ASIA April 2020
How does COVID-19 affect food services segment ??
The food services segment in Asia is not spared from the negative effects of the pandemic. We noticed 3 major outcomes namely in places where the outbreak are growing rapidly.
Firstly, some major brands are closing their stores temporarily in accordance to local laws. For example, in China, Domino's Pizza had temporarily closed their stores in China in late February, while further plans for expansion were shelved aside. Pizza chains experienced their highest growth rates in China lately prior to COVID-19. Earlier on, Domino’s had even expressed hope of expanding its store numbers to 1,000 stores from 250 in China.
Secondly, restaurants might face shortage in supplies of raw ingredients which indirectly also push up the prices. For example, in Indonesia, several restaurants are taking some dishes off their menus due to rising prices of onions which according to some sources, soared more than 10-fold. In addition, garlic prices have also jumped from Rp35,000 (US$2.13) in 2019 to Rp55,000 (US$3.35) this February due to shortage in supplies which usually came from China. The lockdown in certain countries indeed have caused major disruptions to the supply chain. Onions and garlic do not grow well in Indonesia, as such the country relies on imports, particularly from China. With the ongoing supply issue, many restaurants are building up their stocks to prepare for future shortages.
Thirdly, restaurants, fast food outlets and other food stores are now at the mercy of the decisions made by political leaders. Some governments might decide on a complete lockdown whereas some allow partial lockdown where the public are advised not to go to crowded places. This will have severe impact on their sales. Even if they open their stores, they might face a dwindling number of customers. And to maintain operations during this difficult times will not be economically feasible in the long run as they need to fork out manpower, rental and other operating costs. In Singapore, the Restaurant Association of Singapore (RAS) had appealed in late January for landlords across Singapore to review their rentals down at a time when restaurants were battling major challenges brought by COVID-19. Rental cost contributed almost 30% of most food service operations in the country. Despite the appeal, many landlords had been late in helping their tenants (the food service operators) with the rental rebates.



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