The Path Forward in Foodtech
Covid-19 has the potential to paralyze food and hospitality businesses. Six months into the pandemic, nearly 1 in 6 restaurants had permanently closed. More recently, the national spike in cases has caused local and state governments to reinstate capacity limits and partial closures, at the same time that restauranteurs are contending with the loss of outdoor dining space due to colder temperatures. If you’re in the business of bringing people together to share a meal, you’re likely fighting to survive.
We recently hosted the second in a series of events with players across the foodtech ecosystem to discuss the path forward, where they found both reasons to be hopeful and reasons for concern. There’s widespread agreement that many of the changes that have enabled restaurants to persevere have become table stakes for guests and need to continue after the crisis ends. There is also shared angst over what still needs to happen in order for food and hospitality founders to keep their doors open. We share here some of the key takeaways.
Let’s start with the tech-forward innovations most likely to stick post-pandemic. After almost a year of quarantining and social distancing, customers have come to expect contactless interactions and convenient and speedy options for delivery and takeout. Restaurants have added ordering apps, QR code menus, curbside pick-up, walk-up windows, and drive-thrus. Fast casuals expanded their menus to meet the new demand for family meals and make-up for the vanishing lunch rush after offices closed. For example, our portfolio company sweetgreen fast-tracked its Plates line and began offering plant-forward entrees with sides served on square trays designed to resemble dinner plates.
When indoor dining shut down, high-end restaurants experimented with home cocktail kits and five-course meals in takeout boxes. Hundreds of local eateries and shops were able to deliver their most popular items to restless customers all over the country using online delivery startup Goldbelly. Many of these changes are likely to inform their business models well into the future.
Danny Meyer, a leader in the restaurant industry and CEO and founder of Union Square Hospitality Group, spoke at our event about how he sees the sector continuing to evolve in response to the pandemic. He envisions shorter menus and wine lists as restaurants face reduced capacity in kitchens and dining rooms and are looking for ways to turn tables faster. Besides, he explained, customers never needed 800 choices for a bottle of wine. Danny also wants to create payment models similar to those used in ride-shares and contact-free coat checking to reduce the spread of germs and speed-up the exit process.
Technology has driven many of the improvements across delivery, customer experience, and operations. With new levels of insights from ordering apps, startups are deepening their relationships with customers by learning more about their nutritional concerns and evolving food preferences, fine-tuning their marketing, and offering more personalized menu options. In supply chain management, tech has been a game changer. Cava, a portfolio company, has leaned into their digital network to log overages, shortages, damages, and quality issues and used the aggregated data to identify and respond to issues and trends in real-time.
Tech has also played a major role in allowing employees and consumers to return safely to restaurants. In states where regulators require food businesses to collect customers’ names and contact information in the event of an outbreak, many restaurants have been able to leverage the same QR code technology used for digital menus to also capture contact information directly from customers’ phones should it later be needed for contact tracing. CLEAR, a Revolution-Growth backed biometrics company, is partnering with businesses and restaurants to screen for Covid-19 as employees return to work. These types of health screening protocols help protect staff and go a long way in increasing consumer confidence, which will be particularly critical in reigniting demand once Covid-19 is in the rear view mirror.
So, what are the areas of concern that still need to be addressed for the industry to recover? The most significant challenge is how to solve the real estate dilemma. Occupancy has dropped precipitously yet restaurants are still on the hook for rent and often locked into multi-year leases. Many entrepreneurs, landlords, and lenders are looking to federal and state governments for support to avoid massive debt, layoffs, and permanent closures. Business owners in the food and hospitality space are also dealing with plunging consumer confidence, shifting targets for appropriate staffing levels, and high fees from delivery platforms.
Another area that food tech founders are still addressing following this year of social unrest: corporate citizenship. In the years to come there will be a much-needed, intentional focus on equality and inclusion in hiring, professional development, and promotions. Food companies are grappling with how to increase transparency around internal policies and employee compositions. Moving forward, they’ll be called on to take public positions on pressing socio-political issues and will need to demonstrate a holistic understanding regarding the environmental impact of how ingredients are sourced, manufactured, packaged, distributed, purchased, and discarded.
At every level, food service businesses are fighting to overcome challenges and meet evolving customer need states. There is still much work to be done. In the long-term, the resulting operational changes and culinary innovations will lead to improved guest experiences that we can all share around the restaurant table one day, uninhibited by masks and social distancing.
