Food safety, sustainability… we’ve discussed many of the most important industry issues with Tim York over the years, in pieces such as these:
Now, suddenly, we find ourselves in some “Brave New World” discussing the very survival of the foodservice industry as we know it.
Mira Slott, Pundit Investigator and Special Projects Editor, spoke to Tim about the world of foodservice in the midst of the coronavirus outbreak in 2020:
Markon Cooperative, Inc.
Q: So much has transpired since we reunited at our New York Produce Show last December at the Jacob Javits Center, which suddenly has been transformed into a 2,000-bed hospital to care for coronavirus patients. We had been celebrating your brilliant, 34-year career at Markon and talking about your plans to leave Markon in June 2020 for new adventures.
A: Yes. it’s hard to believe. Now, we’re just so day-to-day, in survival mode. I haven’t even started looking down the road at plans outside of Markon.
Q: It feels like a different world, since you were facilitating your popular workshop at the New York Show’s Ideation Fresh Foodservice Forum, a concurrent event enjoining top foodservice executives across the supply chain in innovative, solution-driven discussions. At the same time, the main trade show day offered a unique venue that brought people together from the foodservice and retail worlds. In many ways, those interactions seem more relevant now than ever.
Restaurants across the country have been shuttered, and key suppliers are scrambling and shifting gears to endure. It’s such a rapidly changing situation. Are you able to give perspective on what’s been happening on your side?
A: At Markon, as you know, we’re almost exclusively foodservice business, so we’ve gotten the brunt of this first-hand certainly. Gordon Food Service has some Cash & Carry stores that are retail. Other than that, we are a foodservice business.
What we’ve seen is a little bit of a lagging indicator in terms of what’s going on because our orders today are reflective of what’s happened a couple of days ago with their distributors and their replenishment.
I would say overall we were down nearly 80 percent in the third week of March, and closer to 70 percent down for the last week of March. That’s a good sign.
Q: So, the sales trajectory is better. Why is that?
A: I would say the third week of March, in particular, was a hard week, because the week before that, everything started to get shut down. So distributors were left with a lot of product. Then they were really cleaning out inventories and sending it to food banks and other outlets that could take the product.
Now we’re trying to get back to a reasonable semblance of order, whatever that new order is.
What we see — and you see this at retail also — is a narrowing of the number of SKUs, and not being willing to carry nearly as many products as we normally would.
I heard one of our distributors say they would normally have over 500 fresh produce SKUs and they’re reducing that to under 100 SKUs. That’s really around inventory management and risk of shrink and reducing that risk.
Q: So, is this both narrowing the quantity and changing the types of SKUs, perhaps focusing on more shelf-stable products? Potatoes and onions versus more perishable items like berries or fresh-cut watermelon, for instance?
A: No, not really. I don’t see that in our numbers. That’s what we’re hearing consumers are buying at retail. Right, it’s more shelf-stable items. But we don’t see that at foodservice.
I want to say the shift is narrowing, so instead of carrying six packs of apples, maybe we’re carrying two. Or we’re not carrying gold kiwi fruit; we’re only going to carry regular kiwi fruit. We’re going to have items, if you will, that are more mainstream, that we have more outlets for, rather than the typical, ‘you have to have everything for anybody that might want it.’
A creative chef comes up with an item he wants, and you’ve just got to have it. The problem is you don’t know if there’s an outlet for that anymore, so you can’t buy for that and risk that kind of shrink and loss. So, we’re really focused on reducing shrink.
Q: I’ve been hearing about a lot of partnerships of foodservice distributors connecting with supermarket chains, to try and keep their businesses going… What’s happening on that front?
A: Yes. I know several of our members who have done that, who have partnered with retailers or are moving people to other divisions, anything they can do to keep personnel busy and equipment in use. You’ve got all that capital expenditure so it would be great to be using it. Retailers have needed the help.
What we’re hearing with fresh produce… retailers have gotten caught up with inventory on the fresh produce side, but are still needing help with the dry grocery. I see that with grocery shelves around here; there’s a lot of empty spaces.
So, retailers are really in a catch-up game, and we’re in a position where that demand has shifted from foodservice to retail, and we’re able to help them out.
Q: But you’re saying in terms of fresh produce, supermarkets have caught up on supply for the current consumer demand. So, the produce supply chain systems retailers were using before the coronavirus are now sufficient?
A: That’s what we’re finding. Supermarkets don’t need our help as much on the produce side, but more on the grocery side.
Q: Are there new strategies to deliver direct to consumers? For instance, I had a riveting interview with Michael Muzyk, president of Baldor, about ways he’s reinventing his company, including a conversion to home deliveries, in order to cope…
A: I haven’t seen home delivery amongst our distributors, but I read about what Baldor is doing.
Q: Can you talk about the short-term and long-term consequences of something like this?
A: We’re having to look at all our expenses, like everybody else has. What does our outflow look like, and what does our income look like? So, we have had to do a staff reduction already by 35 percent.
We’re trying to be patient and see how the business rebounds, and to see what the new normal is because we don’t want to be understaffed. At the same time, we don’t want to have people twiddling their thumbs.
We started having people working from home the week of March 9, and as of the week of March 23, all our staff is off site.
I can’t really reflect on how our distributors are confronting all the new rules of social distancing. It was kind of odd when we were all still working in the office. We were on a conference call with a speaker phone in the middle of a big room, where we were each separated from each other in four different corners all shouting at the phone. It’s a very surreal experience, I’ll tell you that much. We’re doing the social distancing, and constant washing of hands, wiping down of surfaces, trying to do the things that CDC has advised us we need to be doing.
Q: What are the key challenges going forward, and any advice or insights you can relay to the industry?
A: The key challenge for us right now is just getting the organization the right size. We have a building that we rent, that nicely accommodated 61 employees. We’ve got too much space in the building now. You can’t do a whole lot about that in the short term. But the reductions we can make are around personnel. We do that with a heavy heart. Those are people you’ve worked with, sometimes for a short period of time, sometimes for a long time. Some worked here many years or a couple of decades even, whose lives have been impacted by fissions around the business. And none the less, you have to make the right decisions for the continuity of the business or the remaining people. Otherwise you’re not doing right by them, you’re not doing right by the ownership. So, we’ve had to make hard decisions around personnel, and that’s not easy to do.
What you want to do is make sure your workforce is rightsized for the amount of work that you’re going to have for the foreseeable future. And I’m not sure we’ve found that equilibrium yet.
We’re still trying to find what’s the new normal.
Q: There are still so many unknowns. We don’t even have a sense of when restaurants could be opened again…
A: No. We could be several months, and then there’s the potential of a second wave of the virus, just about when we get back to normal. What is going to be the psychology of people about getting into more confined spaces and in close proximity of each other, whether it’s restaurants, subways, the line at Disneyland, buses, airplanes…. How are people going to feel about that?
When would we get back to normal, and what does normal look like? I don’t know if normal will be back to what we had before the coronavirus. I hope we don’t go around just waving to our friends from a distance, and don’t feel comfortable giving them a hug.
Q: That would be quite contrary to our close-knit produce industry norms and culture…
A: Obviously, as we’ve talked before, the produce industry is a real people business. It’s very isolating to be working from home and not being with the people you’re used to seeing and working with in person. We have to figure out, how do we get around that, how do we overcome that. We’re using Zoom — I think everyone is using Zoom these days — we should have bought stock in that. It’s a way to connect. It’s better than nothing, but it’s not the same.
Q: I’ve been inspired by executives in the foodservice industry, who have been working tirelessly to meet the challenges in front of them…
A: I know. We’ve read that three percent of restaurants have closed their doors and won’t be reopening, but that’s just the beginning. I think we could see the entire restaurant business destroyed. Some are more adaptable, more flexible, to figure out takeout or off-premise dining more quickly than others.
There are over one million restaurants in the US. I think we have maybe 20 percent of those at risk, and many will be independents, really the invigorating and exciting kinds of places.
What has happened to foodservice is really a tragedy. The evidence that people are better off crowding through supermarkets than dining in restaurants is actually pretty weak. In Sweden, for example, they kept open most schools and most restaurants. As this piece elaborates, Sweden’s chief epidemiologist Johan Giesecke makes the point that other nations “have taken political, unconsidered actions” — actions that the facts do not justify.
In the past, we have had quarantines that lock down infected people. The article continues:
“This is, in fact, the first time we have quarantined healthy people rather than quarantining the sick and vulnerable. As Fredrik Erixon, the director of the European Centre for International Political Economy in Brussels, wrote in The Spectator (U.K.) last week: “The theory of lockdown, after all, is pretty niche, deeply illiberal — and, until now, untested. It’s not Sweden that’s conducting a mass experiment. It’s everyone else.””
Of course, the foodservice industry has little influence. The trade can beg Washington for financial relief, scramble to stay alive with take-out and delivery and hope that things will normalize soon.
For someone like Tim York, who has been an integral part of foodservice as it became a major industry in America, it must be shocking, astonishing and painful to see the trade collapse and to watch friends have their livelihoods and life’s work destroyed.
We only hope that he will see things turn quickly so at least as he moves on to the next stage of his life, he will be able to leave knowing that things are on an upswing. Many thanks to Tim York for taking time to share this extraordinary moment.