June 18, 2020
DMA NEWS
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DISTRIBUTOR NEWS
Restaurant Suppliers Report Demand for Health, Safety Products
Products focused on health and safety are among the top purchases for restaurant suppliers as dining rooms begin to reopen. Restaurant suppliers in Wisconsin, which is slowly reopening businesses, are seeing increased demand for products to sanitize tables, guards to separate tables, sanitizing stations, and smaller table sizes. In addition, products that target crowd control, including signage for where people should stand in line, have garnered interest, reported Milwaukee Business Journal (June 3). Full Story (Subscription Required)

Aramark Launches Pop-Up Grocery Stores
Aramark opened more than 100 pop-up grocery stores at healthcare facilities across the country. These "mini-marts" stock basic and hard-to-get items that Aramark is able to source through its distributor network. Full Story
SUPPLY CHAIN
Lineage Logistics Expands Operations
Lineage Logistics will acquire Henningsen Cold Storage Co. The deal bolsters Lineage's presence in the Pacific Northwest by adding 14 facilities across Oregon, Washington, Idaho, Pennsylvania, North Dakota, and Oklahoma. Full Story

Additionally, Lineage Logistics acquired assets from Maines Paper & Food Service. Maines serves more than 2,500 restaurants, with Burger King, Tim Hortons, and Darden Restaurants among its clients, reported Verdict Foodservice (May 21). Full Story

A few weeks after the acquisition, Maines Paper & Food Service filed for Chapter 11 bankruptcy June 10. The 101-year-old food distribution company noted sales fell by as much as 70% due to the pandemic and connected economic fallout, reported Binghamton Press & Sun-Bulletin (June 10). Full Story
INDUSTRY TRENDS
Already in Turmoil, Many Restaurants Put Reopening on Hold
Following months of mandate closures due to the coronavirus pandemic, many restaurants were ready to begin reopening across the U.S. before civil unrest forced some to change their plans.

Many retailers and restaurants put efforts to reopen on hold as protests swept across the nation in early June. Restaurant Brands International, McDonald's, and Starbucks limited hours and pared back operations to protect employees and comply with curfews imposed in many cities. Additionally, grocery chains such as Ahold Delhaize USA and Fareway Stores Inc. closed locations impacted by the protests and instructed workers to keep stores closed if conditions are unsafe, reported The Wall Street Journal (June 1). Full Story (WSJ Subscription Required)

Regarding small businesses, many independent restaurants considered pushing back their opening dates due to damage from looting. Before the protests began, some 3.3% of restaurants across the country permanently closed within the past six weeks, about the same percentage that typically close in eight months, according to Datassential. An estimated 5-10% of independent restaurant locations are expected to close as a result of the pandemic compared with 2-3% of chain units, according to a Stephens analysis, reported The Wall Street Journal (June 4). Full Story (WSJ Subscription Required)

Between 15-18% of New Jersey restaurants aren’t expected to reopen, the president of the New Jersey Restaurant & Hospitality Association forewarned a Senate subcommittee. She added the closures are most likely to hit businesses that are small, independent, and ethnically diverse, reported NJ.com (June 9). Full Story

The restaurants that are trying to reopen are facing overdue bills and high costs of restarting business. For many restaurants, the reopening has turned out to be harder than closing because it is nearly impossible to predict revenues amid social distancing, while fixed costs remain the same. In addition, many haven't paid for food bought before the shutdown and some suppliers won't deliver new food on credit unless some of the old bills are paid, reported The Wall Street Journal (June 16). Full Story (WSJ Subscription Required)

Meanwhile, eating and drinking places are getting creative to adjust to social distancing in a new era of travel. Wineries, breweries, distilleries, farm stays, food halls, cooking classes, and food tours are embracing outdoor seating, relying on reservations, targeting local citizens, and refocusing on employee protection as the country reopens, reported The New York Times (June 16). Full Story

Additionally, some states are considering a tightening of laws to prevent a second wave of coronavirus cases. New York Gov. Andrew Cuomo threatened to reinstate closure orders following 25,000 complaints issued statewide regarding reopening violations. The state singled out Manhattan and the Hamptons as problem areas, with violations including large gatherings, social-distancing violations, and lax face-covering enforcements, reported Boston Globe (June 14). Full Story

New Jersey planned on suing the city of Asbury Park over a law it passed to allow indoor dining in defiance of the state's order to prohibit in-restaurant customers. The city's deputy mayor noted it was simply expanding the governor's order allowing indoor gatherings of up to 50 people to include food and drink, reported Reuters (June 12). Full Story

In Oregon, the state paused its reopening plans as workplace outbreaks at food processors and agricultural sites led to more than 600 infections among workers and close contacts in the state and southwest Washington since mid-April. Fourteen of the 24 active workplace outbreaks in the state are connected to agricultural or food processing facilities, reported The Oregonian (June 14). Full Story

Price Fixing Allegations Plague Meat Industry
Meat, poultry, and seafood companies across the U.S. are facing legal trouble.

Meat
The Justice Department sent civil investigative demands to four meatpackers over potential antitrust violations, according to a person familiar with the matter, reported Bloomberg (June 4). Full Story
The department's antitrust division sent civil investigative demands to the companies and is talking with state attorneys general about the probe after a group of states called for an investigation.

Tyson Foods Inc., JBS SA, Cargill Inc., and National Beef Inc. control more than 80% of the U.S. beef processing market. The dominance has sparked long-standing concerns about their pricing power over livestock suppliers.

Kansas City, MO-based National Beef confirmed it received a civil investigative demand from the Justice Department.

“The request was very narrow in scope, which leads us to believe that the DOJ does not necessarily believe there is an antitrust issue,” National Beef said.

Poultry
The subpoenas to the meatpackers follow criminal charges over price fixing against four current and former executives of chicken processing companies, including Jayson Penn, CEO of Pilgrim's Pride Corp.

The other executives allegedly involved in the scheme include former Pilgrim’s Pride VP Roger Austin, Claxton Poultry Farms president Mikell Fries, and Scott Brady, a former Pilgrim’s Pride executive who joined Claxton in 2012, reported CNBC (June 3). Full Story

A grand jury in the U.S. District Court in Denver, CO, indicted all four with one count of conspiring to fix prices for broiler chickens from at least 2012 through 2017. The indictment said the Pilgrim's Pride and Claxton executives communicated to each other nonpublic information about negotiations with fast food chains and grocery stores and put forth similar bids.

The criminal investigation is still ongoing, and the four men are the first to be charged, according to the Department of Justice.

The Wall Street Journal reported June 4 that Penn pleaded not guilty to federal charges that he conspired to fix chicken prices. “He plans to fight these charges and expects to be fully vindicated,” Michael Tubach, a lawyer for Penn, said at a hearing. Full Story (June 4)

A judge imposed conditions that he can't contact employees of eight companies that are customers of Pilgrim's and are alleged victims of price fixing, and can't contact price negotiators at other chicken suppliers who allegedly participated in the price fixing.

Seafood
Meanwhile, a Washington state lawsuit alleged price fixing by StarKist and rival tuna conglomerates, reported The Seattle Times (June 2). Full Story

The lawsuit alleges a three-company price fixing scheme between 2004 and 2015 cost Washington residents at least $6 million by artificially driving up the cost of canned tuna. For example, the lawsuit said a resident ordinarily paying $1 for a can of chunk light tuna might have paid $1.08 under the scheme.
“We cannot have a free market where corporate titans are able to tip the scales to their own bank accounts,’’ said Washington State Attorney General Bob Ferguson, adding he seeks full restitution allowable under state law in addition to court costs. “Washingtonians lost millions as a result of this corporate greed. I intend to get that back for them.’’

Washington is the first state seeking compensation from the tuna giants after a U.S. District Court judge imposed a $100 million fine against StarKist in December for its role in the scheme. Bumble Bee already paid a $25 million fine in 2017 because it was judged to be in a rougher financial state and faced additional lawsuits from Walmart and other supermarkets and customers. Food Institute Focus (June 8)

Plant-Based Products Remain Popular During Pandemic
With meatpacking operations facing complications from the coronavirus pandemic and increasing prices in the sector, many consumers turned to plant-based foods as a cost-effective and healthier alternative.
Sales of plant-based foods were outpacing total food sales amid the pandemic, according to research from the Plant Based Foods Association and SPINS. Sales of plant-based foods jumped 90% in March as U.S. consumers entered a peak panic buying phase compared to March 2019 and increased by 27% in the four following weeks.

“Since the beginning of the pandemic, there has been a continued shift in consumer purchasing toward natural and organic products that enhance health and immunity,” said Tony Olson, owner and CEO of SPINS. “Our data shows, the plant-based meat boom of last year continues and as reports of animal-based meat shortages increase, we can expect plant-based meat to gain even more traction.”

Impossible Foods said it will sell plant-based meat burgers in the U.S. directly to consumers through its own website. It will offer free shipping and two-day home delivery on orders placed through the site, reported Reuters (June 4). Full Story

Meanwhile, competitor Beyond Meat was active in the international sphere. It inked a distribution deal with Chinese food distributor Sinodis. The company, which currently distributes imported foods to 4,500 wholesalers, restaurant chains, and hotels in China, will distribute Beyond Beef and the Beyond Burger in the country, reported Barron's (June 8). Full Story

In the Netherlands, Zandbergen opened a co-manufacturing facility to produce Beyond Meat products, including Beyond Burger and Beyond Sausage. The facility is expected to allow more efficient distribution of Beyond Meat's products across Europe, the Middle East, and Africa, and it'll debut the company's new packaging. Additionally, Beyond Meat acquired its first European manufacturing facility in Enschede, the Netherlands, to handle the texturizing of its proteins. Full Story

Starbucks to Transform Store Formats
Starbucks is speeding up plans to build stores with drive-thrus and will close locations in unpopulated malls in response to the ongoing public health crisis, reported The Wall Street Journal (May 21). Full Story (WSJ Subscription Required)

CEO Kevin Johnson outlined the company’s "Bridge to the Future" in a recent letter to company partners. The first action included reopening stores and recovering business.

"On a daily basis, we monitor the virus’s status in each of the communities we serve, work to exceed local health officials’ recommendations to keep our partners and customers safe, and we make store-by-store decisions," said Johnson. "We are borrowing strongly from our lessons navigating this in China, expanding options for mobile ordering and pickup, and innovating on our store operations to serve customers responsibly."

Starbucks will accelerate the transformation of the "third place" already underway before COVID-19 by adapting to a more on-the-go format. Approximately 80% of store transactions before the crisis were on-the-go, according to Johnson, driven by the use of the Starbucks mobile app.

"Our digital leadership and ability to transform lower performing locations and formats to successful new store formats (i.e. relocate Starbucks stores from low-traffic malls to new, thriving Starbucks locations that combine the third place with drive-thrus) are unique strengths that we will lean into in the coming months," Johnson wrote. Originally, the company's plans for this transformation were to be over a three- to five-year period, but will now occur over the next 12 to 18 months.

When it comes to independent coffee shops, they are also changing their business model to provide more emphasis on coffee delivery. There’s been a 521% increase in U.S. coffee sellers that are offering curbside delivery or traditional pickup since shelter-in-place orders began, according to a study conducted by Square Inc. and the Specialty Coffee Association, reported MarketWatch (May 21). Full Story

The study found a 340% increase in delivery sales among coffee sellers and a 5,380% combined sales increase in curbside and pickup orders. Coffee shops are also relying more on digital payments.

In addition to Starbucks, other chains find drive-thrus are more profitable, relieving some of the pressure to reopen too quickly. In fact, for chains like Jack in the Box Inc. and Raising Cane’s Chicken Fingers sales are up compared with pre-crisis levels.

“We’re doing plenty of drive-thrus—it’s our safest way to keep our customers and team safe,” said Raising Cane’s CEO Todd Graves. Although the chain can open dining rooms in Georgia and Texas, Raising Canes opted to keep them closed. Food Institute Focus (May 28)

Foodservice Expansions, Acquisitions, and Closures
  • TGI Friday's could close up to 20% of its 386 U.S. stores permanently, according to the company's CEO. The company continues to struggle with driving sales as many customers remain at home during the pandemic, and even with a shift to pickup and delivery, sales are down about 50%, reported Boston Globe (May 26). Full Story
  • Fortress Investment Group LLC acquired Krystal Restaurants LLC. Fortress, an affiliate of SoftBank Group and Golden Child Holdings, named Thomas Stager president of Krystal, reported AL.com (May 26). Full Story
  • Wahlburgers president and CEO expects the company will expand to 300 stores from its current count of 37 within five years. As the company expands, it could turn to fast-casual concepts as only one German outlet is set up for currently, reported Boston Globe (May 27). Full Story
  • Pret a Manger reopened 204 shops across the UK for takeaway and delivery on June 1 but offered a limited menu. The company installed barriers at the cash registers, restricted the number of customers allowed inside, and imposed social distancing in its kitchens, reported The Independent (May 28). Full Story
  • Popeyes will redesign its restaurants and logo with a more modern look as it looks to expand internationally. Its Shanghai location will be one of the first with the new design and is the first step in establishing a footprint in mainland China with a goal of opening more than 1,500 restaurants across the region. Popeyes aims to expand into additional international markets in 2021, reported South Florida Business Journal (June 2). Full Story (Subscription Required)
  • Subway Restaurants reportedly plans to open an office in Miami, FL, according to people familiar with the matter. However, the company stated it is not planning to move its headquarters from Milford, CT, reported New York Post (June 2). Full Story
  • Red Robin Gourmet Burgers focused on reopening about 270 locations in its largest and highest volume markets in the Pacific Northwest and West Coast. Full Story
  • The Cheesecake Factory Inc. noted sales at locations that reopened were close to previous levels, but protests were hampering that progress. Additionally, about a quarter of its restaurants opened dining rooms with limited capacity in accordance with local health orders, reported MarketWatch (June 2). Full Story
  • Chuy's Holdings raised $50 million from an at-the-market offering and used a portion of the proceeds to fully repay its $25 million revolving credit facility. The remaining funds will be used for general corporate purposes. Full Story
  • Luby's Inc. will immediately pursue the sale of its operating divisions and assets. It will explore a variety of potential transactions, including selling the company's divisions: Luby's Cafeteria, Fuddruckers, and Culinary Contract Services, as well as its real estate, or selling the company in its entirety. Full Story
  • BurgerFi plans to merge with Opes Acquisition Corp. The companies aim to finalize the merger by the end of the third quarter. Once the merger is completed, BurgerFi would become a publicly traded company, reported South Florida Business Journal (June 8). Full Story (Subscription Required)
  • Earl Enterprises acquired the assets of Bravo! Italian Kitchen and Brio Italian Grille from FoodFirst Global Restaurants Inc., which filed for bankruptcy in April due to the pandemic. The company expects to welcome back 4,000 employees across both brands when locations return to full operations, reported AL.com (June 11). Full Story
  • Punch Bowl Social is having conversations with investors and hopes to have an announcement in the "near to mid-term" about how the company will proceed. The company, which lost its primary investor, Cracker Barrel Restaurants, in March, will permanently close two locations in Stapleton, CO, and Schaumberg, IL, and plans to move its headquarters from Denver, CO, reported Denver Business JournalFull Story
  • Chipotle Mexican Grill's margins are set to benefit from a resurgent avocado supply that will keep prices lower at least through the summer, according to a SunTrust analyst. He estimated avocados account for only 5-10% of Chipotle's cost of goods sold, but volatility in recent years has had an "outsized impact" on the chain's margins, reported Bloomberg (May 21). Full Story
  • Garden Fresh Restaurants is liquidating all assets due to Chapter 7 bankruptcy. The company, which has 97 restaurants under the Souplantation and Sweet Tomatoes brands along with three distribution centers, attributes its failure to the impact of the coronavirus. Full Story
  • British bakery chain Greggs will reopen 800 locations for takeaway on June 18 and will encourage customers to make contactless payments. It plans to reopen the remainder of its approximately 2,050 locations in early July. Greggs temporarily suspended new openings except where it is legally committed or expects strong customer traffic. It's also approaching landlords for rent reductions, reported BBC (June 16). Full Story

Executives on the Move
  • Denny's appointed Gail Sharps Myers as general counsel. Full Story
  • Panera Bread Co. named former Kraft Heinz executive Eduardo Luz as chief brand and concept officer, reported St. Louis Business Journal (May 28). Full Story (Subscription Required)
  • Acosta named former Coca-Cola Co. executive John Carroll as chief growth officer. Full Story
ECONOMIC PULSE
Technomic’s Take: Preparing for a Return of the Virus
In recent research, Technomic took a look at concerns of the virus reappearing, the health and safety of service industry employees, sales performance, consumer spending, and guidance on tackling the next phase of recovery. Full Story
Restaurant Overview
U.S. restaurant chain transactions declined by 14% in the week ending June 7, compared to same period a year ago, according to The NPD Group. Major full service restaurant chains saw the most dramatic improvements, up 7% during the week ending June 7 when compared to the prior year. Full Story

Meanwhile, the U.S. GDP fell at a 5% annual rate in first quarter 2020 when adjusted for seasonality and inflation, representing the largest quarterly decline since the Great Recession, according to the Commerce Department. The total was down 0.2 percentage points compared to the advance estimate released in April. Full Story

Selected Restaurant Results
  • Papa John's same-store sales increased 33.5% in North America in May and 7% globally, the second straight month achieving the best sales in the company's history. Meanwhile, Domino's Pizza's U.S. same-store sales grew 20.9% from April 20 to May 17. Analysts predict delivery pizza chains will fare better than other restaurant companies as consumers navigate a COVID-19 world, reported CNBC (May 27). Full Story
  • Popeyes' U.S. same-store sales increased more than 40% as of the third full week of May, outpacing Restaurant Brand International's two other chains. However, Tim Hortons' and Burger King's sales are beginning to rebound from March. Tim Hortons' Canadian same-store sales declined by mid-20s, up from the more than 40% decline in the second half of March, while Burger King's U.S. same-store sales shrank by mid-single digits, bouncing back from declines of more than 30% in late March, reported CNBC (May 28). Full Story
  • The Wendy's Co. reported a 3.3% drop in same-store sales during May, but noted sales improved each week following a beef supply disruption at the beginning of the month. Breakfast accounted for approximately 8% of U.S. system-wide sales, and the company said it was operating 99% and 81% of its U.S. and international restaurants as of May 31, reported Seeking Alpha (June 8). Full Story
  • Starbucks predicts it lost as much as $3.2 billion in revenue due to the coronavirus pandemic. U.S. same-store sales fell 43% in May, but in the last week of the month, same-store sales tumbled just 32%. For the full fiscal year, the company expects same-store sales in the U.S. and China to decline 10-20%, reported CNBC (June 10). Full Story
  • Jack in the Box same-store sales increased nearly 5% during the first eight weeks of the third quarter. With that, the company ended interim reporting and is returning to its quarterly reporting schedule. Full Story
  • Red Robin Gourmet Burgers saw a 20.8% decrease in same-store sales in its fiscal first quarter, and off-premise sales reached 40% of revenue. The chain reopened dining rooms in almost half of its 554 restaurants and is engaging in "constructive discussions" with landlords to reduce lease payments, reported Denver Business Journal (June 10). Full Story (Subscription Required)
  • McDonald's Corp.'s overall same-store sales declined 21% in May, after falling 39% in April. Globally, current-quarter same-store sales were mainly hurt by the closure of all its restaurants in France, Spain, the UK, and Italy in April. The company now plans to boost advertising spending by $200 million as a part of its recovery plan to ride out the crisis, reported Reuters (June 16). Full Story
PARTNER NEWS
Introducing Tundra Restaurant Supply
Tundra Restaurant Supply, which recently joined DMA as a supply chain partner, is your dedicated one-stop-shop for restaurant supplies, commercial equipment, and replacement parts. The company has grown its business since 1993 by helping fast casual and foodservice chain customers succeed. At Tundra, the main goal is to provide solutions to customers. Whether rapidly executing a national product rollout to multiple locations, seamlessly shipping new store opening package, or partnering to develop custom products, Tunda has it covered. Full Story
Let R3 Help You Adapt to Off-Premise Popularity
With off-premise dining becoming the new normal, the need for reliable off-premise packaging is a must, but how do you know what kind of packaging is right for your needs? Do you need to keep something hot or cold? Microwave safe or disposable? Aluminum or poly? R3 Redistribution has all the answers and all the products for whatever you need. Our product offerings include containers, cutlery, napkins, plates, and more. We are the off-premise packaging experts, so let us help you make the right decision the first time and every time after. R3 - the difference that makes us better together. Learn More
U S Chemical Update
When your staff and clients are confronted with a disease such as COVID-19, SARS, MERS or others, there is always a need to ensure a safe environment. Failing to reduce the risk of disease may result in loss of business, risk to your brand value, reduced workforce efficiency, and even lives.

During an outbreak there are a number of things that can be done to help prevent spreading disease. Key areas and touchpoints as well as high-risk areas need more frequent attention. Cleaning and sanitation are essential building blocks to infection prevention and outbreak control.

At U S Chemical we care about the cleanliness of your facility and operations. We would like to survey your location, reviewing all areas that you clean, disinfect, and sanitize to determine that your needs are being met by your current sanitation program provider.

For more information, please contact Brian Taticek at brian.taticek@diversey.com to set up a consultation. Full Story
Make the Safer Choice
The people have spoken. And they no longer feel safe using air hand dryers. In a recent study, 70% of the respondents agreed with the statement “I wish more facilities offered paper hand towels as an alternative to air dryers,” and as many as 33% “feel unsafe entering a washroom with air dryers.” And the fact is, jet air dryers spread up to 10 times more germs into the environment. This has become a recurring problem facing facility managers all over the world in the wake of the COVID-19 pandemic.

Thankfully, there’s an easy solution. The Tork PeakServe Continuous hand towel system is a hygienic, single-user touch system that uses 50% compressed bundles to offer the highest capacity on the market, making sure that hand towels are always available. Learn More
P&G Cleaning, Disinfecting Products Give Peace of Mind
Just published P&G Professional research with +900 restaurant “users” (a combination of LSR/QSR and “Full Serve”) revealed the following important findings, which confirm the importance of using trusted, well-known brands in restaurant operations to provide patrons the confidence and reassurance as they seek a safe, clean dining experience: 
  • 74% of diners want to know how restaurants are being cleaned/sanitized and what measures are being taken to ensure food safety.
  • 70% of diners want these cleaning and safety measures posted on the restaurant’s website while 64% want signage in the restaurant or information via email. 
  • 58% of diners would be more likely to pick a restaurant if they knew the restaurant was using a manufacturer/brand of cleaning products they personally knew and trusted.
  • 1 out of 3 diners would be willing to pay more at a restaurant if they knew the restaurant was using a manufacturer/brand of cleaning products they personally knew and trusted.
P&G Professional has a full lineup of EPA-registered products effective in killing a broad spectrum of pathogens; the following two products are found on List N for emerging pathogens:
  • Comet Disinfecting Cleaner with Bleach (EPA Reg # 3573-77)
Clean and disinfect with Comet Disinfecting Cleaner with Bleach. A unique 2-in-1, all-purpose formula combines the cleaning power of heavy-duty detergents with the stain removal power of bleach, while being a hospital-use disinfectant.
  • Spic and Span Disinfecting AP Spray & Glass Cleaner (# 3573-96)
Powerful 3-in-1 formula helps improve productivity by simplifying cleaning and replacing three products with one for less inventory and operational ease and simplicity. Spic and Span offers remarkable cleaning performance as a disinfectant, hard surface cleaner, and glass cleaner.
Finally, know P&G continues to make significant strides in improving replenishment of our sought-after products—especially our disinfectants. We’re now in position to more effectively fulfill demand on core P&G products. Several P&G items have been removed from “managed supply,” while other products like Safeguard hand hygiene items will remain on “managed supply” for the near future.

For info about our complete cleaning portfolio, visit http://www.pgpro.com. Operators can contact Bruce Bykowski via phone at 612-327-9912 or via e-mail at Bykowski.bd@pg.com, or James Kennedy via phone at 704-609-8015 or via e-mail at Kennedy.JH@pg.com.

For distribution questions, please reach out to U.S. foodservice distribution manager Taft Sales via phone at 817-821-8014 or e-mail at Sales.TL@pg.com.
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