Getting the Goods During the Pandemic: Pivoting Consumer Supply Chains
As millions of Americans are sheltering in place during the pandemic, the at-home demand for food and supplies, including paper goods such as toilet paper and paper towels, has increased, while restaurants and offices no longer need these items in bulk. According to Alix Partners, U.S. household demand of toilet paper is up 40% due to the closure of schools and offices nationwide.(1) Coupled with consumer desires to “stockpile” some items for preparedness sake and to avoid shortages, the demand for many items in the direct-to-consumer channel has increased dramatically in the last two months. Out-of-stock shelves in brick-and-mortar grocery and sold-out e-commerce channels have forced consumers to get creative while sourcing their needed items and forced manufacturers and distributors to figure out how to pivot supply chains in order to meet these changes in demand.
Local restaurants have, in some cases, started selling grocery items to their consumer supply base, utilizing their ability to source goods at the wholesale level. Not only does this provide an opportunity for restaurants to make money and keep staff employed during the crisis, but it also potentially engenders goodwill with consumers, who may seek to patronize these establishments that helped consumers get what they needed when they couldn’t find it elsewhere (and I can personally attest to this dynamic, with a strong affection for my local Italian restaurant selling flour in bulk and my local brewery selling yeast!).
Notably, new technology upstarts are helping to enable food and toiletry businesses serving commercial markets to reach consumers directly with goods as the crisis unfolds. Cheetah, a startup founded in 2015 with an app enabling wholesale supply deliveries to restaurants, in late April just announced $36 million in funding from Eclipse Ventures, ICONIQ Capital, Hanaco Ventures, and Floodgate Fund. As the pandemic has played out, Cheetah has shifted its business model to reach consumers directly, through a service called Cheetah for Me, in which consumers can purchase groceries, paper goods, and other supplies in varying quantities via the app and pick them up at designated delivery sites around the Bay Area. As such, goods that would have traditionally found their way into the restaurant supply chain are now in the hands of consumers at home, enabling the startup to generate revenue despite widespread restaurant closures. Similarly, Choco, a Berlin-based startup that also operates in the U.S., recently raised a round of funding in mid-April ($30 million from Coatue Management, Bessemer Venture Partners, Atlantic Labs, Target Global and Greyhound). Choco, which streamlines ordering from, and communicating with, suppliers for chefs and restaurant staff, is currently partnering with its restaurant customer base to enable them to resell groceries directly to consumers.
Companies that are flexible and creative in finding ways to meet changing demand patterns in the global pandemic have clearly attracted the attention of new customers and investors and will likely continue to do so in the coming weeks and months ahead. As consumer investment bankers, we are keenly interested to continue to follow how changing supply chain dynamics will continue to shape the consumer landscape going forward. Our MHT Partners’ consumer team welcomes further discussion on changes in the consumer landscape as a result of COVID-19 (Tara Smith, firstname.lastname@example.org, Craig Lawson, email@example.com, Patrick Crocker, firstname.lastname@example.org), Gavin Daniels, email@example.com, or Tom Gotsch, firstname.lastname@example.org).