insights

Report Predicts Grocery Store Profits Up, Restaurants Down This Year

April 2, 2020 — As the COVID-19 pandemic continues to have sweeping effects across the food industry, a recent report indicates that sales will not be where they were forecasted to be in 2020. The report was authored by University of Guelph associate professor Simon Somogyi and Dalhousie University professor Sylvain Charlebois. In the report, they state: “The food industry is being decimated as the result of COVID-19.”

Some of the ways restaurants are trying to slow their losses is through reducing their prices dramatically. Menu items are being lowered as restaurants strive to be more competitive with their pricing. Many food restaurants are switching to take-out or delivery models, nudging their way into the area dominated by fast food services. As more food businesses compete for their share, prices are dropping lower to attract customers.

While this is difficult for businesses in the food service sector, the report isn’t all bad news. Numbers in the report illustrate the pandemic is having an opposite effect on grocery stores. The report states that restaurants typically generate more than $90 billion in annual sales but that $40—50 billion of that will shift to grocery stores. However, the report anticipates that this will not be a long-lasting switch. Somogyi states that when the pandemic subsides and restaurants open there will likely be a flock of people back to these locations.

The report also indicates that while grocery stores are seeing an increase in sales, their costs are increasing at the same time due to being declared an essential service. Increased cleaning and santizing, along with hiring more workers to assist with the demand, are all costs that must be incorporated into the budget now.

As the COVID-19 pandemic progresses it remains to be seen how long these changes will continue, and whether profits will return to food service businesses.