Hopefully the advanced information CTH provided on the food supply-chain has helped to understand the issues, challenges and demands many are seeing.  Inside the food manufacturing industry the impacts of COVID-19 are stunning; crazy increases in business; and there are going to be interim shortages on popular products.

To understand the ongoing issues with empty shelves, and also prepare for future shortages on specific products (hint: buy extra pet food now), here’s some interesting background:

Champaign, Illinois – […] “We can’t make enough mac and cheese right now,” said Dilton “Dee” Gibbs, plant manager at the facility that makes half of the Kraft Macaroni & Cheese sold in the U.S., as well as A-1 steak sauce, mayonnaise and salad dressings.

The packaged food giant, along with many of its peers, has had to ramp up production amid an abrupt reversal in consumer trends. Shoppers who in recent years shunned processed foods in favor of fresher, healthier and more premium products are now loading up on shelf-stable standbys as shelter-in-place orders force vast swaths of the nation’s population to prepare for a long stretch of cooking at home.

[…] Kraft Heinz, co-headquartered in Chicago and Pittsburgh, said demand for numerous products, from ketchup to Kool-Aid, has been up sharply since pandemic fears sent consumers into a stockpiling frenzy.

Macaroni and cheese sales, which grew just 1.6% in 2019, were up 27% during the 13 weeks that ended March 21 compared with the same period last year, the company said. Sales of Heinz vinegar have been robust, perhaps because people are using it not only to cook but also to make cleaning solutions.

To be sure, all sorts of food has been flying off the shelves. Year-over-year sales of rice, beans and pasta more than tripled during the week that ended March 21, according to Nielsen. Fresh meat sales doubled and oranges, dense with immunity-boosting vitamin C, grew 57%.

But products that had fallen out of favor in recent years are making a fierce comeback. Packaged soup sales shot up 237%, according to Nielsen. Canned meat surged 282%.

[…] Credit Suisse has projected that retail sales of packaged food companies will grow, on average, by as much as 15% to 30% during March through May. Some of the largest companies have announced production increases by as much as 40% to keep up with demand, it said.

[…] “The priority right now is producing the maximum amount of food that we can possibly produce,” [Conagra CEO Scott] Connolly told investors on a conference call Tuesday.

The company has shifted employees from its food service production lines, where demand has dropped drastically because of mandated temporary restaurant closures, to the lines making products sold in grocery stores.. Its planned rollouts of new products are being put on hold at some retailers that want to focus on core staples.

As a result, consumers might see less variety on shelves as companies focus on churning out the most in-demand products, said Geoff Freeman, CEO of the Consumer Brands Association, an industry trade group.

Unilever has said some variations of its products may be unavailable as it focuses on its most popular sizes of Hellman’s mayonnaise and flavors of Knorr meal mixes.

“There will be no shortage of product,” Freeman said. “Product will be there, but perhaps not some of our choice.”

[…] And the lean, efficient supply chains companies have adopted to save money also are being reconsidered as manufacturers weigh the benefits of redundancies in the event of an emergency, Fereday said.

There will likely be a move toward de-globalizing the supply chain in favor of local suppliers, he said. (read more)

Read that again, considering the influence of Big AG:  “There will likely be a move toward de-globalizing the supply chain”…  That is good news.

BACKGROUND – By now the majority of protein manufacturing has caught up. Beef and pork should be solid at your local market; however, chicken, while available, will lag to full replenishment capacity in the protein sector. The reason is: “chicken” is an ingredient component in many shelf stable items (soup etc.), that are still short as the manufacturing sector runs at capacity.

We enter a phase where grain commodities are now arriving at manufacturing.

♦ Between the Appalachian mountain range and the Colorado mountain range there is a massive amount of grain, meal, and derivative (farming) product generated. Thin component inventories, now exhausted at processing, are the cause of the current manufacturing supply chain stress… This lag will take a little longer.

There are train-loads of grain products heading both East and West daily; but there is a process of background prioritization taking place within the grain (total), flour, meal, rice and dried beans sector. The downstream ingredient system has a long-term and short-term priority schedule.

Example: total flour is prioritized to industrial bakeries for the production of bread. Nationally retail or consumer flour shortages are caused by prioritization in this part of the supply-chain.

Dry pasta will eventually catch up as manufacturers receive millions of metric tonnes of raw material. However, the canned pasta derivatives (think Chef Boyardee etc.) will come after. The same applies to macaroni (mac-n-cheese) manufacturing.

The grain and row crop farmers are loving the emptying of regional, industrial, dry storage silos; there will be a long-term benefit in the next harvest season.

Remember, chicken is a base ingredient for many shelf-stable items such as soup noodles (Ramen), as well as wet and dry soups. The temporary shortage of chicken will extend for an unknown time-frame as the retail chicken and manufacturing sector are both pulling from Chicken farmers. Because both segments are pulling inventory, the ability of soup manufacturers to catch up is a little limited. You are probably noticing that on retail shelves.

Chicken is also a big part of frozen processed food production. In addition to chicken nuggets, patties etc; it is also the primary ingredient for many blends of frozen dinner foods.

Rice is similar in that it is a base ingredient for a variety of sectors: plain rice, shelf stable blends, stuffings and many frozen prepared meals pull from rice harvests.

The manufacturing sector will catch up, but the raw material is diversely spread into multiple manufacturing segments; so it takes a bit longer.

A note of caution, the dry pet foods category could also see a slight shortage in manufacturing as they draw from rice and grain supplies.  You might see some empty shelves of dry dog and cat foods as a consequence. [Just an fyi]

Fruit juices are abundant as the seasonality of berries has left very little disruption in that sector. Water and enhanced water products that use fruit juices were only constrained by distribution issues (phases two and three), and those should be back to normal. Frozen fruit products and desserts also unaffected (except for distribution).

Dehydrated potato products will also catch up soon as the retail demand is never too extreme on an ordinary basis. They don’t need to manufacture too many dried potato varieties to catch up. Frozen potato products are only a distribution capacity issue. Good ol’ taters are solid.

Dried beans again are a multi-segment derivative. Used in dry and wet soups, shelf stable products, rice blends, pet foods etc. It might take a little longer to see raw dried beans back in stock as the manufacturing sector for the derivatives soaks up the beans. Wet beans (baked beans) should be back in business very soon; if not already.

Canned vegetable production is almost unimaginable in scale amid the big manufacturers. One can assume they are buying up the bulk row crops, wet beans and corn silos from all sources. However, on the positive side they can crank out canned vegetables at an astonishing rate and the restaurant bulk business doesn’t need it.

Overall, the majority of products should be back on our store shelves, sans some specific brands, very soon (depending on region). It’s the manufactured shelf-stable items that are now playing catch-up.

Meat cases should have ample products as the distribution was running 24/7 for almost the past month; again, with the single exception of chicken as noted above.

Retail eggs may take longer as eggs are also needed as a raw material.

On the paper and chemical side there is still a big void. However, that void is almost certainly an issue with “cube space” prioritization from phase two and three; and a demand shift from commercial to consumer.  First, ‘cube space’ is literally the amount of space it takes to ship products.  Paper goods take up a lot of shipping space and with demands on food – paper good distribution is not as critical or urgent.  Food comes first.

Second, toilet paper is two sides of a slightly different product, commercial and consumer.  Commercial TP demand is down 40% while consumer TP demand is up 40%.  The TP you use at home is not the same as the stuff you use at the office, school, restaurant, public restroom etc.  Both products manufactured differently; both packaged differently; both manufactured to fit different dispensing equipment.

Consumer, home use TP, now in +40% demand.  The industrial scratchy, big roll, individually wrapped, less appealing commercial TP not-so-much.   That is likely why the lack of toilet tissue has remained for so long… Sheesh, who knew.

Big manufacturing soap and chemical users also have been challenged with the extreme demand for sanitary products. Hand soap, hand sanitizing, personal hygiene and also surface sanitizing products are beyond extreme demand. Here I would place a note of caution… Again, prioritization has to happen.

When given a choice between laundry/dish detergent and personal hygiene products we can expect the manufacturers will prioritize production of the latter first.

This *could* lead to a shortage in laundry and dish soaps. Just keep that in mind if you are seeing some of your favorite brands in those sectors missing.

Think of a massive segment within our economy that was already working near capacity…. now demand has increased 40% overall within that industry….  It’s incredible we have not seen more widespread shortages considering the scale of this increase.

Keep on truckin’…

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