‘People Are Hoarding’: Food Shortages Are The Next Supply-Chain Crunch
There’s plenty of food. There just isn’t always enough processing and transportation capacity to meet rising demand.
(Bloomberg) -- In Denver, public-school children are facing shortages of milk. In Chicago, a local market is running short of canned goods and boxed items.
But there’s plenty of food. There just isn’t always enough processing and transportation capacity to meet rising demand as the economy revs up.
More than a year and a half after the coronavirus pandemic upended daily life, the supply of basic goods at U.S. grocery stores and restaurants is once again falling victim to intermittent shortages and delays.
“I never imagined that we’d be here in October 2021 talking about supply-chain problems, but it’s a reality,” said Vivek Sankaran, chief executive officer of Albertsons Cos., who echoed the laments of other retailers. “Any given day, you’re going to have something missing in our stores, and it’s across categories.”
In Denver, broken parts at the milk supplier’s plant affected shipments of half-pint cartons, on top of disruptions at one time or another in cereal, tortillas and juice.
“We’ve been struggling with supply-chain issues with different items since school started,” said Theresa Hafner, the executive director of food services at Denver Public Schools. “It just continues to pop up. It’s like playing whack-a-mole.”
In Chicago, Dill Pickle Food Co-Op ran out of certain dry goods because its two main distributors haven’t been sending orders in full in recent weeks.
“Early in the pandemic, panic buying was the cause of many of the out-of-stock situations that grocers experienced,” general manager I’Talia McCarthy said in an email to store owners this month. “Although the food industry was able to somewhat rebound, the sustained nature of the pandemic, combined with the slow pace of vaccination globally and the recent surge caused by the delta variant, have resurfaced the problem.”
The shortages aren’t as acute as they were earlier in the pandemic. At supermarkets, on-shelf availability has stabilized since dropping drastically in November last year, according to data from NielsenIQ.
Still, one key metric is trending down a bit. The total on-shelf-availability rate was 94.6% in September, a decrease from 95.2% in August. That means that 94.6% of expected revenue was generated last month, NielsenIQ says.
Many food suppliers are planning for these hiccups and shortages to last.
Saffron Road, a producer of frozen and shelf-stable meals, is holding extra inventory, keeping about four months of supply on hand instead of the typical one or two months.
“People are hoarding,” said CEO and founder Adnan Durrani. “What I think you’ll see over the next six months, all prices will go higher.”
A&W Restaurants earlier this year had to cancel a marketing deal for chicken tenders when its supplier couldn’t get extra stock of poultry. Instead, the chain, which has about 560 locations domestically, went with chili-cheese fries.
“Rather than running short, we replaced the promotion with something we could get,” said CEO Kevin Bazner. Supplies are improving, he said, but the chain is still only getting about 80% of what it orders, he said.
Not Enough Styrofoam
Food producers complain of supply-chain headaches of their own.
Land O’Lakes Inc., one of the biggest U.S. farm cooperatives, said its members are producing abundant amounts of milk at their dairies.
“The challenges in the supply chain continue to be issues such as driver shortages, labor and congestion at the ports,” Chief Supply Chain Officer Yone Dewberry said in an email.
Meat processors tell a similar tale. Earlier this month, one pork supplier couldn’t get products out because there weren’t enough Styrofoam trays, said Steve Meyer, a consulting economist for the National Pork Producers Council.
Labor issues are also roiling the meat supply. Plants are running but not at full capacity due to a lack of workers and truckers, Meyer said. The problem is so bad that at least one U.S. meatpacker has tried to lure new employees with Apple Watches.
In most cases, animals are being harvested but there aren’t enough people to handle normal value-added processes such as boning, trimming and curing. That may make it harder for grocery-store customers to find such high-value products as boneless hams.
Said Meyer, “You name it, it’s going wrong somewhere.”
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