pic source: perishablepunditpodcast.com
HERE we go again. Walk into a US supermarket and chances are you’ll see some empty shelves once more.
It’s an unwelcome throwback to earlier stages of the pandemic. Remember in 2020 when panic buying and a sudden frenzy for baking hit grocery aisles hard? And last year, when supply chain snarl-ups led to shortages of everything from cat food to Lunchables? This time around, the poor availability is due to a convergence of both issues.
There are a few reasons to expect this latest crunch to be temporary. Record inflation, for example, will likely take a bite out of consumer demand and thus ease supply constraints.
But don’t expect the problems to end there. To recap: Global trade routes were already stretched before Omicron emerged. Factory and port closures in Asia from the earlier Delta outbreak led to shipments getting stuck in the Pacific ahead of the 2021 peak selling season.
Bed Bath & Beyond Inc said that in the run-up to the holidays it couldn’t get enough paper to send out its circulars to tempt customers into stores.
Add in labour shortages among food-processing plants and truck drivers and by the holiday season, stocks of seasonal staples were lower than normal.
The latest Covid variant has only made these issues worse. Supermarket Albertsons Co said last week that Omicron put a “dent” in its expectations about improved supply chains, as staff absences continued to disrupt food manufacturing and distribution.
It anticipates this to continue for the next four to six weeks. Similar concerns were echoed by food manufacturer Conagra Brands Inc, which warned of challenges for the next month or so.
According data provider IRI, grocery shortages have been up since the start of this year. Some categories that were in short supply during 2021, such as beverages, continue to suffer from poor availability.
But it’s not just supply issues leading to bare shelves. Consumers are also returning to stay-at-home habits including home cooking and loading up on pantry items.
Right now, cold weather in the northeast is prompting even more Americans to cosy up at home — and adding another layer of complexity to distribution. There are big variations in availability across the country, according to IRI.
But retailers and consumer-goods companies have gotten better at dealing with these issues.
Manufacturers, for example, have culled ranges so they can produce more of their biggest sellers. Supermarkets, too, have been able to stock substitutes for hard-to-find items, so there’s usually something suitable for customers even if it wasn’t their first choice, notes Jim Prevor (picture), who runs the Perishable Pundit blog.
Consumers too have gotten more flexible, perhaps substituting a new brand for their go-to and finding it wasn’t so bad after all.
As for staffing issues due to employees out sick, stores have been able to draw on the wider pool of the seasonal workers they typically hire during the holidays.
A tougher consumer backdrop may also help alleviate supply strains. After all, part of the problem was the surge in demand for goods as economies reopened. That will change as things get more expensive.
US food prices rose by 6.3% in December, the highest in a decade. Although stores aren’t seeing it yet, paying more for everyday essentials is expected to crimp consumer appetites.
This, though, is a double-edged sword. While moderate inflation is good for grocers, as it bolsters the value of sales, the risk is that more cash-strapped customers trade down to cheaper items and defect to budget rivals.
Retailers have grown adept at navigating 2021’s shipping constraints. A consumer spending squeeze will be another matter entirely. — Bloomberg
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.