The pandemic was a trying period for players in the food and drinks service market, as well as the overall hospitality industry. It was only with resilience and adaptability that entrepreneurs managed through restrictions in operations and shifts in consumer needs and preferences. For companies that pivoted, rewards followed. In 2021, HoReCa businesses experienced a 30-40% increase in sales compared to pre-pandemic levels, Florin Maxim, a hospitality professional with more than 20 years of experience and the Institute Director at the Hospitality Culture Institute, tells The Recursive.
The Institute gathers professionals and identifies trends in the hospitality industry, know-how, and solutions. According to its fifth national research on the food and drinks services sector, the food and drinks service market grew to a record level of €5.66 billion – a 21% increase compared to 2019.
“The main trend this year is delivery. This trend has increased during the pandemic period, and it will not disappear. We saw a slowdown, but it also has a big share in the market. In 2022, estimate that the overall food service sector will further increase by at least 30-40%,” Florin Maxim adds.
Florin Maxim has also founded the HoReCa Business Accelerator, a startup program that aims to guide entrepreneurs in the hospitality industry, and co-founded Comarket, a digital tool aiming to help businesses achieve a better management of procurement operations.
The Recursive sat down with Florin Maxim to discuss the key trends in the hospitality industry and particularly the food service sector in 2022, what challenges lie ahead for businesses, his plans with Comarket, as well as what is needed to increase the HoReCa industry’s contribution to the local economy.
The Recursive: How resilient was the food service sector during the pandemic period? How have companies adapted?
Florin Maxim: During the pandemic, entrepreneurs in the food service sector proved that they are resilient and can adapt quickly. It’s true that the number of players in the market has decreased in the last two years but those who survived are stronger than before.
Food service entrepreneurs were capable of switching the business model very fast from offline services to delivery, which is a completely different business model.
It’s not easy for a restaurant to switch from a la carte and table service to delivery; you must change the menu, raw materials, personnel, and so on.
When it comes to the digitalization of the business, hospitality entrepreneurs managed to update their online presence very quickly; they developed digital menus, as well as started working with reservation apps and aggregators.
As a result, for many companies this period brought a new segment to the business.
Regular businesses in HoReCa now have seen a 30-40% increase in sales compared to pre-pandemic levels.
What challenges remain for the market players?
Before the pandemic, there was a huge personnel crisis in HoReCa in Romania. Because the sector was growing so fast, it was hard for businesses to find staff. As a result, at the beginning of 2019, there was an influx of personnel brought from Asian countries. During the pandemic, this was slowed down.
Now, the challenge of finding personnel resurfaces, as businesses are reopening offline services and physical events.
Also, misfortunes never come alone. The pandemic was followed by an energy crisis and a food supply chain crisis, in the advent of the war in Ukraine. For food sector businesses, this brought challenges in procuring raw materials. Prices are also changing everyday for all resources, not just vegetables; they also apply to meat, dairy, and alcoholic beverages.
Imagine that you sell your products with one price in mind but the energy bill comes at the end of the month.
The challenge for the market is to predict the increase in costs and set the right price for the customer, in order to keep monthly profitability, or even to stay in business.
What solutions most impressed you in the current technology track of the HoReCa Business Accelerator?
In this cohort, we have seven teams that are developing innovative solutions for retail and HoReCa. I was very impressed by the teens from this cohort because they come with ideas that innovate.
For instance, we have solutions like MagiX that aim to increase brand presence on retail shelves, communicating a vast amount of information that until now corporates weren’t making use of in their marketing programs.
We also have alternatives for restaurants that sell their products in office spaces, such as Eat Smart, offering vending machines with AI-based software that can analyze which kind of products will sell.
There’s also Unit Pay with a digital menu solution integrated with social media communication and lots of data, which can optimize the personnel scheme in the HoReCa location; with this solution, clients can pay from their phones and call for the waiter, for instance.
We have very good teams in this cohort that can really add value to the day-to-day operations of HoReCa businesses.
What solution does Comarket propose in the hospitality industry?
Comarket is a solution that aims to bring innovation behind the scenes in the hospitality industry. There are a lot of digital solutions for what happens at the front-end of the business, in relation to the client. Comarket aims to to help HoReCa entrepreneurs in their relations with suppliers, where the most important KPI in the sector is formed: the food cost. The acquisition cost is largely influenced by relations with suppliers.
Currently, we want to pivot the solution that we proposed last year – a marketplace where suppliers can meet the buyers – to a more complex offering, a platform-as-a-service (PaaS).
You can use CoMarket as an acquisition software in which you can manage your own suppliers, products, and prices, in one place and in a digital form, with reporting options and transparency throughout the process. Right now, we have more than 400 suppliers in the CoMarket ecosystem.
You can also use it as a marketplace, with more than 8,000 products currently available. Our target is to reach 15,000 products by the end of the year.
You recently announced starting a new funding round. How will you be using the new capital to support your growth plans?
43% of the funding will be directed toward updating the technology and transforming the platform into a SaaS offering. This requires a huge development effort, and we will be expanding the team of developers.
Additionally, we will have a very strong API that will permit us to integrate with other software in the market. The holy grail is to achieve digitalization and not only to digitize certain parts. We are already moving from SMS, phone calls and WhatsApp messages to a software solution where everybody can see what is happening.
Next year, we will also integrate an AI module in the platform, which will provide valuable information both to the buyers and the sellers. The two parties need a huge amount of information regarding prices and products.
Another major spending component will be marketing campaigns, in order to raise awareness and create traction for the solution in the market.
Are you planning to also use blockchain, crypto, and NFT applications in your projects in the future?
We are indeed thinking of using blockchain at Comarket. Everyone is interested to see if what they are eating comes from safe sources. Thus, we are analyzing the possibility of using blockchain to offer traceability of raw materials in the HoReCa market.
We are also thinking of NFTs for one of the projects in the Romanian Hospitality Institute, the Romanian Hospitality Awards. We want to propose something very unique and innovative using NFTs but I cannot say more at this point because it is a work-in-progress.
How do you imagine the future of the hospitality industry?
The Prime Minister said that the HoReCa industry can contribute 10% to our national GDP. I think we could make up to 15-20% of the GDP in Romania, but only with the support of the state, regulation and macro-economic actions for the sector.
Presently, we have a Ministry of Tourism that is taking care of 300 travel agencies. But we don’t have a Ministry for the 50,000-60,000 players in the food service sector. Nobody knows what is happening in this sector.