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'The Food Service Industry Is a Partner in Curbing the Pandemic – Not an Adversary’

The food service industry shapes our culture. It has been particularly badly affected by the Covid-19 pandemic. How can businesses survive in the long run, how can jobs be protected and how can new prospects be generated for the future? Olaf Koch, METRO CEO at the time of the interview, spoke about these issues with MPULSE. Among his main concerns is the introduction of protective measures.

In April 2020, you and many other representatives from the food service industry wrote an urgent letter to the German Chancellor, in which you called for a cautious reopening of the food service industry. As a result, the lockdown was lifted in May. In November came the second lockdown, and again the restaurant businesses were affected. What is the effect of these initiatives?

In these difficult times, METRO stands shoulder to shoulder with our customers and the independent entrepreneurs in the food service industry, who are so important for our society. I wouldn’t like to envision a society where the small, friendly and often family-run restaurants cease to enliven our cities and towns. METRO was committed to amplifying the diverse voices of the food service industry during the first lockdown, even if, as a company, we tended to remain in the background. Working together, we have been able to help raise public awareness of the fate of independent restaurateurs. The temporary VAT reduction from 7% to 5%, the financial aid and the cautious reopening of restaurants in May were important results of our joint effort. Now, during the second lockdown, we can build on this public awareness and remind people once again that a safe hospitality industry must have a future in Germany.

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METRO CEO Olaf Koch. 
Photo: METRO

In your interview with Handelsblatt in October, you said, ‘The food service industry is a partner that will help us get through the pandemic safely, not an adversary.’ What exactly can the food service industry do to demonstrate this even more clearly?

After the reopening in May, the majority of restaurateurs not only implemented all the hygiene standards required to protect their customers and employees. Many went above and beyond and made considerable investments as well. For example, they upgraded their hygiene equipment, created new Plexiglas solutions between the tables, and some installed air filters. People getting together in restaurants were safe. This is also suggested by coronavirus infection data, even though the database is not absolutely comprehensive. While the exact role the food service industry plays in the infection process is not clear, politicians have decided to close restaurants while keeping other areas of life open. We don’t think this makes sense: it has shifted contact from restaurants, where safety measures can be enforced, to private settings, which cannot be controlled. Many opportunities have been missed here. What is more, the suggestion that school teaching be moved to restaurants because it is easier to ensure safety there is inconsistent, to say the least. We continue to be convinced that a restaurant that has been professionally adapted for the coronavirus situation is the best and safest place to meet people, and these get-togethers are essential for a functioning society. That’s why we want the food service industry to be recognised as a partner that should be involved in the effort to curb the pandemic, rather than being stigmatised as an adversary.

The German government has launched aid packages for restaurateurs and the self-employed. Is this sufficient?
 
The aid package the federal government has put together for self-employed restaurateurs is well-intentioned, but it is essential that it reaches these people without any red tape. It will help to roughly make up for losses incurred in November, but it must be made clear that restaurants, pubs and cafés with well thought-out hygiene plans can reopen soon. After all, having Christmas dinner at a sit-down restaurant is safer than doing Christmas with several households in your own living room. On the other hand, the 220,000 restaurant businesses can only survive and protect jobs in the long run if they can generate turnover again – rather than filling out applications for financial assistance.

Restaurant businesses can only survive in the long run if they can generate turnover again – rather than filling out applications for financial assistance. 

Olaf Koch

What else can the restaurateurs and policymakers do to allow the food service industry to stay open permanently, even if we continue to be in the grip of the virus for some time to come?

Policymakers must ask themselves how sensible and realistic it is to keep channelling billions of euros into businesses that have had to close. This is not going to work in the long run. Plus, surveys show that the majority of the population does not support closing restaurants. There are better solutions. A recent study by the University of the German Army in Munich examined the relevant protective effect of air filters in combination with Plexiglas panes in restaurants, offices and classrooms, and proved that they can vastly reduce the risk of direct and indirect infection. The study is right to criticise the fact that these tools are currently being neglected in terms of funding. The lack of communication from policymakers concerning the effectiveness of these tools and their failure to send positive messages to encourage greater investment are just as serious. Therefore, I believe that, instead of providing financial compensation for restaurant businesses that have been forced to close, the government should provide funds for restaurateurs so they can modernise their businesses and make them demonstrably and permanently safe for their customers and staff. This will help the industry to survive and will create trust while at the same time protecting our society against infections. This suggestion therefore constitutes an important alternative to the policy of closing businesses. In concrete terms, the government should subsidise air filters, Plexiglas panes and digitalisation in the food service industry.

How can immediate help for the food service industry be provided as long as the lockdown continues? What are the opportunities digitalisation offers?

During the coronavirus pandemic, we have noticed in many areas that this phase is acting like an accelerator of sorts for the digitalisation of processes. Where physical distance must be maintained, digital applications help businesses to stay in touch with customers. Restaurateurs are now more open to employing digital tools to boost efficiency and accelerate their businesses. Currently, a restaurant can only generate turnover via pick-up and delivery services. Those who are restricted to established delivery platforms because they have no integrated order application on their website will lose a large portion of their profits. Depending on the individual situation, the fee for using delivery platforms is between 15% and 40% of the respective turnover. METRO is working with restaurateurs in France and Germany to develop solutions that will make them less reliant on delivery platforms. We are collaborating with various platforms in this project, which gives restaurateurs considerable reach – without forcing them to pay large fees. This example shows just how valuable digitalisation can be for the food service industry, both now and in the future.

What is crucial is that market participants are able to adapt to the new situation quickly.

Olaf Koch
The credit reference agency CRIF Bürgel has warned that 1 in 5 restaurant businesses in Germany could face bankruptcy in the first quarter of 2021– what would this mean for suppliers in the industry?

METRO is in a good position to deal with the situation and has survived the coronavirus pandemic well so far. To a large extent, we owe this to our diversified customer groups as well as the flexibility of our business model with stores, a delivery service and an online portfolio. But let’s not fool ourselves. There is no doubt that the second wave will affect the supplier industry, too. The sector is already highly fragmented today. What is crucial is that market participants have a financial cushion and are able to adapt to the new situation quickly. So far we have managed well with our portfolio for restaurateurs, whether you take our call centre service for financing or using government subsidies, whether it’s the digital applications we offer to establish a delivery business quickly or enable digital registration in restaurants. What’s more, our transactions with China and Real have considerably strengthened our balance sheet.

How do you view the future of the food service industry, which was struggling with difficult market conditions even before Covid-19?

We believe in the future of the food service industry. Studies have identified a longer-term trend towards eating food away from home, and this trend is continuing. As a place where people meet, restaurants will further gain in importance, I’m absolutely convinced of it. In fact, however, the industry is also facing challenges. Issues that need addressing include the lack of skilled workers, competitive pressure and rising costs. We see ourselves more and more as an all-round partner who assists entrepreneurs by providing solutions, services and advice. Take digitalisation, for instance: the fact is, if you cannot a restaurant online today, it no longer exists as far as the younger generations are concerned. Our portfolio of more than 200,000 free websites therefore ensures visibility for restaurant businesses. The website is complemented by our table reservation tool, which is now used by about 35,000 restaurant businesses. And to ensure traceability, we offer the option of registering guests digitally via a QR code. With additional digital tools such as the MenuKit, we enable restaurateurs to cover their costs and earn a good profit margin when planning their purchases and menus. There are many more examples of how the food service industry can employ digital applications efficiently in order to further improve its viability in the future.

In your October interview with Lebensmittel Zeitung you said that feedback from customers tells METRO that their trust in METRO has increased since the start of the pandemic. What are the questions and problems restaurateurs are currently coming to you with?

Indeed, we have not only won back former customers during the coronavirus pandemic, but we’ve actually acquired new ones too. This shows that METRO is gaining an increased market share, not just because we are able to continue offering our customers a reliable and high-quality product range, but because we are also able to respond to their specific needs during this time. Let me give you an example: restaurateurs who can currently only offer delivery service also tend to make short-term purchasing plans. Consequently, we have adjusted our package sizes so they are now smaller. This does not mean that our customers come to our stores less frequently and buy less, but that they come more often so they can react flexibly to the needs in their business. This also shows the great advantage of a bricks-and-mortar business. Wholesalers who rely solely on delivery services have far greater difficulty in maintaining their sales. 

The coronavirus pandemic has shown that the food service industry is anything but crisis-proof. Why are you still convinced that METRO, with its focus on the food service industry, has chosen the right course and should stay on this path in the future?
 
The food service industry is gaining ground around the world and offers considerable growth potential from which METRO will profit, too. Independent restaurateurs’ demand for high-quality products, innovative solutions and reliable service is enormous in all markets. Coronavirus may slow down the food service industry somewhat for a while, but in the medium and long term we will learn to live with the virus, and people will rediscover how much they enjoy going to restaurants. Restaurateurs, but also the independent retailers, are much more loyal than retail customers. Their purchasing volume is about 10 times that of retail customers, and we are able to build close relationships with our customers. This allows us to keep expanding our range of products and services to meet our customers’ needs – including professional kitchen equipment, for instance, or financial services which METRO offers. In that respect, METRO’s decision in its role as a wholesaler to place and keep its focus on the HoReCa and Traders customers is the right one, also in terms of strategy.
 
You are leaving METRO at the end of the year – that is not far away. Even so, you continue to be actively committed to the food service industry and also signed the latest urgent letter to the Chancellor. Why is this issue so important to you?

METRO customers have become really dear to my heart over the years. They represent pleasure, hospitality and cultural diversity, but also passionate entrepreneurship. This passion they demonstrate, which inspires their customers, is truly infectious and deserving of every support. I am sure I will not lose sight of these entrepreneurs even after I leave METRO.

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