Covid-related delivery crunch, staff shortage dampens China’s food demand

A recent article in a catering trade publication laid out the challenges faced by restaurants during the current Covid lockdown in Shanghai. While the current outbreak in China is centered in Shanghai, other cities are also adopting stricter lockdowns after finding only a few dozen cases.

The challenges faced by restaurants in Shanghai are a precursor for what other cities will likely face and will have a major impact on food demand in China over the coming months.

One chain restaurant with 29 restaurants in the region notes that their sales are down 80% and they have nearly 700 employees who are currently in home isolation and unable to work.

Other restaurants are completely shuttered with a smaller operator saying their restaurant has been shut since March 28with all their employees still in lockdown at home.

While some restaurants continue to provide delivery service, this is relatively small.

The first issue is that, unlike the previous lockdown at the beginning of the pandemic, most apartment complexes are currently banning residents from picking up deliveries at the main entrance.

Rather than a ‘last mile’ problem, it has become a ‘last 100 meters problem’. Many residential neighbors are relying on a handful of volunteers to actually transport delivered items to the doors of residents.

In some communities that might only happen once per day, making the delivery of prepared food impossible.

The second is that most neighborhood committees are still prioritizing delivery of essential food items such as rice, meat, vegetables, rather than non-essential food orders for restaurant delivery.

Some restaurants are able to make semi-prepared items, such as assembled but uncooked dumplings, which they can deliver as part of large group orders. However, many restaurants do not have such capability.

Even for restaurants that are able to open and operate, there is still difficulty sourcing ingredients and raw materials. While food supply in Shanghai is improving, supply chains and availability still remain chaotic.

Labor is also an issue since many restaurant employees are also in lockdown. While some essential employees of logistics and food distribution companies have been able to leave their apartments to return to work, this type of permission does not seem to be extended to most restaurant employees.

Lockdowns across China will continue for the foreseeable future and will continue to weigh on protein demand.