10 Wednesday, July 7, 2021 Economy & Business Why it may not be plain sailing for Delivery, a pandemic lifeline Fed on inflation for restaurants, is ‘here to stay’ Agencies thereby reinforced inves- tors’ belief that the Fed Markets reached the will remain dovish, causing Consumers aren’t letting go of their newfound fondness for getting food delivered to their front doors half-year point last week, bond yields to ease and eq- with Wall Street equities uities to rally further into Agencies reaching new highs, the US the end of the week. 10-year bond yield steady However, it may not be Last fall, as the weather slightly below 1.5 per cent as plain sailing for the Fed cooled and coronavirus cases and the greenback improv- on inflation, as the mar- began to rise, May Seto, owner ing. Investors shrugged off kets currently assume, on of Grand Lake Kitchen here, concerns about “tapering” a number of fronts, includ- refurbished a used pizza oven by the US Federal Reserve ing wages where there are and started a takeout and de- and analysts hailed the lat- widespread indications that livery pizza business out of an est US employment data as pressures are building due extra kitchen where she had a “goldilocks” moment that to strong demand for labour cooked for catering and private showed that the economy and high vacancy rates. events. was running “not too hot, While the markets ap- Now, one of Grand Lake’s not too cold, but just right”. pear to be buying the Fed’s two locations serves as a hub This current benign per- view that current high for couriers picking up the res- spective at the middle of readings of inflation are taurant’s cafe fare and pizzas. the year reflects the recent being driven by one-off Seto also has plans to rebuild big improvement in growth exceptional factors in the the entryway at her other loca- prospects as a result of suc- consumer goods sector in tion to provide more space for cessful vaccine campaigns, particular, such as a post- the flocks of delivery drivers with a number of major pandemic dislocation of picking up food. central banks having raised supply chains, wages are “We might rearrange the their growth forecasts in the among a number of other front of the restaurant a little past few weeks. elements that could yet bit, and keep delivery in mind More importantly, mar- tip over into broader price as if it’s here to stay, because it kets appear to be buying pressures. is,” she said. into the Fed’s argument Rising asset prices, Delivery services such as that any accompanying in- house prices and oil prices DoorDash and Uber Eats be- flation will be “transitory”, are other ingredients that came a lifeline for businesses meaning that quantitative could all feed into a much during the pandemic. Restau- easing tapering will not be more troubling challenge in rants learned the logistics of seen for some time and in- the months ahead. dealing with them — rearrang- terest rates will be left alone Mohammed El-Erian, ing kitchens and stockpiling The dining room of Kasama in Chicago with takeout boxes lining the bar on June 26, 2021. As in-person dining returns, home delivery is hold- for even longer. president of Queens’ Col- takeout containers in aban- ing up. (Lyndon French/The New York Times) The latest US June em- lege, Cambridge University, doned dining rooms — and re- ployment reports provided writing in the Financial luctantly accepted delivery fees first quarter of this year — a DoorDash estimated that it owners said. encouragement to this Times last week took is- that cut into their already thin welcome respite from Uber’s would process $9.4 billion to Last week, San Francisco’s view. Although 850,000 sue with the benign “goldi- profit margins. slumping ride-hailing busi- Highlights $9.9 billion in orders during board of supervisors voted new jobs were added, which locks” assumptions that Some of those changes are ness. ● In a recent JD Power and the second quarter of the year, unanimously for a permanent was more than markets ex- currently prevail, arguing beginning to look like they may Something similar is hap- Associates survey, 71% of after processing $9.9 billion in cap on delivery fees, limiting pected, other crucial com- that too much confidence become permanent because pening in places such as San consumers said they would the first quarter. them to 15%. Similar measures ponents of the data were a is being placed in the view consumers aren’t letting go of Francisco. As lockdown or- continue to order delivery If delivery is here to stay, are under consideration in little softer. The unemploy- that inflation will be “tran- their newfound fondness for ders eased this spring, Lau- restaurant groups are press- Chicago and other cities. ment rate ticked up to 5.9 sitory”, along with some getting food delivered to their rie Thomas, co-owner of two as much or more than they ing for ways to deal with it fi- “We can’t have a system per cent and the workweek other assumptions “about front doors. In a recent JD restaurants in the city, said had during the pandemic. nancially. Thomas leads the where people are being charged dropped. the durability of high global Power and Associates survey, deliveries declined. But as ● In the first quarter of the Golden Gate Restaurant As- upwards of 30% of their sale to This leaves a weaker growth rates and the con- 71% of consumers said they San Francisco began to more sociation, an industry group survive,” said Ahsha Safai, a June path for economic ac- tinuation of ever friendly would continue to order deliv- fully reopen in June, Thomas’ year, DoorDash processed that has lobbied to cap the board member who co-spon- tivity than assumed, with central banks”. ery as much or more than they DoorDash orders climbed back 329 mn orders, a quarterly fees charged by delivery com- sored the legislation. growth forecasts for the sec- In warning that there had during the pandemic. up, and were just slightly lower record for the company and panies, while allowing them DoorDash and Uber Eats ond quarter being adjusted has been too little apprecia- In markets that reopened than they had been during the a 219% increase from the to charge additional fees for have responded to the emer- slightly lower. And although tion of the way inflation can earlier than most places, in- pandemic. previous year marketing services. Early in gency caps by revamping wages growth at 3.6 per develop through the sys- cluding Florida and Texas, as “Delivery became a huge the pandemic, many cities how restaurants pay for their cent year on year was a bit tem, he went on to express well as Australia, DoorDash part of life during the pandem- pandemic was a boon to online placed emergency caps on the services and tacking on local stronger than assumed in concern that the Fed could said its order volume slipped ic,” said Ben Bleiman, leader of delivery services. In the first fees that delivery companies charges. In April, DoorDash June, they were revised be very late in adapting its about 20% from the height the San Francisco Bar Owner quarter of the year, DoorDash could charge restaurants. But gave restaurants the option to slightly lower for May and strategy should price pres- of the pandemic. Uber Eats Alliance. “The question is how processed 329 million orders, many of those orders are set pay a 15% fee for basic services, April. sures become more persis- also had dips as communities much of that is here to stay and a quarterly record for the to expire. If fees return to pre- and the option to pay higher Overall, the numbers tent. reopened, but its revenue still how much is going to leave.” company and a 219% increase pandemic levels, delivery will fees for marketing and other grew 230% annually in the There is little question the from the previous year, it said. become unaffordable, business services.

Set for shake-up Why are Britain’s supermarkets so attractive to buyers? Agencies Britain’s supermarkets that Sains- British and throw the company’s buy the company on the cheap. bury’s raised its profit forecast on hat into the rather crowded ring “As the Morrisons situation British supermarket Sainsbury’s Tuesday and said it now expects battling it out for Morrisons. evolves, it is leading to more ques- beat expectations for its first-quar- to generate profit of £660 million “News of a third suitor sent tions than answers,” said Andrew ter sales on Tuesday, while online this fiscal year, up from a previous pulses racing on Monday and sent Koch, a fund manager at L&G. grocer Ocado said its half-year re- forecast of £620m and far exceed- Morrisons’ shares way above the “Given this is an agreed bid, tail sales had jumped 20 per cent. ing pre-Covid levels. 245p a share offer price accepted it is likely that Fortress and their No wonder then that bullish The group, which trails market by the supermarket’s board over partners have had more informa- growth for Britain’s supermarkets leader Tesco in annual sales, said the weekend,” said Danni Hewson, tion than others on this. Investors is attracting the interest of buy-out like-for-like sales, excluding fuel, financial analyst at AJ Bell. need to have the detailed figures bidders for Sainsbury’s smaller rose 1.6 per cent in the 16 weeks “Will any disappointed party to be able to make a considered rival, Morrisons. to June 26, its fiscal first quarter switch allegiance and consider a decision regarding the right future Three private equity bidders – versus analysts’ average forecast bid for one of Morrisons’ competi- for the company and their share- have thrown their hat in the ring of a fall of 1.7 per cent and a rise tors? That rather depends on how holdings.” for the supermarket group, just of 11.3 per cent in the previous hot the bidding gets and whether Sainsbury’s chief, Mr Roberts, months after Asda was snapped up quarter. Mr Jassy has a taste to buy Brit- also addressed the issue, saying in a £6.8 billion ($9.4bn) buy-out Sainsbury’s said sales of ish.” there has been “a lot of discussion by the Issa brothers and London grocery, general merchandise and One thing is for sure, with about the sector being underval- private equity firm TDR Capital, clothing were all higher than its ex- investor pulses racing over Mor- ued for a very long time”. who took on £3.5bn of debt to fund pectations throughout the quarter, Industry leaders said that Britain could face gaps on supermarket shelves this risons, its share price has soared, Other challenges for the sector the acquisition from Walmart. helping the chain to outperform summer and an unimaginable collapse of supply chains after the pandemic. with shareholders in other pub- include rising costs because of the “There’s a lot of interest in the competitors and grow its market licly owned British supermarkets global food price increase as well sector,” Simon Roberts, Sains- share. The online grocer said the pan- While there is no indication also benefiting. as Brexit red tape, Covid supply bury’s chief executive officer, said This is all despite Britain grad- demic had resulted in a permanent that Tesco is in line for a takeover “Shares in Tesco and Sains- chain disruption, raw commodity on Tuesday. ually easing its Covid-restrictions shift to web-based shopping, help- bid, if one or more parties lose out bury’s both jumped and if water shortages and increased shipping With interest also zoning in on with cafes and restaurants now ing drive demand for groceries it on Morrisons, the grocer could coolers were still the place for and petrol costs. Sainsbury’s, the UK grocery sector fully open for indoor and outdoor sells with partner Marks & Spencer be a viable alternative, according murmurings, they’d have been This month Premier Foods, is set for a huge shake-up. But it’s dining and the government plan- and for its technology, which helps to Andrew Porteous, a wall street honeypots today,” Ms Hewson one of Britain’s biggest food com- not all plain-sailing, with concerns ning to ease all curbs on July 19. retailers to expand online. analyst at HSBC. said. panies, urged the government to about assets being sold off too “Sainsbury’s faced an ex- Its retail revenue for the 26 The stand-out performance With murmurs of interest consider using the army to distrib- cheaply, and the industry facing a tremely hard act to follow in the weeks to May 30, a period when of Britain’s supermarkets during in Sainsbury’s too, it seems pri- ute goods to help relieve a severe number of major challenges from past three months compared with Britain was mostly in lockdown, the pandemic helps to explain vate equity firms are looking to shortage of lorry drivers. staff shortages to global food price a year ago when many people were rose 20 per cent to £1.2bn, with why buy-out companies are cir- capitalise on a business model Industry leaders said that pressures and Covid supply chain panic buying in the early stages of the company continuing to add cling the industry, with interest in that was heavily boosted during Britain could face gaps on super- disruption. the pandemic,” said AJ Bell invest- new customers even as coronavi- Morrisons increasing up over the the pandemic thanks to the surge market shelves this summer and Those worried about sup- ment director Russ Mould. rus restrictions ease. While basket weekend. in grocery shopping as consumers an unimaginable collapse of sup- ply chain disruption and staffing “This makes it all the more sizes have shrunk a little since The company agreed to a were forced to stay at home during ply chains after the pandemic and issues might be wondering if the impressive that the company has restaurants had reopened, they £6.3bn takeover from a consor- a series of lockdowns. Brexit led to a shortage of more Morrisons negotiations might managed to chalk up growth for were still larger than before the tium led by Fortress Investment However, some shareholders than 100,000 heavy goods vehicle involve more than cold hard cash, the period and confirms the at- pandemic. Group, trumping private equity are concerned the bidders might drivers. said Dani Hewson, an analyst at tractions of a UK groceries space, “We are confident Ocado Retail firm Clayton Dubilier & Rice’s ear- underpay for the assets, with Legal At a Department for Environ- AJ Bell. which was recently reflected in the will continue to grow market share lier £5.5bn bid, which the super- & General Investment Manage- ment, Food & Rural Affairs meet- “Could the courtship push multibillion-pound bid for Mor- as we help them to roll out even market operator rejected. ment asking Morrisons to publish ing last month, Chris Hall, head of other issues to the fore?” she said. risons.” more capacity,” said chief execu- Then a third player entered the more information on the value of logistics at Asda, said the grocer “Could negotiations include Meanwhile, Ocado said de- tive Tim Steiner. market on Monday with Apollo the supermarket’s real estate. was “just about keeping our head promises about supplier terms, mand for its grocery business and Even at Tesco, the UK’s largest Global Management also consider- The company is one of Mor- above water”. staff and assets in the same way technology were strong after it grocer, sales hit £13.3bn for the ing an offer. risons top 10 shareholders, and He warned, however, that any pension promises are already up- announced a significant boost in 13 weeks to May 29, according to There is even speculation that said the extra information would surge in demand this summer ping the ante.” first-half retail revenue on Tuesday results published last month, a 1 Amazon’s new chief executive help investors to decide whether would “give us significant chal- Such is the furore surrounding as well as a new contract in Spain. per cent year-on-year increase. Andy Jassy might consider buying private equity firms are angling to lenges and disruption”.