September 2020

elated restrictions, many companies
have had to focus their
efforts on survival and recovery.
Pandemic-related shutdowns,
as well as the new behaviours of
consumers that suddenly found
themselves working from home,
hit cafés and coffee shops hard.
“Across all areas of foodservice,
operators are experiencing economic
struggles and the coffee/
café segment is no exception to
this,” states Mir. “From a financial
standpoint, brands will experience
economic losses, with the
remainder of the year focusing on
recovery — or even survival — for
smaller emerging chains or independent
restaurants.”
An example that clearly
highlights the economic hardship
faced within the industry,
Montreal-based DAVIDsTEA Inc.
filed for bankruptcy protection
and began implementing a
re-structuring plan in order to
stem the losses from its retail stores
and accelerate its transition to an
online retailer and wholesaler.
“The transformation of our
business model is necessary
to position the company for a
return to profitability,” explains
Frank Zitella, CFO and COO of
DAVIDsTEA. “DAVIDsTEA has
experienced a multi-year decline
in brick-and-mortar sales and the
post-COVID-19 retail environment
creates significant challenges
for our unique in-store customer
experience.” He adds the chain
“may terminate a significant number
of our 222 leases as we seek to
right-size our retail footprint.”
In June, Starbucks also
announced plans to close up to
200 company-operated locations
in Canada over the next twoyears
OUT-OF-HOME FALLOUT
FOAM
AND
FUNCTION
Entering 2020, beverages featuring
functional ingredients were on the
rise. “Certain aspects of the functional-ingredients
trend are more
relevant today as consumers place
heavier emphasis on their mental,
emotional and physical well-being,”
shares Sophie Mir, associate editor at
Technomic. “Ingredients that provide
mental and emotional benefits, are
increasingly essential as consumers
navigate the new normal of their
day-to-day lives, such as remote
work environments.” Embracing
demand for functional beverages,
this summer, Toronto-based coffee
brand Strange Love launched
botanical cafés inside each of its four
Toronto locations, offering moodaltering
tinctures, tonics and drinks.
as part of “portfolio-optimization”
efforts. This strategy coincides
with plans to reposition many U.S.
stores and will see some Canadian
locations be repositioned as well.
Starbucks is working to accelerate
the U.S. expansion of convenience-led
formats, such as drivethru,
mobile-order-only Starbucks
Pickup locations, walk-up windows
and curbside pickup, over the
next 18 months to meet changing
customer behaviours. The transformation
will also encompass
renovations to select store layouts,
including the addition of a separate
counter for mobile orders.
Strategy shakeups are likely
to be the norm as the industry
navigates the current environment.
While the major players
within the segment have been
prioritizing the development of
digital channels in recent years,
COVID-19 has served to accelerate
this process — as it has with a
number of key trends within the
foodservice industry.
“The COVID-19 pandemic
forced chains to become more
innovative in serving their customers,
with a huge emphasis
on off-premise opportunities,
while in-store operations were
closed,” says Mir. “Even as stores
open, customers are still wary
of coming on-premise, so offpremise
service will be huge for
the remainder of the year. For
example, some chains launched
curbside pickup, while others
[offered] online ordering for
retail items.”
Tim Hortons’ parent company,
Restaurant Brands International
(RBI), also indicated the importance
of digital innovation to its
recovery efforts. “Our teams have
re-written code for our apps;
re-imagined service opportunities
such as curbside pickup; and
expanded delivery services into
thousands of new restaurants.
The outcome has been a significant
increase in digital sales in
North America and we believe
this trend shift to digital is what
guests will continue to demand,”
Jose, Cil, CEO, RBI, shared in a
company update.
On the retail front, Pelton
points to the launch of Second
Cup’s e-commerce platform,
which took place in April, as the
brand’s “biggest new development”
to take place since COVID-
19 hit. This saw the brand offer
home delivery for its products for
the first time. Aegis’ other café
brand, Bridgehead (acquired in
January), has also seen growth
through retail channels during
this period. “Following the closure
of its coffeehouses due to
COVID-19, Bridgehead has seen
10-times growth in its online
sales,” says Pelton.
As coffee shops progressed
down the path to re-opening, Mir
notes one bright spot. “According
to Technomic’s Canadian consumer-survey
data, 51 per cent
are buying from local restaurants
as a way to support the community.
It’s undeniable this is a hard
time for everyone, but in true
Canadian spirit, it looks like consumers
are ready to take out their
wallets to help their neighbourhood
restaurants stay afloat.”
Aegis Brands has been seeing
the impact of this behaviour first
hand. “What’s amazing to see is
just how quickly our operations
are bouncing back — much
quicker than anticipated and
far surpassing our post-COVID
expectations,” shares Pelton.
“Second Cup cafés in Alberta
and the Eastern provinces, for
example, have been delivering
year-over-year same-store-sales
results of approximately 75 per
cent, despite the significant
distancing regulations that are
still in place…It’s clear that
there’s a strong desire [from customers]
to return to the comforts
of their coffee routine as quickly
as possible.” FH
With many Canadians working from home, foodservice spending has taken a
huge hit and, according to a recent study by The Agri-Food Analytics Lab at
Dalhousie University, in partnership with Caddle, many Canadians intend to
continue working from home for the long term.
Given the strong link between morning foodservice occasions — which
account for a large portion of out-of-home coffee sales — and the workday
commute, this is expected to pose a challenge for coffee-focused operations.
According to The NPD Group, in 2019, hot coffee was included in 30 per cent of
all foodservice meal or snacks purchases. But, during the first three months
of the pandemic, that figure fell to 23 per cent (see story on p. 9).
Further, the Dalhousie report suggests workday foodservice visits will
continue to be impacted post-pandemic. Prior to the pandemic 36.8 per cent
of survey respondents were going to a restaurant or ordering out for a meal/
coffee break during the workday at least twice a week. That number goes
down to 23.3 per cent when asked about plans after the pandemic is over.
Unsurprisingly, as out-of-home coffee occasions decreased, retail sales of
coffee, as well as coffee equipment, increased. However, this has not made up
for demand losses.
60 FOODSERVICE AND HOSPITALITY SEPTEMBER 2020 FOODSERVICEANDHOSPITALITY.COM