In response to rising COVID-19 cases and hospitalizations, California Gov. Gavin Newsom enacted a Regional Stay At Home Order Dec. 5, 2020. The order will be enforced in regions where ICU capacity drops below 15 percent. The order impacts several sectors of business and notably the food and beverage industry. Restaurants are only allowed to be open for takeout or pick-up, while wineries, bars, breweries and dispensaries remain closed. The pandemic continues to have a great impact on the food and beverage industry and sure to have lasting, long-term effects. Food companies and restaurants continue to adopt new strategies to stay open despite closures and continue cash flow.

RESTAURANTS REMAIN RESILIENT

The National Restaurant Association reports 80 percent of full-service restaurant traffic was on site before the pandemic. In its 2021 Restaurant Industry Trends report, a survey of 6,000 restaurant operators and 1,000 consumers, the Association identifies key menu and food trends that could help restaurants during this time. Streamlined menus, branded meal kits and alcohol to-go are some of the top trends restaurants have adopted to maintain cash flow and keep doors open.

INCREASING CASH FLOW IN UNCERTAIN TIMES

Food and beverage companies have also been called to pivot during the pandemic. In a webinar hosted by Ervin Cohen & Jessup, “A Year in Review, How the Food and Beverage Industry Drastically Changed the Business Landscape,” industry professionals shared five ways companies can improve cash flow now.

1. Reducing Expenses: Companies have reduced labor, travel, commissions and promotions to improve bottom line and overhead costs.
2. Anticipating Trends: Applying analytics to anticipate customer needs, monitor inventory and supply chain will help companies make informed decisions now and save money in the long run.
3. Improving Efficiencies with Technology: In the last three years alone, Tyson Foods has invested more than $500 million in automation and technology improvements. Many food companies are following suit and increasing their investment in automation and technology.
4. Leverage Third-Party Providers to Drive Off-Premises Sales: In a 2019 survey issued by the National Restaurant Association, 78 percent of operators said off-premises programs were a strategic priority. Given restrictions, off-premises sales are now more of a priority and driver for cash flow.
5. Maximize Federal Funding: The second round of the Paycheck Protection Program has expanded terms and given special consideration for some food and beverage companies. Read more about the changes in GHJ’s Strategic Advantage blog.

LOOKING AHEAD TO THE BIDEN ADMINISTRATION

A new administration typically signals changes to legislation and often in relation to tax. Some changes that might arise under the Biden Administration and impact the food and beverage industry include:

• Increase in Minimum Wage: There is a great deal of discussion that the federal minimum wage rate will be increased to 15 percent, which will have a tremendous impact on the restaurant industry.
• Expanded Scope of PPP-2 Funding: The SBA issued an Interim Final Rule, expanding the type of expenses that could be forgiven under PPP-2 including operating expenses, property damage costs, supplier costs and worker protection expenses.
• Bonus Depreciation to Phase Out After 2022: After 2022, bonus deprecation of 100 percent will phase out and decrease 20 percent per year. This will impact how and when food companies are investing in automation and technology.

As another new year begins with renewed hope for the months to come, there is still a long road ahead for the food and beverage industry. However, there is hope for a silver lining, with opportunities to improve cash flow, increase efficiencies, innovate and do what it does best, serve.

If you have any questions about the above or any other current food and beverage plans, please reach out to GHJ’s Food and Beverage Practice.

If you would like to listen to a rebroadcast of “A Year in Review, How the Food and Beverage Industry Drastically Changed the Business Landscape” webinar, you can access the recording here. Access Passcode is: ik8JA=jr.