ArrowStream Foodservice Blog

Analysis of ArrowStream’s network of more than 200 chain restaurant brands by our economists revealed June data which signaled that the overall restaurant industry continues to slowly improve, but remains below year-ago levels. However, with states confirming recent increases in COVID-19 cases, action is being taken again to curb the spread which may further slow the improvement we have seen. 

In mid-June, ArrowStream's economists published initial data noting a rise in COVID-19 cases among three of the four largest restaurant states. And as the trend continues, they called out in the most recent issue of ArrowStream's Maloni Report that they're closely watching the mortality rate which, if it rises following the increase in hospitalizations, could mean those states may revisit more permanent social restrictions.

As the economy continues to adjust to the global pandemic, it's become clear that certain segments are improving faster than others. While foodservice and drinking establishment sales saw a 29 percent increase in May from April, unfortunately, we continue to see the restaurant industry making minimal gains and falling behind in overall recovery. At a 39 percent decline in sales from this time last year, ArrowStream economists analyzed U.S. retail sales and note where restaurants currently sit.

Confirmed COVID-19 cases are on the rise in several U.S. states, including three of the four largest restaurant states. California, Florida, New York and Texas typically account for 37 percent of annual U.S. restaurant sales and over the last week, ArrowStream economists have closely tracked an increase in positive test results in California, Florida and Texas. 

ArrowStream economists have been closely watching protein production and are beginning to see signals of improvement. But while this is encouraging news, they also warn further plant disruptions could continue as the COVID-19 landscape evolves. 

"Last week pork output was 4.2 percent better than 2019 while beef production was down only .4 percent. As the chart shows, total beef, pork and chicken output was likely better than the previous year (we say likely as these are USDA estimates). Cattle and hog slaughter are expected to improve during the next few weeks. The best-case scenario may be that these plants reach 95 percent capacity due to operation adjustments for employee safety. And we'd offer, we're getting close to those levels. Thus, weekly gains in protein output could be tempered this summer. Also important to note that many plants continue to struggle with COVID-19 which could cause further plant disruptions."

ArrowStream data continues to signal that the return of the consumer to restaurant dine-in has been careful and that independent restaurants are being hurt more from the lockdowns than restaurant chains. According to RestaurantData.com, less than 10 percent of chain restaurant stores in the U.S. are directed to full-service dining while that share is almost two-thirds for independents.

ArrowStream's economists certainly were not surprised by the continuous fall in restaurant sales that were reported in April. They noted sales were "down almost 30 percent from March and 48.7 percent less than last year. And restaurant traffic was lower by 51.5 percent from 2019 while the average menu price was up 2.8 percent."

ArrowStream economists this week looked at April's U.S. restaurant industry's jobs report, which had the largest one-month job loss on record, representing about 13.5 percent of total jobs in the U.S. As the unemployment rate jumped to 14.7 percent - the highest in more than half a century - to say that the U.S. restaurant industry has been hit hard during this crisis is an understatement.

ArrowStream economists are closely monitoring and modeling the restaurant industry's re-opening on a state-by-state basis. The last week has seen several states plan to re-open, aligning with ArrowStream's COVID-19 State Ranking Model that follows each states' coronavirus response and risk. (Find the latest Model on ArrowStream's COVID-19 Resource Center.)

As we experience a historic downturn in protein production, ArrowStream's economists this week noted the U.S. meat protein industry's swift reaction to the slowed foodservice demand.