Americans Get Used to Pandemic Life, Easing Restaurant Pain

(Bloomberg) --

Restaurants are catching a break after a sharp drop in sales as Americans from New York to Los Angeles get used to life under lockdown.

Customers are starting to feel more comfortable getting takeout or ordering food delivery through the likes of Uber Eats or DoorDash, and some parts of the country are starting to open up again. That's sparking an increase in sales and orders of everything from cooking oil to chicken and eggs.

McDonald's Corp. said Thursday it expects results in the second half of April to be better than the first, when the closely watched measure of comparable sales dropped 25% in its home market. Agriculture giants Cargill Inc. and Archer-Daniels-Midland Co. as well as poultry supplier Pilgrim's Pride Corp. said this week they see rising orders from the food services industry.

“We've been encouraged by what we've seen in the last couple of weeks in the U.S.,” said McDonald's Chief Executive Officer Chris Kempczinski. “That certainly does help with the demand that we're seeing, I think, as people get confident about our ability to continue to offer food in a safe way.”

The restaurant industry has been hit hard by the novel coronavirus, with more than 8 million employees laid off or furloughed since the outbreak, according to the National Restaurant Association. The food services industry will lose more than $80 billion in sales by the end of this month, with 40% of restaurants closed, the industry group forecasts.

‘Subtle' Pickup

But as people get used to pandemic life, things are starting to change.

Cargill CEO Dave MacLennan said this week that there's been a “subtle” pickup in orders from the food services industry in the past three weeks. As a result, the company has ramped up some of its egg production that had been initially hit by the absence of restaurants.

ADM said the worst is probably over and things have become “a little bit better” in the past two weeks, CEO Juan Luciano said Thursday. He is more optimistic as the economy starts to reopen that the U.S. will see a similar trajectory to Asia, where the pandemic first hit and food services are now back to 70% to 80% of what they used to be.

Pilgrim's Pride, the second-biggest U.S. chicken producer, said its fast-food segment is largely back to business as usual. Fast food will have a faster recovery compared with full-service restaurants as Americans gradually return to their routines, CEO Jayson Penn said Thursday.

“We are seeing those coming back today to very close to pre-Covid levels,” said Penn, whose company counts on fast food for more than 50% of its restaurant business.

Consumers are starting to venture out and they are choosing more familiar brands, Kempczinski said. People are unlikely to order something new when they opt for takeout, so food innovation is being delayed and restaurants are focusing more on their traditional products, Luciano said.

Stimulus checks are also helping.

At restaurant chain Salsarita's Fresh Cantina, sales are starting to pick up, CEO Phil Friedman said in an interview. The chain saw about a 60% drop in mid March, but it's now down about 40%, he said.

“A lot of that is our curbside has picked up a lot, our online has picked up a lot,” he said.