The COVID-19 pandemic has had a massive effect on sectors across the board but one of the most severely hit was the food and beverage industry. While some restaurants are closing down, others are reimagining their operations rapidly to accommodate new social engagement constructs. The restaurant industry can be primarily divided into delivery and dining out segments.

As of today, the food delivery industry seems to have largely recovered, with the overall sector clocking around 75-80 percent of pre-COVID GMV. While the dining out industry in India is yet to bounce back and operating at 8-10 percent of pre-COVID levels. The slump in the industry is largely driven by markets being in lockdown, consumers not stepping out due to fear of transmission and restaurants not opening up, even if the city is not in lockdown. This according to food-tech player Zomato’s report focuses on the current state and future outlook of the industry.

Residential versus commercial areas

When it comes to food delivery, some areas in some cities are clocking higher GMV than before. Turns out, affluent neighbourhoods no longer fear contagion from food delivery and are combining home entertainment with outside food.

Residential areas are doing 50 percent better than commercial areas, and hence, restaurants in and around commercial districts are expected to take the longest to recover. The number of restaurants offering food delivery is at 70 percent of pre-COVID levels. Out of this, about 5 percent of restaurants did not offer food delivery services pre-COVID. Most of these are dining out centric places that have shown agility to pivot to food delivery. While sporadic lockdowns in some cities disrupt business as usual for a few days, however according to Zomato, food delivery volumes bounce back as soon as these lockdowns are lifted.

The WFH impact

Interestingly, ordering frequency of customers after their first order mid-COVID is the same as pre-COVID, which shows that the first order mid-COVID is key for customers to cross the hump of safety perception. With companies giving employees the option to work from home, there has been a mass exodus of people from metros to other cities across India – 1 in every 5 users who order from a metro city in pre-COVID days, has opened their app from a smaller town recently. Out of these relocated folks, one third have already started ordering food again from their new location.

Food delivery versus dining out

For food delivery, recovery trends are strong and the industry may hit pre-COVID levels of business in the next 2-3 months. However, the Dining Out seems to be witnessing an absolute contrast. Even cities where restrictions have been lifted have only 17 percent dining out restaurants are open for business at the moment which is also running at low capacity.

Out of the 83 percent restaurants that are not open for business, 10 percent of restaurants have already shut down permanently and an additional 30 percent restaurants may not reopen at all. Remaining 43 percent are closed right now but likely to open, as the situation becomes better. 60 percent restaurateurs said they estimate to retain less than half of their original business volumes for a few months even post-COVID.

International markets paint an optimistic picture

While safety and hygiene have now become a permanent addition to the customer’s decision-making model, in markets with low COVID incidence like the New Zealand market, safety and hygiene still figure as one of the top factors. However, usual factors like price and location have already started commanding a higher significance in a consumer’s decision-making process compared to two months ago.

According to the report, a strong recovery in international markets paints an optimistic picture as Zomato’s dining out transactions in markets like New Zealand, UAE and Portugal are already back to pre-COVID levels. However, recovery in India will be slow and would largely be driven by the industry’s ability to build back consumer confidence.