The concept of meal kits is not a new one. Yet this segment is enjoying something of a rebirth thanks to coronavirus.
When first introduced meal kits were hailed as can’t miss idea but somehow, they never caught on. The business struggled with high costs for marketing and delivery. Many of the meal kit companies failed or were acquired and the survivors found profits elusive.
Then along came the coronavirus. Nearly nationwide shelter in place orders to slow the spread of the virus led to lots of consumers preparing more meals at home. At the same time, though, trips to grocery stores were perceived as risky for some. As a result, operators and consumers were able to see meal kits in a new light.
The Nielson research company found customers spent around $100 million on meals at retail stores during the month ending April 11. This is almost twice as much as the same period one year ago. Earnest Research reported online meal kit sales grew 63% in the week-ending April 15 compared to the same period last year.
Perhaps the best known of the meal kit companies, Blue Apron is now hiring staff to pack the boxes. The company’s CEO said, “We have enough capacity. We have the equipment. We have the ability to expand the supply chain.”
Of course, meal kits are not limited to startup companies. The Wall Street Journal listed several restaurant chains offering meal kits, including Panera Bread, Chick-fil-A, Denny’s and Shake Shack. In addition, some of the steak chains offer meals with uncooked steaks but they may not call them meal kits. And some concepts, like Blaze Pizza, offer do it yourself pizza kits aimed at the entire family.
While nobody’s entirely sure which consumer behaviors adopted during the pandemic will withstand the tests of time, it may turn out that meal kits are one lifestyle change that becomes permanent.
Economic News This Week
- Nonfarm payroll employment fell by 20.5 million in April, per the Bureau of Labor Statistics. This came on the heels of an 870,000 decrease in March. April represents the largest month-over-month decline in the history of the study. Employment is at its lowest level since February 2011.
- Unemployment grew to 14.7%, an increase of 10.3 percentage points. This, too, is the largest month-over-month increase since the beginning of the series in 1948.
- Foodservice and drinking place employment declined by 5.49 million. In the last 2 months the number of foodservice employees has plunged by 44%.
- Initial jobless claims totaled 3.17 million, a decline of 677,000 for the week-ending May 7, per the Department of Labor. The 4-week moving average declined by 861,500 to 4,173,000. While the number of new claims filed has fallen for the last few weeks, millions of people continue to lose their jobs every week.
- National employment declined by 20 million workers in April, per ADP. Companies with fewer than 49 employees shed more than 6 million jobs. Companies with 50 to 499 employees lost 5.2 million jobs and companies with more than 500 employees dropped almost 9 million positions. The leisure and hospitality sector declined by 8.6 employees. The only positive finding was there were 7 million fewer jobs lost in April than in March.
- The Institute for Supply Management’s Manufacturing Index totaled 4.5 in April, a 7.6 point decline. (Any reading greater than 50 indicates contracting activity.) The Production Index totaled 27.5, a 20.2-point decline. The New Orders Index totaled 27.1, a decline of 15.1 points. The Order Backlog Index hit 37.8, a decline of 8.1 points. The Employment Index hit 27.5, a decline of 16.3 points. Of the 18 manufacturing industries in the study only 2 – paper products and food, beverage & tobacco – reported growth.
- The Institute for Supply Management’s Non-Manufacturing Index totaled 4.18 in April, a 7 point decline. (Any reading less than 50 indicates declining activity.) This marks the first time the non-manufacturing has contracted since December 2009, ending a 122-month period of growth. The Business Activity Index totaled 26, a 22-point decline. The New Orders Index hit 32.9, a 20-point dip. The Order Backlog Index totaled 47.7, a decline of 7.3 points. The Employment Index hit 30.0, a decline of 17 points. Of the 18 manufacturing industries surveyed, 16 reported contraction. Included in this is the foodservice and lodging sector.
- The U.S. Census Bureau’s Full Report on Manufactured Goods showed a 10.3% decline in new orders in March. Shipments were down 5.2% and unfilled orders dropped 2.0%.
- Labor productivity decreased 2.5% in the first quarter of 2020. Output decreased 6.2% and hours worked declined 3.8%. Unit Labor Costs increased 4.8% in the first quarter of this year as hourly compensation increased 2.2% and productivity decreased 2.5%.
- Consumer credit declined by 3.4% in March, according the Federal Reserve. Revolving credit, which is primarily credit card borrowing, decreased by 30.9% while non-revolving credit (auto loans, student loans, etc.) increased 6.2%.
Foodservice News This Week
- Bloomin’ Brands begins reopening its dining rooms. As of May 5, the company’s goal was to have 336 of its dining rooms open. All will have numerous limitations and requirements such as having guests wait in their cars until their tables ae ready. The company’s CEO added that Bloomin’ Brands’ investment over the years in building its takeout and delivery businesses paid off when the pandemic occurred.
- Arizona will allow restaurants and coffee shops to reopen, provided these operators meet distance requirements and limit occupancy.
- Texas Roadhouse takes a u turn. For several years, leadership was emphatic the chain had absolutely no interest in the off-premises business. Management believed that its menu items simply did not travel well and that consumers would not be pleased with the quality of takeout food. Then came COVID-19 and the choice was off-premises sales or shut down completely. The company chose curbside and put up double drive-thru tents. By the end of April takeout food sales were up to$56,000 per week. This is about half of unit dollar volume before the start of the crisis, but Texas Roadhouse believes that the chain can continue to grow its off-premises sales. Despite this success, the company is still not ready to try third-party delivery service.
- Famous Dave’s serves some good news. In March, the barbecue chain furloughed 2,700 employees, roughly 85% of its staff. But now Famous Dave’s CEO told the Wall Street Journal the chain has been recalling some employees both for off-premises business and now to staff reopened locations. He expects most employees to return, including those whose unemployment benefits exceed their regular wages.
- Restaurant operators are not impressed by the Illinois’ Governor’s reopening plan. One criticism of Gov. Pritzker’s plan is restaurants won’t be allowed to open until June 26. And that date is not firm. Another problem is the state divided into sections, which may mean that operators in some areas may have to wait even longer to reopen. The president of the Illinois Restaurant Association said they were caught “flatfooted” and were never consulted about the governor’s plan.
- The Cheesecake Factory rolls out its reopening strategy. While some chains plan to simply get as many units reopened as soon as possible, the Cheesecake Factory is moving at a deliberate pace. The company is looking for a steady stream of re-openings. Then, too, the Cheesecake Factory did a decent slice of off-premises business during the lockdown. The chain’s mall locations aided sales by having plenty of parking. The business also sold lots of cheesecakes. The company also feels it has a built-in advantage in its interior design that makes it easier to facilitate social distancing.
- McDonald’s will open the chain’s restaurant of the future in the Netherlands. The new design features signs on the floor to keep customers and employees 1.5 meters apart, food delivery carts and plastic partitions between tables and workstations.
- Growth Chains: Umami Burger has opened a restaurant in Qatar, the first of five planned for that country
- Comparable Store Sales Reports: Baskin Robbins up 1.8%, Bloomin’ Brands (combined down 10.4%, Outback down 9.5%, Carrabba’s down 8.7%, Bonefish Grill down 13.9% & Fleming’s down 13.2%.) BJ’s Restaurants down 15.5%, Brinker’s International (Chili’s company owned down 5.3%, Chili’s franchised U.S. locations down 6.34% & Maggiano’s down 9.9%.) Dunkin’ down 2.0%, Fiesta Restaurant Group (Pollo Tropical down 7.3% & Taco Cabana down 13.5%.) Noodles & Company (system down 7.2%, company-owned down 7.0% and franchised down 8.9%.), One Group Hospitality (STK Company down 12.8% and Kona Grill down 15.5%), Wendy’s flat, and Wingstop up 9.9%.
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