Restaurants Turn To Retail As Profits Sink Due To COVID-19

Note: This article is the fourth part of a series examining the impact of the coronavirus pandemic on the restaurant industry. For more perspectives on different effects of COVID-19, read part one, two and three.

In recent years, the blurring between retail and foodservice had already started with the proliferation of high-end food halls throughout North America — a model that was already familiar to much of the rest of the world, especially throughout areas of Europe and Asia.

Massive sprawls that mixed restaurants and ingredients for purchase, such as Eataly’s rapid expansion throughout the United States and recent push into Canada, allowed shoppers to sample wares as composed plates, grab to go items, or buy the components to recreate these dishes in the home kitchen. At the same time, these concepts posed interesting opportunities for the supply chain, as inventory is brought into a centralized location and then disseminated throughout the complex in the most cost effective way possible, using in-house labor to break down large cuts of meat or turn raw ingredients into prepared pastas (for more on how Eataly manages this food puzzle, read Behind The Scenes Of Eataly Toronto).

These lessons may prove invaluable in the new landscape that restaurateurs find themselves in due to the necessary measures put into place to battle the COVID-19 pandemic. Closed dining rooms, and lessened calls or insufficient resources to provide takeout or delivery, put restaurant owners in a tight spot. Faced with perishable inventory, or just looking for alternate streams of revenue to pay rent or other expenses, some businesses are pivoting to a hastily constructed retail model for the short term. 

The quickest shift for a restaurant is to adapt to a straight grocery-style concept, combining simple basics (or loss leaders) in order to entice buyers to add prepared meals or more expensive prepared dishes. Vancouver-based chain restaurant group Earls launched Earls Grocery, where shoppers can scoop up in-demand all purpose flour or eggs in grocery packs, along with the company’s prepared ribs. Offerings from smaller independent restaurants like Montgomery’s in Toronto echo the restaurant’s ethos and aesthetic. “Being a restaurant that focuses on sustainability and seasonality, this food box will reflect just that; Foods sourced from nearby growers and farmers, and access to all the great products we use at the restaurant,” writes chef and co-owner Guy Rawlings about the Grassroot Food Box.

Even large scale foodservice suppliers, such as Sysco Canada, are offering consumer access to their typically restaurant-bound products at Sysco at Home (be aware that foodservice packaging scales large for volume, so these orders may include 96 mini Babybel cheeses or 120 pack of English muffins).

Other companies build off existing delivery structures, marshalling resources already in place. “People are frustrated with supply and waiting in line. That’s why we are stocking some essentials that will be easier for you to get,” reads the home page of the newly launched general store and market arm of Toronto-based Creeds, whose business areas also include dry cleaning and a coffee bar.

One area that has proven to be extremely lucrative during pandemic times is alcohol sales, which market research firm Nielsen said increased by 55 per cent in mid-March. In Ontario, where alcohol sales are tightly controlled by the AGCO (Alcohol and Gaming Commission of Ontario) and sold through the LCBO (Liquor Control Board of Ontario) to consumers and licensees, a relaxing of the rules in late March specifically put into place due to the effect of COVID-19 on the hospitality industry allowed restaurants to sell alcohol through delivery and takeout, as long as it was purchased with food (other provinces also offered similar regulation changes, with variation by region). As a result, local bars and restaurants storing unicorns or other expensive liabilities could sell them off for immediate profit, and keep their bar rail product also moving to increase liquid cash.

Although many of these changes are temporary responses designed to keep restaurants afloat during the COVID-19 disruptions, it remains to be seen how many of these shifts will stay in place when we emerge from the pandemic measures. Much like the changed expectations surrounding the restaurant environment, the idea of fine dining and luxury, and the consumer perceptions of the supply chain and food availability, the concept of what separates a restaurant from retail may also be one that is forever changed.