Margins, meats and the final mile: 2020 restaurant industry predictions

We recently returned from The Future of the Industry: 2020 and Beyond, hosted by Bloomberg Intelligence and The Elliot Group, where we listened to the most powerful minds in the industry debate today’s hot button issues – from plant-based meats, last mile delivery, and health and wellness to the presidential election and oversupply.

Want to know what they said? Here’s a snapshot.

Technology may be a margin-saver. We ended 2019 with same store sales in the positive column, but the 2020 outlook is shaky. Last year’s positive sales were primarily driven by the QSR sector, which successfully raised prices and introduced premium items to offset traffic loss and cost pressures. But 23 states will raise their minimum wages in 2020, adding further margin pressure for operators. Technology, according to Bloomberg Intelligence Senior Research Analyst Michael Halen, may be the answer – automating routine tasks can reduce some labor costs. We know firsthand the value of technology to engineer price, too, which brings us to our second point…

But blue states might add to margin woes. According to Joe Kefauver, Managing Partner of Align Public Strategies, state level races will be most important in the 2020 election – more important than the always-on presidential race. The reason: “blue” states all align on the traditional “left of center” issues, including minimum wage increases, overtime, paid leave, corporate taxes, and more. Changes to these bottom-line issues will cause costs to rise, so operators will have to look at traffic-saving ways to pass cost pressures to consumers. And speaking of costs…

Delivery is darn expensive. Bloomberg Intelligence Automotive and Transportation Analysts Lee Klaskow and Kevin Tynan led a discussion on last mile delivery, the most expensive element of the delivery process. While electric and self-driving cars may present a long-term opportunity, Tynan and Klaskow issued a warning to the audience, based on their knowledge of the freight industry. Freight saw 18% negative growth this year, which could be an early indicator of a recession. And speaking of bad news…

Plant-based meats won’t save the industry. According to Jen Bartashus, Senior Analyst for Bloomberg Intelligence, plant-based meats represent an opportunity to reconnect with aging boomers looking after their health and millennials who want to do the right thing for the planet, but the products are not a sustainable growth driver. Why? Current plant-based products are not truly healthy; they are highly processed with a high fat and sodium content. The next innovation in the space, though, just might change the game: cell-based meats. The $10B business is expected to grow into a $50B industry within next 10 years because of its positive attributes for wealthy countries – the products are real meat, eliminate animal cruelty, and truly are a healthier option – and for not-so-wealthy countries, which can rely on cell-based meats to provide food security.

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