of a big hole created by the COVID-19 pandemic that largely kept people at home in 2020.

So says CoBank’s Will Sawyer in a new report outlining the continue impacts of “The Great Grocery Grab of 2020” on both industries.

The pandemic forced a shift to at-home consumption not seen since the 1980s, as well as an historic shift by meat suppliers in distribution to other channels, namely retailers.

Whereas U.S. protein supplies have normalized, the foodservice sector has lost one in five restaurants nationwide during the pandemic. Sawyer surmises that foodservice sales might not return to pre-pandemic levels until the second half of 2022.

So while U.S. meat consumption slowly returns to normal, foodservice will still lag, portending challenges for suppliers of high-value beef cuts, poultry produced for foodservice specifications, and labor-intensive processed meat products that are in short supply, Sawyer notes.

“Trends in consumer demand for at-home and away-from-home consumption are central to the profitability and viability of the U.S. animal protein supply chain,” Sawyer said in a news release. “As the U.S. foodservice sector climbs out of the hole left by 2020, the animal protein sector will not only need to realign itself with the survivors of the last year, but also remain flexible.”

Foodservice channels

Individual foodservice channels present different levels of importance by animal protein species and producer.

Sawyer notes that some foodservice channels, such as quick-service and fast casual restaurants, have recorded positive comparable-store sales since the summer. But full-service restaurants continue to see double-digit declines in sales as COVID-19 cases remain elevated and consumers remain wary of dining indoors. In November, full-service restaurant sales were down 36% compared to last year while total foodservice sales were down 17%.

U.S. beef consumption highlights varying performance in foodservice channels. Although ground beef makes up the majority of beef volume through foodservice, it represents only about one-third of the total value due to its low price point.

Ground beef has performed well in limited-service restaurant channels, but depressed business in full-service restaurants, hotels and education channels is a drag on the rest of the beef portfolio. High-value steaks and roasts sold in these channels make up just one-quarter of the volume of beef sold through foodservice, but account for nearly half of beef sales.

Sawyer suggests beef and pork packers should have more flexibility to adapt because they sell to a variety of retail, foodservice and export customers. It could be more of a challenge for poultry processors, though, because many integrators and poultry plants focus either on retail or foodservice, not necessarily both.

So, poultry producers who focus on retail and fast-food chains have fared well during the pandemic. Others will need to focus on cost and supply reduction until foodservice demand normalizes, which could be one or two years away.

By Tom Johnston on 2/1/2021

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