Restaurants are eager to get back to their standard fare, complete with $1 Wing Wednesdays—but there is no simple ‘on’ switch to get a supply chain up and running again.
Restaurants are struggling to meet consumer expectations on a number of fronts. Though some of the issues are apparent (like the ‘we’re hiring!’ signs everywhere), many of the issues are taking place in the kitchen.
As B2B companies scramble to process goods, shortages of key ingredients are causing delivery delays and surging prices. It’s no surprise that advertising isn’t a top priority for many brands in the B2B Food and Restaurant sector right now.
We encourage you to subscribe to our blog for the latest data surrounding the advertising industry. We will provide daily updates as COVID-19 continues to make its mark on the US economy.
Another Kick While Restaurants are Down
“We can’t afford, especially now, to be selling something that we are, you know, going to be losing money on, obviously. It’s been a really, really rough year. And we feel like we’re on the verge here, and…it’s just kind of another, you know, kick while we’re down.”
— Joe Lanni, Co-founder of Thunderdome Restaurant Group
The sudden return to eating out is straining restaurants and their supply chains. Between labor and key supply shortages, restaurants are struggling to meet consumer demands.
The latest shortage in the kitchen is meat. The issue isn’t at the farm, but at the processing plants. When people started consuming meat at home, manufacturers and processors that primarily served restaurants switched gears and started processing meat in a way that could be sold at grocery stores.
Now that people are eating at restaurants, the processing plants are returning to their traditional models, but top corporations are paying high prices to control their supply chains. Smaller players can’t compete.
According to Greg Newhall, a small farm operator Windy N Ranch, if you want to butcher beef, some of the processors aren’t only booked through the end of this year, but all of 2022 as well. (As a solution, his farm is opening up its own butcher shop.)
Due to supply chain bottlenecks and other forces, prices are rising quickly. Wings that were $.89 a pound in 2019 have risen to $3.22/lb in 2021. That doesn’t bode well for restaurant-goers who are used to large portions for fairly moderate prices.
As a response, the Biden administration announced a new supply-chain task force through the U.S. Department of Agriculture that is dedicated to strengthening and diversifying our nation’s food system. The task focus will receive $4 billion in funding.
It’s clear our food system has areas of vulnerability in times of crisis. But let’s remember, most people won’t starve due to these weak spots, but they may have to make changes. They may have to purchase chicken thighs, rather than wings. Or peanut butter, rather than meat.
But when it comes to managing a restaurant, it seems these issues are impacting other areas outside portion-control or menu options. We can see it in the advertising spend.
Overall, there have been 641 advertisers in the Food & Beverage equipment, shipping, and processing categories this year. To date, they have spent $8.2mm across B2B trade publications and websites.
This is down 28% from the same period in 2020, which helps confirm that the restaurant industry is still struggling. The pandemic was extremely difficult, forcing companies to rearrange their processes. Now, as restaurants gear up, they’re working in overdrive and are cutting their advertising spend.
And while restaurant supply chain brands in the B2B space are reducing their spend, something interesting is going on when we look at consumer brands.
On the consumer side, restaurants and bars are spending 16% more in 2021 (Jan-June) than they did in 2020. Spend is up to $2bn this year from $1.73bn in 2020.
But it’s not too surprising when you consider who makes up most of this spending increase.
The top five spending brands include Domino’s, McDonald’s, Taco Bell, Wendy’s, and Subway.
Together, they spent $771mm in the first 6 months of 2021. This accounts for 38% of all advertising spend from the 5.5k brands in the space.
National fast and casual chains typically dominate the spending in the consumer-facing restaurant category. But they are especially positioned to advertise more than other brands right now. They are paying top dollar to resist extreme disruption in their own supply chains, while smaller chains are in a more vulnerable position.
Right now, B2B restaurant brands are struggling, but large B2C chains are willing to spend. As processes smooth out, we’ll keep you updated on advertising behavior and new opportunities.
For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy.