The impacts of the COVID-19 pandemic will be felt for a long time. Many businesses have had to make adjustments and, in some cases, pivoted in order to remain profitable or meet demand. It’s easy to take good things for granted in normal times, but the sparse grocery store shelves we’ve seen through this pandemic have forced people―even those who have typically never worried―to actually think about their access to food and beverage. Thankfully, agricultural producers and food manufacturers responded swiftly to address the challenges, and we can all be proud to be associated with these essential services. I know that I am. Hopefully, when we sit down with our friends and families for Thanksgiving this year, we all appreciate how good it feels to be together, and remember the efforts and contributions of farmers, ranchers and food producers who helped to keep us fed in times of great uncertainty.
Ironically, the current food situation is a bit like having a Thanksgiving every week – minus the guests of course! Over the last four or five years, food-away-from-home food and beverage has exceeded food-at-home spending. But there are two big exceptions each year, Thanksgiving and Christmas. You know, when we all complain about how crowded the supermarkets are when everyone is trying to make sure to pick up enough ingredients for the big meal. The following graph from the USDA’s spending database shows that big food-at-home seasonality. Recently, I heard one of our clients, a food distributor, remark that it’s like Thanksgiving everyday now as people are forced to cook at home and are often picking up weeks’ worth of groceries on their infrequent trips to the supermarket.
When we get the updated data for 2020, we will probably see a spending ratio that we have not seen since the 1970s. The USDA data doesn’t go that far back, but back in the 60s and 70s eating away from home was a pretty big deal. Dining out was mostly reserved for special occasions, even for families that had above-average household income. And, back in those days, ordering food online for pick-up or, or using an app to have food delivered to your doorstep would have sounded like half-baked science fiction. People still ate well―very well, in fact―but, it was primarily home-cooked meals.
Every time you eat away from home you increase GDP because someone is working for you. When you cook at home, you have to prepare, cook, serve, and clean up for yourself or your family. It’s real work, but interestingly this is not counted as gross domestic product (GDP). Many economists have pointed out that GDP activity will be lower because we are eating at home more. Too often, we treat GDP as a perfect proxy for societal well-being. When GDP involves essential goods and services like health and education that proxy makes sense, but it becomes a lot less intuitive when you start to consider goods and services that are simply nice to have like eating away from home.
Because restaurant labor and overhead are counted as financial transactions, food-away-from-home data has a bigger impact on GDP than food-at-home. But, when you eat at home, the preparation and clean up and the use of your kitchen do not count towards GDP, so a greater portion of the money spent on your meal goes towards the farmers, ranchers, and food producers. The following tables from the USDA show the distribution of the dollar spend between food-at-home and food-away-from-home. When we dine out, the table on spending shows that 3 out of 4 dollars spent go to the restaurant’s labor, overhead and profits. The food component using the Farm-Share is only 4 percent. In contrast, when people prepare meals and eat at home, Farm-Share is 19 percent. The biggest share for Food-At-Home is for food processing at 26 percent, which makes sense given all the preparation done in the food processing facilities.
Here is another point to consider; in 2020 (vs. the 60s and 70s), much of the preparation and cooking has already been done for us (and done well) by food manufacturers. We spend a lot less time now in the kitchen prepping for meals – trimming meat, chopping and peeling vegetables, etc. And, thanks to the efforts to implement the Food Safety Modernization Act (FSMA), food borne illnesses have been curtailed and traceability has been drastically improved. Food-processing facilities are extremely safe and efficient so that more of the food dollar can be spent on the food and beverages. This transformation of food and beverage GDP and “Thanksgiving everyday” shopping habits have proven very beneficial for some in the business, while others like restaurant workers, are facing severe hardships.
It is impossible to say what the exact impact on GDP will be with this sudden shift. The key question is whether Americans will go back to their pre-COVID19 patterns quickly or slowly. Regardless, we all need to eat, and the U.S. business will continue to accommodate us. The industry will reward businesses that offer the best value, most convenient and tastiest solutions to the American consumer, and they will probably reap those benefits for years to come.