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If the Coronavirus Spreads in America, Food Delivery Companies Could See a Surge in Demand — Are They Ready?

March 2, 2020

Original content c/o: MarketWatch

People who isolate themselves with ‘social distancing measures’ would still need food

From movie chains to luxury retailers, the coronavirus could cut into earnings for many consumer-facing companies if the virus that’s infected more than 82,000 people worldwide escalates in America and forces consumers to stay home.

Chinese workers in February carrying a cart of vegetables meant as groceries for nearby residents.
Photo Credit: GREG BAKER/AFP via Getty Images

Yet bottom lines could go in the opposite direction for companies with food delivery built into their business model, according to market experts who point out everyone still has to eat — even if they do not leave their house.

More Americans are using the internet for their grocery shopping and meal plans, and that trend was going strong before coronavirus concerns, said David Portalatin, vice president, food industry advisor, for The NPD Group, a market research firm.

People have all sorts of ways to bring food into their homes, ranging from an order on Amazon (AMZN, -1.43%) Prime, Walmart (WMT, -1.79%) Grocery, Uber Eats, Fresh Direct or Stop & Shop’s Peapod, to name a few.

In the past 30 days, 21% of US consumers ordered perishable, edible groceries online, Portalatin said. That’s up from 18% at the same point last year.

“It is reasonable to conclude that if we were to have a serious outbreak here, it would be an acceleration of the previous trend,” Portalatin said.

There’s some evidence that increased reliance on food delivery is happening in China, where there had been nearly 78,497 coronavirus infections and 2,744 deaths as of Thursday. There was a 20% growth in spending on food deliveries in China during January, compared to a year ago, NPD data said.

Customers in China are requesting ‘non-contact’ food delivery
Requests for “non-contact” food delivery have reportedly been surging in China since the coronavirus outbreak. That can mean leaving the food at a specified site, like a front desk or in front of a building. Meituan — a food order and delivery platform in China — reportedly had 80% of all orders between late January and early February request no contact, Business Insider reported. Meituan food couriers even have their body temperature on display in an effort to reassure customers they are healthy, according to the Financial Times.

With health officials warning that Americans should prepare for the possible spread of the coronavirus, some observers foresee increased demand for food delivery in the US. In an investment note on GrubHub, the online food ordering platform, D.A. Davidson analyst Tom Forte said, “concerns related to the outbreak may motivate consumers to stay home and order in, which could provide a boost to short-term revenues.”

The rising number of confirmed coronavirus infections in America “increases the potential for consumers to stay home and order in, which could be beneficial to Grubhub’s sales in the March quarter and, even, June quarter depending on the duration of the outbreak and extent of the impact on consumer’s behavior,” wrote Forte, a consumer technology analyst, in Tuesday’s note.

A GrubHub (GRUB, -1.67%) spokesman said, “This is obviously a complex and fast-moving situation. We are focused on prioritizing the health and safety of our drivers, diners, restaurant partners and employees during this challenging time. We will continue to monitor the situation closely, including assessing and analyzing the potential impact on our business.”

Grubhub shares were down Friday approximately 1% from the start of the year, while the Dow Jones Industrial Average (DJIA, -2.33%) was down nearly 11% in that time and the S&P 500 (SPX, -2.05%) was down 8.5%. The stock market endured a massive sell-off this week amid concerns about the coronavirus’ severity and reach.

As of Feb. 27, there were 60 confirmed coronavirus infections in America and no deaths.

‘Social distancing’ could mean more time at home
If the coronavirus outbreak intensifies in America, online orders might be a matter of necessity, not convenience.

Earlier this week, Dr. Nancy Messonnier, director of the CDC’s Center for the National Center for Immunization and Respiratory Diseases, told reporters “we expect we will see community spread in this country. It’s not so much a question of if this will happen anymore but rather more a question of exactly when this will happen and how many people in this country will have severe illness.” (“Community spread” refers to infections in people who have not traveled to areas where the virus is widespread or come in contact with people who have traveled to those places.)

‘Right now, every company that is handling food, that is delivering food, right now go over these things with your workers. Don’t wait until you have a bunch of people contaminated.’
— Dr. Elizabeth Bihn, executive director at Cornell University’s Institute for Food Safety

“Social distancing” is one way to address the spread of the virus, including tactics like school closures, cancelled business meetings and telecommuting to reduce the risk of exposure, Messonnier said. She acknowledged the possibility of closing school and missing work “may seem overwhelming…But these are things that people need to start thinking about now.”

A worsening coronavirus outbreak in America could push more people into online grocery shopping, said Neil Stern, senior partner at McMillanDoolittle, a Chicago, Ill.-based retail strategy company.

One of Stern’s clients is a South Korean retail store he declined to identify. The country has a much more developed online grocery shopping market — and it also had 1,766 cases and 13 deaths from the coronavirus as of Friday.

The South Korean retailer’s online business has been up triple digits in the past month, especially in the past two weeks, Stern said. At the same time, in-store business has been flat or slightly up. “What they are experiencing is a lot of people going to the stores and hoarding,” Stern said.

He said the company’s workers wear “pretty heavy duty” face protection on the job at this point. And its existing way of doing business could serve it well during the outbreak: Even before the coronavirus’ emergence, drivers would text customers when orders are on the way and then send time-stamped pictures of packages at their door.

Food delivery companies are following public-health officials’ recommendations
If food delivery companies have more demand for services, they’ll also have a greater need to maintain a healthy workforce.

Though Chinese delivery companies may be resorting to “non-contact” deliveries and couriers carrying information about their temperature, people making and delivering food in America should focus first on basic health and hygiene rules, said Dr. Elizabeth Bihn, executive director at Cornell University’s Institute for Food Safety.

That means washing hands correctly, and taking off work if you’re feeling sick, she said. It also includes not smoking on the job or eating food before delivering food, Bihn said. (In both instances, a worker’s hand can touch their mouth, she noted.)

“Right now, every company that is handling food, that is delivering food, right now go over these things with your workers,” she advised. “Don’t wait until you have a bunch of people contaminated.”

Bihn emphasized she has no expertise on the coronavirus, but she knows the fundamentals that are “always relevant for people handling food.” “Before you go down the road of all these other things we might have to contemplate, start with the basics that people tend to overlook,” she added.

Companies whose workers come into close contact with customers told MarketWatch they are keeping close tabs on the coronavirus’ spread and have been in touch with public health officials.

“Uber (UBER, +0.02%) is not a healthcare expert and follows the guidance of local Public Health Organizations. We are monitoring the situation and take action based on their recommendations,” an Uber spokeswoman said.

“We are watching this situation closely with a focus on the safety of our teams and ensuring we can meet customer promises. We are closely following local and international health authority guidance as this situation progresses,” an Amazon spokeswoman said.

Walmart, Fresh Direct and Stop & Shop (ADRNY, -0.03%) did not immediately respond to a request for comment.