US institutional foodservice expected to recover in 2023
In harsh news for seafood suppliers and distributors, the U.S. institutional foodservice sector is not expected to recover until 2023.
The new Rabobank projection is based on current trends and assumes no major resurgence in U.S. COVID-19 cases, which could alter projections, according to Amit Sharma, executive director of food and foodservice for Rabobank.
Institutional or non-commercial foodservice sales are down around 35 percent for the year through August, Sharma said, and will likely be down 30 to 35 percent for the rest of the year.
That sector – encompassing business and industry, healthcare, and education – is one of the hardest hit, heavily impacting seafood suppliers, wholesalers, distributors, and foodservice distributors.
For the first few months of the pandemic, most broadline distributors’ business was down between 50 and 75 percent compared to the same period last year, according to Michael Seidel, vice president of procurement for Richmond, Virginia-based Performance Food Group, one of the largest foodservice distributors in the U.S.
Seafood sales to the non-commercial foodservice sector dropped 25 percent in March and a significant 45 percent in April, Seidel noted. However, seafood sales dropped 29 percent in July compared to July 2019, Seidel said.
“So it’s still underwater, but the declines are not as bad now as in April,” Seidel said.
Seafood categories with the largest drops in sales to the non-commercial foodservice sector from May through July, according to NPD Group, included: mollusks, down 66 percent; crustaceans, down 58 percent; finfish, down 48 percent; and groundfish, down 36 percent.
Howerver, in 2021, Rabobank expects a sales uptick for institutional foodservice in the “mid-to-high teens” compared to 2020 – but not back to 2019 levels, Sharma stressed.
Some sub-sectors of non-commercial foodservice will perform better than others. Rabobank expects healthcare foodservice to fully return by 2021, given that a relatively small percentage of healthcare employees work from home, along with the return to elective surgeries, Sharma said.
Business and industry, along with the sports/leisure sub-categories, will post the weakest recoveries due to higher unemployment and work-from-home trends, Sharma said.
Education is likely to come back to pre-pandemic levels given government support for K-12 and return to campus for colleges/universities, according to Rabobank. Plus, government/defense will “remain a bright spot with growing sales,” Sharma said.
Seidel noted that there is some sales uptick in the sports/leisure sector because some sporting events are coming back. Plus, “you are seeing a little more recreational travel. Las Vegas, for example, opened back up,” Seidel said.
Additionally, there are some new opportunities opening up for seafood suppliers to institutional foodservice. For example, canned fish sales across the top 15 broadline distributors fell 16 percent in March compared to the same month last year, and plunged 30 percent in April. However, in May, canned seafood sales jumped 32 percent and “continues to grow,” Seidel said.
“This is due to more to-go offerings, such as canned seafood used in sandwiches,” Seidel added. “Some folks may also be selling canned fish in a retail environment.”
Dayton, Ohio-based Kettering Health Network is just one of the healthcare organizations, businesses, and schools that have switched to more packaged products – including sandwiches – that employees can take and eat, instead of a large focus on full-service dining.
“COVID has forced us to enhance our grab-and-go business; it’s about 40 percent of our business right now,” Kettering Health Network Director of Nutrition Services Cheryl Shimmin said.
Shimmin is looking for “food products that we can package into a take-home meal for one, or a family of four or six,” she said. “For seafood, what can be provided in those take-home meal packages?”
In the overall commercial and non-commercial foodservice business, “easy peel” shrimp is in high demand since the start of COVID, Seidel noted.
"Restaurants have less staff so they use these instead to shorten traditional peel time,” he said.
There is also increased demand for “meaty, steak-like” fish such as tuna and mahi as it works better for carry-out and delivery orders, according to Seidel.
Seafood vendors also have an opportunity in supplying value-added seafood products such as breaded, stuffed, and sauced items, Seidel noted.
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