Restaurants as Micro-Processors

June 17, 2020
Some eateries are freezing their offerings for takeout; retail is the next logical step.

Lately I’ve been seeing a lot of speculation about how the coronavirus pandemic will reshape the food industry – I suppose because that’s more pleasant to contemplate than the carnage actually occurring.

In that spirit, when it comes to the future of food production and distribution, I have been fascinated by the role restaurants might play.

Of all the business sectors associated with food, restaurants have arguably been hit hardest. Many if not most of them have been restricted to takeout and delivery. This has slashed the revenue and threatened the very existence of thousands of eating establishments, of every kind, across the country.

But concentrating on takeout and delivery may turn out to be more than a temporary survival tactic for restaurants. It could very well shape and redirect the way Americans buy and relate to food in all retail channels – with implications for industrial production.

Nowhere has the pandemic’s effects on restaurants been more profound than in New York City. Hannah Goldfield now uses Tables for Two, the restaurant review column in the New Yorker, to describe the coping mechanisms of some restaurants: various takeout tactics, selling groceries and supplies once a week, reviving the pushcarts that were starting points for some of them.

In the June 1 issue, Goldfield looks at how some of the restaurants she likes have been selling frozen foods. “Restaurant-quality frozen food is as fast if not faster [than takeout], nearly as effortless, and often more delicious,” she writes. A gifted food writer, Goldfield makes the reader’s mouth water with descriptions of beef-and-kimchi stew and Brazilian-style cheese buns. But the final sentence of her column brought me up short: “A business plan that once seemed like an alternative for restaurants now looks like a blueprint for them.”

Not just for restaurants. I can see frozen food that originates in restaurants as a potential game-changer for the entire segment.

Restaurants have always served as bellwethers for consumer food preferences. Food processing companies often look to restaurant menus to inspire their product development; there are even services that scan menus systematically, across the country, for that purpose.

Frozen food as a category, meanwhile, is shaking off its torpor. For a long time, convenience and price were overwhelmingly the most important value propositions, with quality coming in a distant third. That’s still true to a large extent, but high-value items are no longer an anomaly in the freezer case.

More importantly, frozen food sales are expanding under the pandemic; they’re up 40% in the 11 weeks ending May 16, according to Nielsen. It’s logical to surmise that this means more people will be looking for more appetizing fare than frozen Salisbury steak and mashed potatoes.

So why not sell frozen restaurant fare in grocery stores and other conventional retail channels?

I’m not talking about the kind of cross-branding with chain restaurants that some frozen food processors use, like Kraft Heinz’s arrangement with TGI Friday’s. I mean restaurants becoming “micro-processors,” supplying one or two (or more) grocery stores in their immediate vicinity, either right from their own doors or from a small, nearby (or attached) facility.

It would be a great way to introduce variety and premium quality into a store’s frozen offerings. Grocers who have pushed the “local” concept in recent years could dedicate a freezer cabinet to curated offerings from local restaurants.

The small-footprint technology certainly exists, like digital printing for packaging and cryogenic freezing. In any case, it’s more a question of space and labor than of technology. In a way, this would just be a variation or expansion of restaurants selling things like bottled sauces for home consumption.

There would be a lot to work out, of course. Federal and state governments might have to relax some regulations around packaging and labeling. Fortunately, this is already happening in other contexts, such as restaurants wishing to sell their supplies as groceries, directly to the public.

More fundamentally, retailers who wanted to participate would have to rethink their ordering and inventory procedures. Dealing in micro-batches can’t be done by replenishment algorithms; it takes managers who have good instincts about what their customers want, and are willing to act on them.

For years now, small, startup companies have led food product innovation. Making restaurants into micro-processors would just be a continuation of that trend. As restaurants struggle to survive the pandemic and beyond, edging directly into retail could be a game-changer, not just for them, but for the whole food industry.

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