Rabobank, agriculture banking specialist, have reported food sales are approaching pre-pandemic levels locally and in key export markets, US and China.
RaboResearch podcast Yearning for Normal examined the outlook for the food retail and food service markets via major food companies’ recent economic data and earnings statements.
“We really saw the gap starting to close in March and it’s come at a rate that I must say has personally surprised me,” Rabobank Food and Agribusiness Research general manager Tim Hunt said.
“At market level, we are seeing preliminary data suggesting that food service sales in March were for the first time at or above levels we saw in March two years ago, or pre-crisis in Australia, the US and China.”
At the inception of COVID-19, food service sales (i.e. restaurants, cafés and hospitality venues) fell as countries moved into lockdown. Meanwhile, food retail sales (i.e. supermarkets and food stores) climbed as consumers ate at home and stockpiled food.
As consumers start to shift back to purchasing meals at restaurants and cafés, food retail sales are beginning to decrease “as part of the normalisation process.”
This was reflected in the recent earnings statements for the March quarter with McDonald’s, Yum Brands and Starbucks exceeding sales seen in 2019 and less growth in retail-oriented companies like Kraft Heinz. Coles also spoke of the return of more normal consumer behaviour with an increase in convenience store sales and food-to-go.
However, the drivers of the “accelerated trend towards normal” have differed by country, with “infection-control” being attributed as key in Australia and China.
“In Australia we have seen very low infection rates, fewer lockdowns and shorter lockdowns when they do occur. People are starting to travel again domestically and are going back to the office,” Hunt said.
Meanwhile, in the US the normalisation in food consumption habits is being driven by vaccination and the Biden stimulus package, which saw US retail sales increase by 10 per cent in all product categories in March. These levels have been maintained throughout April.
“Starbucks, for example, reckoned when they saw vaccinations hit 3-4 million during the quarter they started to see people moving around more, people started to be more willing to reconnect with their communities and store traffic picked up,” Hunt said.
In the European market the “recovery story had been heavily distorted,” according to Hunt.
“McDonalds for one noted that dining-in is still impossible in half of their European restaurants at the moment. In a market where there are less drive-in chain stores and less takeaway, that makes it pretty difficult,” he said.
While food sales may have recovered, there has been little additional growth over the past two years. However, Australia is comparatively doing very well, according to Hunt.
“In China, food service sales used to grow at double-digit rates before this crisis hit. Now two years after April 2019, its growth rate in food service is at an annualised rate of only 2.5 per cent. Astonishingly, that means food service sales in Australia have outpaced those in China over the last two years.”