The economic damage to the foodservice sector continues during the COVID-19 pandemic.
While many restaurants are closed, their suppliers work to shift supply. Some of the things that work one week don’t work the next, as the supply chain sorts out the shifting demands.
Steve Grinstead, who has spent more than three decades as a food industry executive, gives his perspective on the economic disaster from interviews last week and this week.
He is CEO of FreshEdge, which owns produce and food distributors, including Piazza Produce BB #:102623, Get Fresh Produce BB #:161388 and Indianapolis Fruit BB #:102610, and does about 80 percent of its business in the foodservice sector.
He said the industry is dealing with a catastrophe, but he has to first stress his admiration and confidence in his produce and food industry peers.
“The fresh food distribution in the United States is truly amazing,” Grinstead said. “The planting, growing, harvesting, transporting, regional warehousing, and last mile distribution to the fork or the shelf is an amazing dance between thousands of partners. It’s a dance that never stops, 24/7/365. At least almost never stops. Which is what happened to the fresh food in the foodservice segment of our industry. The music stopped and left every partner in the foodservice chain without a seat to sit in.
“This crisis has been unimaginably catastrophic to the fresh food to foodservice segment of our industry,” he said. “Many will not make it through. For the ones fortunate enough to make it to the other side of this, the best thing to do is slow your weekly burn down as much as you possibly can and be ready to carefully ramp back up when the business begins to return. It turned off like turning off a faucet, it will come back on much more slowly.”
Grinstead said a few weeks ago when restaurants were forced to close across the United States as many state and local governments introduced shelter-in-place and social distancing rules, fresh food distributors to foodservice had an immediate shut off of 70 to 90 percent of their business.
“We had massive amounts of fresh inventory as we had four hours’ notice of the closing down of foodservice operators. We had fresh fruits and vegetables in trucks heading to restaurants, fresh inventory in our warehouses and fresh inventory on the road coming to our facilities. We all sold what perishable inventory we could to retail which was booming but ended up giving away millions of dollars of inventory prior to it going bad,” he said.
The whole foodservice supply industry has hundreds of facilities operating at low capacity, thousands of parked trucks, layoffs, furloughs and contracts that have become harder to collect and pay, Grinstead said.
Even after some pandemic rules ease, some social-distance ones will remain, which will constrain the foodservice industry’s ability to return to previous sales levels, he said.
Grinstead said right now, the industry is seeing significantly lower fresh produce demand, as foodservice suppliers that could shift to retail did that, and now there’s more supply in the market than demand.
“Growers’ coolers are jammed, and crops are being disked under,” he said. “Core, more stable products are in much higher demand, and more perishable and specialty items are in far lower demand during this crisis. Foodservice specific products like Jumbo Onions, Broccolini, Cipollini Onions, etc.”
Under these conditions, forecasting has become impossible.
“Normal forecasting is out the window right now,” he said. “We are seeing what each day brings and dealing with it accordingly.”
With business slowing, most suppliers have had to cut back on staff.
“The very worst part of this catastrophe are the thousands of families that have been rocked through layoffs, furloughs, and extreme pay cuts during a time of great concern and worry,” Grinstead said.
“Much of our industry and many in our government don’t have full understanding of what has happened to the foodservice distributor and foodservice grower segments of our industry.”
Grinstead said he remains optimistic though.
“FreshEdge is a very strong organization, financially and especially our amazing team,” he said. “We will get through this crisis and emerge stronger than ever. I believe the industry will never be the same, but we look forward to creating the new normal and addressing the needs of our current and future customers.”