Grocery Stores Are Beginning to Run Low Again
Grocers are having trouble keeping shelves stocked again. Remember the empty shelves and quotas from April and May? Now, as coronavirus cases rise again, and some states pause or reverse reopening, items like flour, soup, and pasta are selling out faster than they can be produced. As of July 5th, 10% of packaged food was out of stock, according to the research firm IRI (before the pandemic, it hovered between 5 and 7%).
To review, when shelter in place orders took hold and the economy tanked in March, demand shifted dramatically. Almost overnight, Americans went from spending about 50% of their budget on restaurants, to nearly 100% on groceries. As demand vanished from restaurants (and hotels and schools), pressure ramped up on grocery stores.
This in turn put pressure on food processing plants. Those that were outfitted for restaurants saw demand dry up, while plants that prepare food for individual consumption experienced a backlog. Going one step back in the food supply chain, this forced some farmers to throw away excess produce and cull their herds, as they did not have relationships with processors who could take new orders.
The supply chain morass came after a years-long process on the part of grocers to thin out their inventory and become more efficient (because why not?). Before the pandemic hit, grocery chains had gone from keeping months of inventory to a few weeks worth. This strategy, known as ‘just in time’ ordering, meant lower inventory costs, but also less supply on hand. During the first round of state closures, grocery stores were able to dip into the inventory that they had. Now, retailers are trying to restock as fast as they can.
Meat plants had a rough go of it when the coronavirus first spread. 239 plants reported 16,233 cases of Covid, according to the Centers for Disease Control. Overall, 9.1% of plant workers contracted the coronavirus, and many had no choice but to close. Eventually, the president issued an executive order to keep plants open. Once meat production did come back online, it did so at reduced capacity and with new safety protocols.
Now, baking and shelf stable products are having a moment. According to the Nielsen Company, flour sales grew by 25% in June (after jumping by a staggering 233% yearly in March). General Mills reports that sales rose 21% yearly in the second quarter of 2020, and that cereal sales alone gained by 26%. Items like Hamburger Helper and Progresso soups are seeing sales rise, as rising coronavirus cases force consumers back into their homes.
