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Navigating lockdown in the food and drink industry

12 May 2020

A report by GlobalData on the predicted impact of Covid-19 suggests that as of 14th April 2020, profits in the foodservice industry are likely to fall by 12.8% worldwide for the year, equivalent to US$490 billion in lost revenue. Corresponding figures broken down by region predict a 14% fall in profits in Western Europe alone.

In the UK, the Office for National Statistics has reported that as of 24th April 2020, the accommodation and foodservice sector had the second-highest closure rate of all sectors surveyed, with 82% of respondents confirming temporary closure, whilst around 87% of those who remained open reported “substantially lower than normal turnovers”.

These statistics are very worrying, but of course not surprising, given the enforcement of lockdown measures around the world, generally including the mandated closure of hospitality businesses including pubs, bars, restaurants and large entertainment events. As a natural result of this, many businesses are unable to continue trading in their normal way, and whilst various government-funded financial relief packages have been made available, many are feeling the pressure of ongoing overheads and staffing costs.

With the ever increasing pressure on cash flow and the real risk of collapse, business owners are turning to new ways of trading. Many restaurants are now introducing delivery or take-away services, wholesalers and breweries are shifting sales directly to the consumer, pubs offering their food menu for delivery, and restaurants teaming up with their suppliers to offer vegetable boxes, eggs and milk. Some companies are even temporarily adopting entirely different business models, with various brewers and distillers moving into the sanitiser field, for example.

These types of changes are often made with some haste, in an effort to safeguard the future of the business concerned and minimise lost incomes. Amidst a whirlwind of decisions on the sourcing of takeaway packaging where it has not previously been needed, ensuring social distancing for both staff and customers, and publicising the offering of new goods or services whilst also navigating interruptions to the supply chain of your own ingredients and products, it can be easy to overlook the legal risks that can arise from a sudden and clear change in business direction. Intellectual Property is an important consideration which should not be forgotten.

When the product or service offering under a brand changes, it brings a risk of infringement in a new field not considered in any previous conflict checks. For example, in moving from an eat-in restaurant to hot food delivery, from manufacturing distilled spirits to hand sanitiser, or from operating a café to selling fresh produce, your brand could potentially conflict with third parties already trading in those sectors. Their rights would not have been taken into account in your initial checks, and are unlikely to have been infringed by your activities to date in a different field. Where no initial checks were carried out at all, the risk of unknowingly infringing third party rights will increase.

Nevertheless, a recent poll by Ipsos Mori shows that consumers want brands to actively communicate during the crisis, with 71% wanting to hear from brands that can help them personally, and 72% believing that companies have a social responsibility to offer aid. As such, even if this involves a temporary change in direction for the business, if that change can benefit those in need, these interim activities will arguably generate goodwill and loyalty toward the company longer term. The effective diversification of service offering may even continue into the post pandemic future!

Trade mark clearance searches would always be advisable for anyone adopting a new trading method or entering a new market, to avoid inadvertent infringement of third party rights. Whilst some parties may seek to register their brand for an extension of their activities, for many, this is only likely to be a worthwhile investment if those new activities are likely to continue longer term. What does seem apparent is that any new activities which help existing customers to access your existing goods/services, or changes in direction which benefit the wider community, are likely to boost positive perception of your brand longer term.

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Claire Keating

Claire Keating Senior Associate Birmingham (UK) Chartered (UK) and European Trade Mark Attorney

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