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TRANSFORMING THE FOOD AND BEVERAGE INDUSTRY

MOVING FORWARD POST-PANDEMIC

While COVID-19 forever altered consumer shopping and eating habits, the post-pandemic landscape will challenge brands to stay ahead of the curve and adjust to the evolving food and beverage landscape. Three Chicago-based executives shared their unique perspectives on what’s ahead for the industry with Crain’s Content Studio.

How is your organization involved with the food and beverage industry?

Suzanne M. Alton de Eraso: Benesch has been a part of the food and beverage industry for decades, representing all types of clients who are part of the food supply chain, including food and beverage manufacturers, processors, packagers, distributors, wholesalers and retailers. We assist at all stages of the product lifecycle, from product development to advertising, marketing and distribution—advising clients on almost any legal issue that may arise along the way.

John Wober: Airbrands teams with some of America’s leading hospitality, retail and entertainment brands. We help identify, develop and manage expansion of their concepts. As a minority-owned firm, we also help ensure that projects with minority business enterprise (MBE) or airport concession disadvantaged business enterprise (ACDBE) requirements deliver on their diversity goals through strategic partnerships, joint ventures and board participation. We typically focus on non-traditional locations such as airports and other large venues.

What’s the number one challenge you’re seeing in the industry, and how is your organization working to address/resolve it?

Krusinski: Our biggest current challenge is the lack of availability of resources related to both materials and the workforce. Compounding that is the rapidly rising cost increases for numerous construction materials and components. This is creating a “perfect storm,” pushing the limits of client budgets and schedules— sometimes to the breaking point of postponing, re-designing or cancelling proposed projects. We’re in constant communication with suppliers, manufacturers, subcontractors, design teams and our clients to assess alternative solutions for materials or building systems, as well as securing pricing and lead times to mitigate future risk caused by price escalation and extended schedule increases.

Wober: We need to see the return of foot traffic and indoor capacity to pre-pandemic levels. The financial impact of COVID-19 has eliminated many of our favorite bars, restaurants and entertainment options. Diminished traffic wreaked havoc on our airport locations. We’re happy to see Chicago

SUZANNE M. ALTON DE ERASO Associate Benesch saltondeeraso@beneschlaw.com 312-212-4977

demanding more transparency with respect to how consumables are sourced and from where; this creates considerable risk from a consumer class-action perspective. It’s important for businesses to scrutinize consumer advertising before it reaches the public to eliminate any potential

“NOW MORE THAN EVER, COVID-19 HAS BROUGHT CONSUMER SCRUTINY TO FOOD AND BEVERAGE SUPPLY CHAIN ISSUES.”

expand dining capacity and offer creative ways to draw people back out.

Industry groups such as the Illinois Restaurant Association have been advocating for us with the state and city to increase capacity, hours and restrictions. Those efforts are key to helping both restaurants and venues of all sizes get back on their feet. In our airports, we’ve been advocating for rent relief and additional flexibility to see us through this.

In what ways has the pandemic changed the services or products your organization provides?

JOHN WOBER

President Krusinski Construction Co. jeffk@krusinski.com 630-573-7700

President Airbrands jw@airbrandsinc.com 312-767-8715

misunderstandings about product sources or attributes. Additionally, the pandemic changed how consumers shopped. It’s important for companies to think beyond the label and consider all product representations made at point of sale, including online sales, now that so many consumers are

purchasing food and beverage products online.

Krusinski: As a company and an industry, the pandemic forced us to find new processes and protocols to continue building safely. We can’t physically build buildings by working

“Benesch always does a good job of explaining what our options are and giving us counsel from a very pragmatic approach aimed at keeping matters moving forward and reaching effective agreements.”

—SUZANNE M. ALTON DE ERASO, BENESCH Jeffrey J. Krusinski: Krusinski Construction Co. is a general contractor firm. We work with commercial real estate developers and directly with food and beverage industry end-user clients, from concept to completion, to deliver the facilities where they operate their businesses.

Our involvement is as broad and diverse as the industry. Among the applications we’ve worked with include cold storage, freezer-cooler space, food production, processing and packaging, R&D, food labs, test kitchens and warehousing. In the last five years we’ve completed millions of square feet of food and beverage constructions valued in excess of several hundred million dollars, including Flavorchem’s R&D facility in Downers Grove and the 1.2 million-square-foot Ferrara Candy Co. distribution complex in DeKalb.

JEFFREY J. KRUSINSKI

FRITZ KOHMANN CFO, Shearer’s Snacks

MY BENESCH MY TEAM To learn more about our relationship with Shearer’s, visit beneschlaw.com/myteam.

Alton de Eraso: Now more than ever, COVID-19 has brought consumer scrutiny to food and beverage supply chain issues. Consumers are

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TRANSFORMING THE FOOD AND BEVERAGE INDUSTRY

MOVING FORWARD POST-PANDEMIC remotely, so at times we had to become part nurse/medical staff, part lawyer, part CDC guidance expert and part counselor to figure it out. As a company we’ve always been extremely focused on safety. But job site safety and pandemic safety are at opposite ends of the spectrum. We instituted protocols and procedures to first and foremost protect our workforce, but also had to minimize any cost or schedule implications to our clients. It was scary at first because of so many unknowns and unclear guidance at the state and federal levels. However, our team did an incredible job rising to the challenge, allowing us to continue building safely for our team and effectively for our clients.

Wober: Pent-up demand has consumers craving dining and entertainment “experiences” more than ever. Businesses have to offer best-in-class service to gain customer loyalty. We look to increase our customers’ net promoter scores, which is a metric we track to determine how likely someone is to recommend—or not recommend—a brand. That’s something you do by building a great corporate culture and solid management, on all fronts. Actively listening to employees’ and customers’ needs and incorporating that information into the feedback loop can take a company from good to great.

Are there other specific COVID-related issues you’re dealing with in this industry?

Krusinski: Like many other industries, construction and commercial real estate firms are dealing with staffing related issues. Specifically, in an environment where we’re seeing consistent and even increasing levels of construction activity, we’ve already grown our team significantly—by more than 40 percent in one year. And we’re looking to hire good people at all levels within the organization—including management and in the field. Other segments that are closely connected to our industry, such as suppliers of critical construction materials, are facing similar challenges. Because of the consistent levels of development and construction taking place, suppliers of steel and steel products and other products like concrete tilt-up walls are quoting long lead times. It’s not just a matter of demand for the product, but also the laborers involved in the manufacturing. It’s a complicated process, and one that has a significant impact up and down the supply chain.

Alton de Eraso: The increasing number of businesses adopting online apps for ordering and delivery creates specialized issues with respect to consumer data and privacy. We’re helping our clients move forward

with these innovations by offering appropriate disclosures and obtaining consumer consent on the front-end to avoid future litigation.

Wober: Getting people back to work continues to be a challenge in the hospitality industry, as much of the experienced staff has been absorbed into other industries or isn’t quite ready to return to the workforce. We’re becoming very creative with digital advertising and offering incentives to reach, attract and retain talent. We’re currently piloting a childcare program and are encouraged by the results. We’re also having to overcome some supplychain constraints and cost increases that impact our profitability. We expect these headwinds to subside as we fully reopen and conditions stabilize.

Wober: The food and beverage, hospitality and entertainment industries have embraced the public health guidance and augmenting our existing practices to lead the charge to reopen. If we should face another public health threat, the data supports that when we adopt these measures, we can safely continue to service customers while we deal with the crisis. Moving forward, companies should have a well-articulated safety plan to include updated standards and mitigations that can be communicated and applied to staff and patrons.

Krusinski: My advice is to follow the research, innovation and technology that are establishing or reinforcing new best practices. It’s changing rapidly. Those who are in step with

With construction costs increasing and lead times for materials lengthening, what can food and beverage companies do to ensure their future real estate needs can be accommodated as efficiently and cost-effectively as possible?

Krusinski: More than anything else, food and beverage companies need to be flexible and respond thoughtfully and decisively when making key decisions. In most situations— especially in new construction projects but also in tenant build-out projects—the leadership of food and beverage companies will need to answer the question, “What’s more important, time or money?” In many

“FIRMS WITH HIGH MARKS FOR ETHNIC DIVERSITY ARE BY FAR MORE LIKELY TO FINANCIALLY OUTPERFORM THEIR PEERS.” —JOHN WOBER, AIRBRANDS

What advice do you have for food and beverage companies as they look to address issues like workplace safety, product/food safety and consumer health?

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and adapting to the changes will move to the head of the class, creating new opportunities as they move forward.

Alton de Eraso: Keep up the efforts. These issues are going to be on consumers’ minds for the long haul.

What impact is the recent focus on diversity and inclusion having on the industry?

Wober: Chicago is a culturally rich city and our magic ingredient is our diversity. As a world-class entertainment destination, it’s crucial for the long-term success of Mayor Lightfoot’s economic development vision that inclusion continue to be a major priority. As a local, Latino-owned business, our company is excited about these opportunities to work with our community stakeholders to ensure both the Chicago casino and airport expansion include equitable and diverse participation. In addition to responsible corporate governance, it’s simply good business. Firms with high marks for ethnic diversity are by far more likely to financially outperform their peers.

Alton de Eraso: The impact cannot be understated—everyone wins when businesses embrace D&I efforts. From a business perspective, D&I expands and retains the internal talent pool. It also allows a business to freely advertise its values and communicate that they align with today’s value-conscious consumers. In turn, consumers know that when they spend money with the business that it’s money well spent, and many consumers will pay a premium to purchase goods and services from a business where there’s a clear valuealignment.

construction situations, there are options to consider. Yet each decision, to one degree or another, will have an impact on the time it takes to complete a project or its final cost. For example, we always provide our clients with the options available, their impact on project cost and delivery, and our recommendations. Ultimately, it’s up to our clients to determine whether the immediate opportunity cost—getting their projects completed and fully operational—is more or less important than the hard financial costs.

Wober: Increased lead times have given us an opportunity to revisit some of our design and vendor requirements.

Longer lead times can give our construction partners the opportunity to formulate more competitive bids.

Real estate owners are also providing additional incentives and flexibility during our lease negotiations. We’re also pivoting to alternative materials that are more readily available—such as prefabricated millwork and fixtures— and taking advantage of any energy incentives to help offset costs.

What’s the greatest opportunity you’re currently seeing for the industry?

Wober: Given the shift to homebased entertainment options, I see opportunities for food and beverage and entertainment brands to extend their brand reach through multiple channels such as cloud kitchens, licensing and grocery store items. The gaming industry is also seeing a rapid uptake in mobile wagering, reaching customers at home. Opportunities exist to engage with our customers beyond brick and mortar. Operators should embrace these trends by reevaluating their existing operations to gain efficiencies through technologies to

SPONSORED CONTENT gain a competitive edge. There are also opportunities to access new sources of capital. Although, many of these sources will require ongoing funding and appropriations, operators should stay current on programs such as Economic Injury Disaster Loans, Shuttered Venue Operators Grants, and Restaurant Revitalization Funds.

Chicago has also created a Chicago Vendor Impact Fund to help minorityowned vendors currently doing business with the city.

Krusinski: The opportunity for even further growth, driven by the almost insatiable consumer demand, is tremendous. The best opportunity lies with companies that can best manage the shift in where that demand is derived.

The pandemic created major disruptions to many typical points of sale, such as bars, restaurants, sporting and concert venues. Consumers transitioned from those consumption points to local stores and direct to homes via trips to the neighborhood supermarket or online orders that were shipped direct. Many products and businesses thrived and grew during that time while others struggled.

The ability of a company to adjust its products and distribution channels to service the consumer from a B2B and a B2C structure will continue to prosper.

To that end, I feel there will be increased M&A activity to serve the businesses and consumers on so many different levels.

Alton de Eraso: Now is the time for businesses to set themselves apart from their competitors, be it their supply chains, their commitments to sustainability or animal welfare, or their commitments to their communities or their employees’ well-being. Consumers are listening, and they care about these issues. So now is the time for businesses to highlight the commitments they’re making to the future.

When do you expect to see Chicago’s food and beverage industry fully recover, and what would need to happen for it do so?

Alton de Eraso: Thankfully, we’re headed in the right direction, and for many businesses, relief is on the way as more of the population is vaccinated and COVID-19 restrictions continue to be lifted. Two components need to align for a full industry recovery.

First, we need to get to a point where capacity limits are fully restored for indoor dining. But on the flip side, consumer confidence is equally important. Just because a business can seat at maximum capacity, doesn’t mean that all diners will be comfortable with pre-COVID crowd levels. The most successful businesses will be those that maximize and rethink their floor space, offer carryout or delivery options, manage crowd control and make customers feel like sanitation is a top priority.

Krusinski: I’d be hard-pressed to say that the food and beverage industry as a whole has suffered, based on what we see and hear from our clients in the industry, and the forwardlooking plans they’re making. Without question, bars and restaurants have been devastated during COVID 19.

As restrictions are being lifted, we’re seeing a somewhat speedy recovery, giving hope to this segment that they will soon be on solid footing like the many other segments that are thriving.

Throughout the pandemic, food producers generally found a way to get products in the hands of consumers, and those who serve consumers. As a company, we believe there’s a healthy level of pent-up demand. Satisfying this demand while also plotting growth opportunities will allow for further development and create a need for new and/or expanded facilities.

Wober: We’re hopeful that the worst of this is behind us, and by next year we’ll see a return to normalcy. In the short term, we need higher vaccination rates to drive employees back to their workplaces. The industry relies heavily on the lunch, happy hour and dining traffic from locals. Likewise, higher vaccination rates and heard immunity will likely lead to rebounds in tourism and conventions, which drive traffic to our airports and airlines. Our reopening can’t come soon enough, and the return of summer festivals and events like the Chicago Auto Show and Lollapalooza are welcome announcements. The key to our success will be getting the vaccinations rates up within some of the hardest-hit communities. Industry employee and community-focused vaccination efforts are helping. When I was finally vaccinated, it felt amazing to get back out there.

ABOUT THE PANELISTS SUZANNE M. ALTON DE ERASO is an attorney in the litigation practice group at Benesch, an AmLaw 200 business law firm. She focuses her practice on class-action defense and commercial litigation, defending clients against consumer fraud, unfair and deceptive practices, breach of contract, false advertising, unfair competition and trade disparagement claims. She also defends patent, trademark and copyright infringement claims, from pre-filing investigations to discovery management to trial preparation, and provides regulatory advice to ensure that clients are compliant with federal and state advertising regulations.

JEFFREY J. KRUSINSKI is president of Krusinski Construction Co., which provides comprehensive construction services throughout the Chicago area and nationwide. He joined the 48-year-old family business in 1994, working in a variety of jobs—from master planning to executive oversight— before assuming his current role in 2016. His responsibilities include establishing new client relationships, strategic company growth and developing new markets. He chairs the economic development committee of the Oak Brook Chamber of Commerce, where he’s a longstanding board member.

JOHN WOBER is president of Airbrands, a minorityowned airport concessions, consulting, and brand management firm focused on public-private partnerships. He has over 20 years of experience licensing, consulting and operating national brands in a variety of industries, including retail and hospitality. A first-generation American, he appreciates the value of diversity and frequently partners with local business and community stakeholders as an advocate for equity and inclusion. He regularly volunteers in the Latino business community as an adviser, panelist and speaker. and customer safety protocols. We’re already seeing trends to expand menus to include more plant-based proteins. A host of new technologies in the kitchen and delivery are emerging. We’ll also need to rework our risk management strategies.

The insurance industry may need to redefine what constitutes a business

interruption or insurable event.

Landlords, tenants and creditors will need some lease protections and plans for contingences. The banking industry may need to include forbearance options. This will likely require collaboration among regulators, legislators and the private sector. Initially, we underestimated

the impact of the pandemic and perhaps overcorrected in some areas.

However, we learned a lot from this experience—what works and what doesn’t. We’re better prepared today on how to mitigate these events, shorten their duration, and how avoid a total paralysis if faced with a future public health crisis.

How do you see the industry evolving over the next five years?

Krusinski: The industry continues to advance with creativity related to new products, sustainable packaging, automation and logistics. There’s no end in sight to the advances being made in the industry. The research and development of innovative products is astounding as you see it in just about every facet within the food and beverage industry. Responding to consumer demands for healthier options, transparency in food origin, online ordering and shipping has generated some immensely successful products, services and companies. It’s exciting to witness. Equally as exciting, the companies that are being the most innovative and making the greatest strides represent a combination of start-ups and established names. That bodes well for the industry and all of those who partner with them to execute new plans and visions.

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Wober: We expect to see adoption of enhanced food handling, employee

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“MY ADVICE IS TO FOLLOW THE RESEARCH, INNOVATION AND TECHNOLOGY THAT ARE ESTABLISHING OR REINFORCING NEW BEST PRACTICES.” —JEFFREY J. KRUSINSKI, KRUSINSKI CONSTRUCTION CO.