Distributors and suppliers shifting focus to retail as restaurant profits plunge

Published on
March 23, 2020

The reaction from U.S. consumers to the COVID-19 pandemic has scrambled how Americans are buying seafood. In response, U.S. foodservice distributors and seafood suppliers are shifting their focus away from a shriveling restaurant scene and putting more focus on supplying retailers.

As evidence of how badly restaurants have been hit by a crisis that has seen many restaurants forced to shift to take-out or close entirely, a number of major restaurant chains have announced significantly decreased earnings.

Orlando, Florida-based Darden Restaurants, which operates Longhorn Steakhouse, Olive Garden, Bahama Breeze, and the Capital Grille, said that its same-restaurant sales for the current week plunged 60 percent, Marketwatch reported. On 20 March, Darden said it will close all of its 1,800 restaurant dining rooms across the U.S., while continuing to operate take-out and delivery kitchens, with between six and 10 employees per shift, Orlando Weekly reported. For the third fiscal week ending on 15 March, Olive Garden sales dropped 18.7 percent, Longhorn Steakhouse sales declined 15.9 percent, and sales in its fine dining sector – which includes The Capital Grille – dropped nearly 28 percent.

Calabasas Hills, California-based The Cheesecake Factory said that it is withdrawing its fiscal year 2020 guidance and secured an additional USD 90 million (EUR 83.5 million) on its revolving credit facility. Of the operator’s nearly 300 restaurants, 27 are closed, while its other restaurants have transitioned to an off-premise operating model.

“The Cheesecake Factory restaurants have a longstanding business in the off-premise channel, with historical sales volumes approaching the size of many stand-alone restaurants, which is enabling the company’s restaurants to operate sustainably at present under this model,” the restaurant chain said in a press release.

To alleviate the unprecedented economic impact on the foodservice industry, the United States National Restaurant Association and the International Foodservice Distributors Association are asking for immediate help from the Trump administration and Congress to stave off what they’re calling “an imminent crisis for the U.S. foodservice industry.”

Early economic forecasts reveal the industry will sustain at least a USD 225 billion (EUR 211 billion) loss as a result of the coronavirus and be forced to eliminate between five million and seven million jobs over the next three months, the NRA said in a press release. IFDA projected the industry will lose USD 24 billion (EUR 22 billion) over the next three months as the COVID-19 pandemic shuts down restaurants, schools, and hotels.

Foodservice distributor Sysco, which recently withdrew USD 1.5 billion (EUR 1.4 billion) under its revolving credit facility, is “actively pursuing new sources of revenue by leveraging its supply chain expertise to provide services to the retail grocery sector,” it said in a press release.

“This net new business will help off-set some of the declines in the food-away-from-home segment and also positions the company well to capitalize on growth opportunities after the COVID-19 crisis subsides,” it said.

Fort Lauderdale, Florida-based Netuno USA, which supplies frozen seafood primarily to the foodservice sector, is now working with Sysco and other foodservice distributors and retailers to provide frozen fish fillets, whole fish, and other seafood to the grocery channel.

“We have shifted our focus to distributors that sell retail and the little bit of retail business that we sell direct,” Netuno USA Sales and Marketing Director Amanda Longoria told SeafoodSource. “We already have a relationship established with Sysco and we are working on those items [which were used for foodservice] that they can use for retail.”

Netuno is repackaging its seafood which typically would have been for foodservice clients – such as red snapper fillets – in UPC-ready bags for U.S. grocers’ freezer sections.

“We have been wanting to grow this retail business for some time, but foodservice has always been strongest. The silver lining is that we are getting the opportunity to shift that focus … with products we already had,” Longoria said.

Netuno also recently launched a line of gourmet shrimp meals for the retail arena. The Sauté ‘n Serve line, handmade in a state-of-the-art Vietnamese facility, according to the supplier, utilizes Aquaculture Stewardship Council-certified shrimp. The three flavors include Etouffee, Scampi, and Thai Coconut Curry.

Photo courtesy of Netuno USA

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