The livelihoods of millions rest on how US consumers regard the idea of going out to eat or drink once the immediate dangers and restrictions of the global coronavirus pandemic have passed through
Articulated by American psychologist Abraham Maslow during a previous global emergency – World War 2 – Maslow’s Hierarchy of Needs posited that humans had a series of priorities for their existence, from the most basic through to the most complex and cerebral. At the bottom of Professor Maslow’s famous pyramid sits the physical needs – food, water, warmth, and rest. Just above it sit safety and security. Above that are ‘belonging’ needs – the pleasure we derive from long term relationships and friendships. Near the top are ‘esteem’ needs: our desire to feel important and fulfilled.
At the top of the Maslow hierarchy sits self-actualisation. This is the need to better oneself – transcend the everyday and feel fulfilled. This is the marketer’s secret weapon – and also a fundamental component of our current economic model of consumer capitalism. Most cars these days are safe and reliable, satisfying the need to get me from A to B. A Maserati will also do that but do so in a way that fulfills our need for esteem and, in the way it takes a corner at speed, make us feel at one with the precision engineering and our (perceived) driving excellence. In our fevered self-actualised imagination, it might also make us a more attractive mate and the envy of the neighbourhood. Hence we might be tempted, if we have the money to ditch our more boring-but-reliable family car and amaze the kids, neighbours and our friends with our own piece of Italian sportscar excellence.
Not all of us can own luxury cars, but – in ‘normal’ times at least – most of us can afford to go out to eat. Clearly, America’s one million or so restaurants and bars represent a very wide spectrum of cuisines, prices and service levels, and most aim to deliver a good value meal, safely, rather than a ‘Maserati’ experience at the table. That said, most successful restaurants have learned the art of building some higher-level functions beyond sustenance and safety. Even the scripted welcome at chain restaurant imparts some feeling of belonging, and the thousand-watt smile from the waiting staff can make you believe you are special, at least for long enough so you leave a decent tip.
The business models of some restaurants go further. These more iconic, expensive and ‘name’ destinations aspire (mostly successfully) to deliver on the upper levels of Maslow’s hierarchy: belonging, prestige and self-actualisation needs. Central to any functioning on-premise outlet is that it provides a rational and emotional reason to eat or drink there rather than more cheaply at home. The reason we pay many times the actual cost price of the food and wine to is to do with upper level needs – the taste sensations, the interesting wine list, the whiteness of the tablecloth, the envious looks from those passing outside on the sidewalk.
All of this was, of course, BC (Before Coronavirus). What happens when we cannot fulfill esteem and self-actualisation needs, and we struggle to meet our needs for food, rest and security? In the global human behaviour experiment in which we are currently obligatory participants, we are about to find out. The global virus pandemic has sliced off the top 60% of the Maslow pyramid. As I write this, my household is now mainly concerned with finding eggs and toilet paper (still none of either in my local London supermarkets), speaking to loved ones by various video apps, and doing our best to survive and avoid an invisible and little-understood disease. Restaurants and bars are closed for now in many cities and countries around the world, so there isn’t an opportunity to think about higher level Maslow needs being derived from our drinking and eating out experiences.
So, what happens when this is all over and we can go back to the restaurant? Does Maslow reassert itself in our lives and we go right back to seeking out those prestigious, self-actualising, transformative experiences? The restaurant and bar trade’s future existence relies on the answer to this question being: ‘yes’. The wine industry, reliant on on-premise to sell its more prestigious and self-actualising products, should also be paying close attention.
The stakes around this question are becoming apparent, and they are terrifying. Almost 17 million Americans worked in the hospitality sector at the end of December 2019, according to the US Department of Labor. For the week ending March 21, new unemployment claims in the US leapt by 3.3 million, a one-week record that was 5 times bigger than the previous record holder (in October 1982). While exact numbers are not yet available, most analysts believe that a substantial proportion of these new claims were from newly-unemployed hospitality industry workers. Early indications from Pennsylvania (which reports claims on a near-real time basis) suggests that the week ending March 28 will show another massive leap.
What happens if restaurants and bars stay shuttered for months? The immediate impact on the supply industry, of which wine is a major component, will be a major gap in sales which will either need to be filled by another channel (retail or online, both of which are doing well) or resolved simply by shutting down the supply chain for a period of time. Wine is fortunate in that it does have a long shelf life relative to fresh food for example, and some suppliers will just be riding out the storm by financing uncomfortably high inventory levels and in some cases paying workers to sit and wait.
However, it is the broader economic impact of having millions of US workers not earning money and therefore unable to pay rents, mortgages and household bills that is alarming economists and governments alike. The knock-on effect on the economy as a whole can only be guessed at right now, but it is unlikely to be pretty.
Speaking for myself, I am already missing the comforting ambiance of the pub and my local Italian restaurant here in south London, and I’ve only been denied them for a matter of days. Now the UK government is telling me I may not be able to return to them for up to 3 months. If this happens, simple maths suggests that if all UK consumers go back to previous behaviour immediately, on-premise sales for 2020 will be, at best, 75% of the forecast for the year.
The picture in the US is more complex, because a national lockdown is not (at time of writing) in effect, and major economic centres like New York and California have experienced more profound outbreaks than elsewhere (again, at time of writing). Should President Trump’s latest timetable for restoration of normality, the end of April, US on-premise will have suffered around 7 weeks of closure or severe restriction, accounting for around 13% of annual revenues. Whilst painful, the on-premise and their suppliers can just about cope. Extend this by another 7 weeks, however, and there may be more profound consequences in terms of mass closures and bankruptcies, and possible knock-on effects in terms of ordinary consumer behaviour.