Impact of COVID-19 on Food & Beverages Industry, Indirect Losses to Farmers

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The outbreak of coronavirus has brutally affected all the sectors across the whole world. Among all the sectors, the Food & Beverage industry got the worst hit by the pandemic. Moreover, it has affected the restaurant industry very badly and they are finding it difficult to deal with the crisis.

Even before the restaurants were shut down people started going less to the restaurants due to the COVID-19 news. Some people started avoiding social gatherings because of the fear of the virus. Therefore, they started avoiding going to restaurants or cafes. They started suffering from that time only. For instance, the founder of The Chocolate Spoon Company said that business dropped by 50% when coronavirus news started spreading out.

Furthermore, it got worse when the first lockdown was announced. It’s a misconception that the restaurant industry runs on a high-profit margin. Though, the reality is that the money earned is usually reinvested in the business for growth and expansion. Due to the shutting down of the restaurants, they are left with zero revenue. On top of that, they also have to pay other expenses like rental bills. It is impossible to pay the operational expenditure when the restaurants are earning zero revenue.

Employment Issues

In this situation, it would be difficult for the employer to give salary to their employees. It is true that big names from the restaurant industry might be having savings. Sadly, waiters, dishwashers, cooking staff, vendors would find it difficult to survive. Additionally, the restaurant industry would not get back to normal anytime soon as people would continue to be cautious. So, even people with a hefty amount of money can go bankrupt. Disposable income would also increase and people tend to be more cautious. There are around 7.3 million people employed by the Food and Beverages industry. Furthermore, it is the second-largest employer of human capital in India. NRAI estimates that over 22 lakh people can lose jobs belonging to this industry.

Only a proper stimulus package could save the restaurant industry. Without any help in form of rental waiver, it would be difficult for them to continue their business. Online ordering of food could also not help much as many restaurants remain to be closed due to lack of labor. Deliveries help recover not more than 5-10% of the total costs.

The restaurants on Zomato are reducing and it can further be decreased by 25-40% in the next 6-12 months. After the lockdown is relaxed, big restaurants/cafes are still able to float. Though, the restaurants are expected to continue with less than its total capacity due to social distancing. For instance, in countries like China, Hong Kong they have started opening restaurants with half the sitting capacity. At the same time, small restaurants and street food vendors are having a tough time.

Indirect Loss to Farmers

Consumption of commodities like sugar, milk declined in March due to the closure of restaurants. According to the National Dairy Development Board, hotels and restaurants cover a total of 12 percent of the total milk consumption. It would continue further as there are many restaurants which are not yet open.

Although, if some of the restaurants are open, there is only a takeaway option. The demand from bulk consumers has declined which results in effecting the income of producers of such commodities. Wholesale buyers including restaurants are not purchasing and only retail vendors or hawkers are purchasing that is just 20%. For that reason, farmers who grow vegetables like cabbage, capsicum, cucumber have suffered losses as it went in dump. Therefore, the closing of restaurants affected the earnings of a farmer to a great extent.

Restaurant Industry Disappointed with Financial Stimulus Package

There are many countries that have started offering financial help in form of economic stimulus packages. On 12th May, Rs. 20 Lakh Crore financial stimulus package announced in India as well. Though, any relief in specific for the restaurant industry was not in any mention. People of the restaurant industry have expressed their dissatisfaction with the financial stimulus package.

K.B. Kachru, Chairman of Radisson Hotel Group said that they have the responsibility of paying huge manpower. Also, this sector contributes almost 10% of GDP. Despite it, it is shocking that this sector remains ignored.

Moreover, it is even not worth a mention in the package. Anurag Katriar, President of the National Restaurant Association of India also expressed his disappointment over it. Many celebrity chefs also showed their disappointment on social media by a post titled “Nothing for restaurants. #Dowematter ?”

Should we take a note from other countries?

The stimulus package announced by the USA includes federal loans for small and medium-sized businesses and it could be forgiven also. It depends upon whether workers would remain on payroll or hired. The German government would be suspending legal obligations for companies suffering from liquidity problems to file for bankruptcy. Italy’s €28 billion plan centres hospitality, travel, and fashion. A guaranteed fund for loans is an offer to small and medium-sized companies. In the UK, it would pay wages to the employees who are not able to work in the pandemic time. They would pay 80% of the salary to the staff under employers. In Singapore, hotels and restaurants would get a full property tax waiver for the year 2020. Furthermore, the government would co-fund 50% of wages for companies in the Food & Beverage industry.

Recommendations

Municipal Corporation could give property tax relief to landlords which could be transferred to restaurants. Consequently, it would help them to deal with rental problems. Restaurants should be provided with some rental waivers. Low-interest loans with appropriate repayment terms available for the restaurants. Electricity tariff, excise fee waiver, soft loan for working capital, property tax reduction, wage relief, etc. can be provided to them.

Recently in mid-June Swiggy has taken an initiative and launched “Jumpstart Package” to help restaurants to resume smoothly after unlock. It will provide safety and hygiene protocols and training content on the practices followed in restaurants. Furthermore, packaging material and safety kits would be at 40% off to restaurants. Also, it has introduced bi-weekly payment options for smooth transactions. Due to the Swiggy Capital Assist programme, they can also have access to subsidized financing. More such initiatives by other companies can help restaurants to survive.

It is practically not possible to give benefits like developed countries. Though, at least the restaurant industry was worth a mention in the package considering the employment of so many people. Relief, like other countries gave, is important. If the government is deaf to the needs of the restaurant industry, it’ll all go doomed. The farmers would also be suffering from losses.


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