The entire F&B industry is facing Massive Setback due to the Coronavirus outbreak with no respite in sight
The Coronavirus pandemic has killed more than 1 lakh people world-wide and does not seem to slow down in the near time future. In India, more than 46 thousand people have been infected by the virus, as a result, the government has enforced a very stringent lockdown in order to curb the spread of the virus. This lockdown has severely impacted several industries across India of which F&B (Food & Beverages) services are severely hit. Major food delivery giants such as Zomato and Swiggy have been already functioning at just 10 percent of its total capacity.
The National Restaurants Association of India (NRAI) has predicted an estimated loss of Rupees 80,000 crores for the F&B industry by the end of May 2020. The association has also stated that over 7 million people who were dependent on the food & beverage industry have already lost their jobs.
NRAI has requested all the malls and landowners to waive rent for the restaurant owners for a period of 100 days. This is because an estimated 90 percent of the restaurants in the country are operating on lease. Depending upon the format of their operations these restaurants shell out anywhere between 10-30 percent of their income towards rent.
The post coronavirus world scenario seems also grim for the F&B industry. Spending on foods and beverages is driven by general sentiments in the economy. Further, if all sectors in the economy take a beating, fewer people will eat outside. Of course, a small number of people will turn up due to boredom but that will be just a temporary phase. The general sentiment will be to avoid going to public places like bars and eateries. Food and beverages, in fact, might be the last sector to pick up the pace when the situation begins to normalize.
If the coronavirus outbreak persists for long, people will consume only essential items and avoid eating out. Already, big restaurant chains like Dominos Pizza are able to earn just 30% of the revenue compared to what they earned prior to the virus outbreak.
In neighboring China, people used to dine an average dine-out 28 times per month while in India the comparable number is 4.1. Following the coronavirus crisis, it is even scary to think of what the post virus scenario would look like.
According to NRAI, 50% of restaurants in India might shut down if the lockdown extends till the month of May. As of now, there are only 5-6 restaurant chains that have cash reserves to sustain the impact of a lockdown if it extends more than a month. As an industry, there are a very high proportion of fixed operating expenses; as a result, there is a risk, even in case of moderate revenue fluctuations. Currently, the industry is bracing itself for almost zero revenue in the immediate future and a drop of approximately 50 percent in the months thereafter.
This is because restaurants work on about 15 percent EBITDA (earnings before interest, taxes, depreciation, and amortization) margins."
Staring at a bleak future for the industry, NRAI has written to Finance Minister Nirmala Sitharaman to provide immediate assistance as well as some sort of bailout package.
Like every cloud has a silver lining, the coronavirus pandemic has one too. Swiggy and Zomato have started home delivery service of groceries as supermarket brands like BigBazaar and Easyday are unable to keep up the pace with the booming demand.
Most of their delivery services have already started in Tier-1 and Tier-2 cities across the country. NRAI has also requested the restaurant employees who are out of work to temporarily work with online retails stores such as Big Basket as they are failing to keep up with the rising demand.
This move will not only help in providing jobs to the delivery boys but will also help them to retain their customers.
In fact, in Punjab, the state police have joined hands with Zomato & Swiggy to facilitate the supply of essential commodities including groceries and medicines.
There seems to be a very small window for restaurants to open their shutters for dining once more in the upcoming months, for now, the food industry can just wait and watch and encourage social distancing and isolation by supporting the lockdown.
