The Supply Chain Matters blog provides a side panel follow-up to our previously published blog, Online Grocery Requires Concerted Analysis. In that blog we highlighted a published report indicating that grocery and food retailers need to fix a broken online food fulfillment delivery strategies in the light of a now expanding COVID-19 infection surge currently underway within certain parts of the United States. A corresponding but very related report published this week, adds more to similar challenges experienced earlier this year.
The Wall Street Journal reports this week (Paid subscription or metered view) that the new U.S. coronavirus outbreak has resulted to added pressures on food and consumer packaged goods supplies across the U.S. The report indicates that some grocery retail
ers are being challenged with maintaining adequate stocking levels of in-demand packaged food products. At the same time, food producers indicate that while they have ramped-up production and supply activity as fast as they can, they cannot replenish inventories related to current demand.
The report cites IRI sourced market data that as of the first week in July, 10 percent of packaged food products were out of stock, up from a range of from 5 to 7 percent before the pandemic, and a 12 percent stockout rate at the end of May. The report provides background related to efforts by Campbell Soup, Conagra Brands, General Mills and McCormick to continue with ramping-up production and supply chain support needs.
As is often the case, increased production has led to downstream supply shortages in areas such as packaging or raw material.
A surge among consumers towards more in-home baking has reportedly led to a 233 percent increase in packaged flour sales from a year-earlier period with provider King Arthur Flour producing to accommodate double to triple normal retail sales volume for this product. McCormick & Company is reportedly adding the equivalent of another U.S. factory by utilizing existing third-party producers of packaged foods and spices in addition to ramping-up its own facilities.
In some cases, the current demand for packaged food is likely to continue for several months to come, and in the case of baking needs, anticipated to continue to spur current consumer demand from now and until the Thanksgiving and Christmas holiday period late this year. Readers might also conclude that extraordinary demand for baking products is an indication that consumers expect to be baking their own food products as virus levels force additional lockdowns.
In the March and April period within the U.S., grocery retailers were challenged to meet demand for packaged food and baking products for both in-store and online fulfillment needs. It would now appear that this same or similar condition may continue to be a challenge, depending on which channels consumers elect to purchase their needed food supplies.
The open question is how much out-of-stocks will grow in the coming weeks or whether CPG producers have managed to narrow packaged food SKU counts in order to stay current with demand levels. A further consideration is whether food stocks destined for wholesale sales to restaurants and food establishments can be economically or practically re-purposed for retail sale channels.
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