With news of potentially problematic new virus strains and uncertainty over how and when restrictions will be lifted, food and drink businesses face an extremely challenging start to the year.
The implications affect the whole supply chain from manufacturers and wholesalers to retailers and operators. All links in the chain must work more closely than ever to ensure businesses survive the transition to “living with the virus” by the end of the year.
In the second part of our two-part series Eating In vs Dining Out 2021, published in partnership with foodservice industry expert Peter Backman, we examine the factors that will affect the industry over the coming year and look at how businesses can prepare for what lies ahead.
2021: a year of four quarters for UK food and drink
With the outcome of so many factors affecting the UK food and drink market in 2021 still unknown, it is impossible to predict how the industry will be affected by the pandemic this year with any certainty. Planning is more difficult, yet more critical, than ever.
Business will need to be agile and prepared to respond to changes quickly as the situation develops. Long term views are less useful than usual so to help them we have broken the year down into four quarters. In each quarter we outline the key factors businesses need to track and what they could mean for retail and foodservice.
The quarters are summarised as follows:
- Q1: Lockdown continues
- Q2: Critical time for businesses
- Q3: Some normality returns
- Q4: Starting to live with the virus
Q2 will be critical for foodservice businesses
At the end of Q1, many government support measures are due to end, removing critical support for industries such as hospitality, leisure and tourism. This coincides with substantial hospitality business costs also falling due.
The UK’s vaccination programme is progressing well, however we don’t know what this will mean for restrictions and hospitality reopening.
In Q2, how the government balances controlling the virus, reopening businesses and supporting those still restricted will be especially significant for hospitality, with repercussions for retail.
Where will we be by the end of the year?
By Q4, the true economic impact of the pandemic will start to be felt as support packages are removed. This has implications for businesses (e.g. insolvencies) and consumers (e.g. employment rates, household income). The rollout of another vaccination programme may be needed to continue protection against new strains of the virus.
Assuming the virus is controllable, in retail we expect to see a recovery in pre-COVID shopping trends, with a revival smaller missions such as food-to-go. Financial constraints remain and cash is still a priority for many. Also, some habits (such as working-from-home) are not likely to revert to pre-COVID levels, so although out-of-home spend will have started to return there may still be some way to go before it matches that seen in 2019. Christmas has the potential to be a boom time for foodservice as customers celebrate the release from COVID constraints.
Navigating the challenges ahead
Businesses need to stay close to the changing situation and plan for multiple scenarios. Agility will be key and partnerships could increase in importance.
Key dates and links to resources to support food and drink businesses are contained in the report. Each quarter, we will review our predictions for the year as the situation develops.
Want to know more about the UK out-of-home market?
In the first part of our two-part series, Eating In vs Dining Out 2021, we review the impact the COVID-19 pandemic had on food and drink consumption patterns last year, focussing specifically on the shift between in-home and out-of-home spend.
Read part I
In the second part of our two-part series, Eating In vs Dining Out 2021, we examine the factors that will affect the industry over the coming year and how businesses can prepare for what lies ahead.
Read part II