Due to the unprecedented operational changes over the last few years, a whole new landscape has emerged in the food and beverage sector regarding financial, legal, and supply chain issues, among many others.
Our Executive Vice President and Chief Lending Officer, Jim Haney, discusses the 2023 business outlook with L.A. Times B2B Publishing, weighing in on the food and beverage industry.
You may view the complete article here.
I think it’s been incredibly resilient. Supply chain issues felt early in the pandemic have resulted in a more resilient supply chain. Another change has been for some restaurants to continue outdoor dining, which became quite popular during the pandemic. Many restaurants have begun to seek permanent rezoning to accommodate it. It never ceases to amaze me how resilient business owners are, regardless of the obstacles they face.
It can have a significant effect over time. Although Ukraine is a major breadbasket, it produces less than 5% of the world’s wheat, so in time, there should be enough capacity to make up for shortages now. What is extremely unfortunate is that it might take several crop cycles for supply and supply chains to adjust to where the need is.
An unfortunate situation is that when some businesses don’t survive tough times, it creates opportunities for others to step into the void that was left. I see this happening particularly in the restaurant sector and among businesses seeking to exploit niche markets to a greater degree.
We’re seeing a growing shift to biodegradable, environmentally friendly packaging due to consumer demand, especially in California. Styrofoam — which does a great job of preserving freshness but can be devastating to the environment — is significantly down. There has been a move away from plastic, and the two alternative options have significant drawbacks: Glass is more expensive and heavier (not to mention breakable), and aluminum cans take a lot of energy to make, and some people — including me — don’t think food in them tastes as good. Plastic bag use has also come under fire. However, unlike paper bags, they provide a moisture barrier and are more sanitary than multi-use bags.
In relative terms, given the state of the economy, it’s very strong — since food is largely recession-resistant. People always have to eat. There is plenty of capital, and money is pretty abundant for food products that have mass appeal, are affordable, and fall into the “flavor of the day” category, being attractive in terms of health benefits, convenience, and/or taste. The restaurant sector is a different animal because restaurants can be trendy, and a restaurant’s value proposition is usually more than just the food it serves. In addition to food, the value proposition of a restaurant may be the experience, the convenience, the service, etc., in addition to serving good food.
I see mostly pros. In my opinion, L.A. is the most vibrant business community on the planet. It would rank as the 10th largest economy in the world by itself. If you need it, you can get it here. Restaurant trends are set here, and given our diverse population, L.A. is a microcosm of the world where you can find any type of food. Many suppliers are here because importing is supported by our location next to the West Coast’s largest port and close proximity to farmers, dairies, and ranches. We also have a more creative base of workers than most other places. The cons I can see are the travel distances since the city is so spread out, the cost of living is high, and the regulatory environment can be challenging in Los Angeles.
This article does not constitute legal, accounting or other professional advice. Although the information contained herein is intended to be accurate, Cathay Bank does not assume liability for loss or damage due to reliance on such information.