Fearful of surge, U.S. consumers stock up again
Enough toilet paper to go around projected this time
Consumers are panicbuying key items again as the coronavirus surges across the country — paper towels, disinfecting wipes, baking mixes and wine — but this time around, grocery chains and food manufacturers say they will be able to meet America’s urge to hoard and keep supply chains moving, even during the holiday season.
While Kroger, Giant, Target and other grocery chains have reinstated limits on high-demand items such as paper goods and disinfecting wipes, causing anxiety among shoppers, retailers and supply-chain experts say they do not expect a return to the panicked hoarding and empty shelves of the spring.
“I’m not going to be a Pollyanna and say things are perfect,” says Geoff Freeman, the chief executive of the trade group Consumer Brands Association. “But we are fundamentally in a different place than we were in March and April. Even retailers rationing is a demonstration of lessons learned. The psychology of empty shelves causes a vicious cycle.”
Grocery chains say they were too slow to place limits on high-demand products early on and are trying to prevent hoarding so there isn’t another round of shortages. Retailers and manufacturers say they’re less panicked about widespread shortages now that they’ve spent months simplifying their supply chains, adding shelves and workers to fulfillment centers, and taking other measures to counter panic-buying.
However, they don’t rule out the prospect of price increases or local or temporary shortages due to transport bottlenecks.
“We saw a major demand spike in March and April, and we’re certainly seeing another wave now as case numbers crest again across the country,” says Nick Green, chief executive of Thrive Market, an online grocer that specializes in organic food and natural products. “This time around, it’s a little bit of everything: cleaning products, toilet paper, cold and flu medicine, shelf-stable food. There’s less fear than there was at the beginning of the pandemic — people aren’t as worried that stores are going to run out of toilet paper or that grocery stores will be completely empty, but they’re definitely shifting their consumption habits again.”
Green says Thrive Market has doubled the number of
drivers in its two fulfillment centers in Nevada and Indiana and has added vertical shelving to store more inventory and to increase its ability to anticipate and handle surges in demand.
The company is also buying more products directly from brands, instead of relying on third-party distributors, he said.
Similar calculations are taking place across the country with stores increasing inventory, expanding the number of distribution centers and adopting new technology to become more efficient at anticipating consumer behavior and managing restocking. Retailers also say that consumers’ shift to online purchasing has taken pressure off bricks-and-mortar stores.
INVENTORY CHALLENGES
In Charlotte, N.C., Raydiance Swanston began stocking up on disinfecting wipes, toilet paper and hand sanitizer last month, after seeing a rise in local covid-19 cases and hearing talk of another shutdown. She’s also been buying more shelf-stable foods, such as crackers, nuts and canned tuna, but says she isn’t as panicked about shortages as she was in the spring.
“It was very scary at the beginning, but now I’m noticing that the bread aisle isn’t as empty and things like toilet paper are back in stock,” says Swanston, 28, who works as an account manager for an IT firm. “But stores are enforcing limits again, and you can start to see that some items, like Clorox wipes, are getting depleted again.”
Melanie Nuce, senior vice president for corporate development for GS1 US, a company that investigates new technologies, says the whole food supply chain is trying to be more predictive, overcoming inventory inaccuracies and gaps in communication with artificial intelligence, smartphoneenabled bar codes and computer-connected in-store cameras to monitor stock levels.
“Once we got over the initial shock, what happened in March and April kickstarted some technology investment that the industry had been postponing,” she says. “The technology is there to understand what the consumer’s intent is and how to fulfill that.”
Target is stocking stores with more inventory than usual this holiday season and limiting purchases of disinfectant wipes, cleaning sprays and disposable gloves. Other items, such as food, over-the-counter medicines and baby products, are being “fast-tracked through the supply chain and prioritized for restocking,” spokeswoman Jessica Carlson said.
Walmart’s executives said shoppers have been stocking up on paper goods, cleaning supplies and shelf-stable groceries.
“It’s disappointing to … see as many out-of-stocks as we have in consumables right now, although it’s a whole lot better than it was earlier in the year,” CEO Doug McMillon said in a recent earnings call. “We’ll manage through these curves. They’ll be localized. We will respond. It feels to me like we’ll work through this period of time better than we did in the first wave.”
While in March and April there was hoarding of inexpensive pantry items such as dried beans, flour, yeast, pasta and rice, Janet Garetto, co-leader of food and beverage for global law practice Nixon Peabody, says other food sectors could be more in demand if there are additional shelter-at-home advisories or stricter restaurant closures. Her prediction is that American consumers will turn to more upscale indulgences and ready-toeat foods and that retailers might see shortages of those.
“At the beginning of the pandemic, there was tremendous uncertainty: ‘Was my job secure?’ ‘Could I get access to basic necessities?’ For those whose jobs haven’t been directly impacted, there was this notion that we’re not spending money on vacations, spas or movies, so what people are doing is staying home doing home repairs and spending money on food: ‘My reward for a hard day of work is a treat that makes my day feel a little bit better.’ And some of the excitement of home prep has lagged, so we’ll see an increase in prepared meals.”
FOOD SUPPLY CHAIN
And while grocery chains are confident in their ability to meet demand over the holiday season, their success depends in part on smooth shipping and transportation.
James Kwon, chief executive of technology and logistics wholesale platform ePallet, says that freight costs have risen significantly from last year and that production costs are also expected to increase because of labor shortages due to coronavirus outbreaks.
But Kwon says these disruptions are more likely to result in higher prices paid by retailers and then passed along to consumers, not supply chain gaps.
Agricultural sectors report strong supply and that much of the food that had been scheduled for food service before the pandemic has been repackaged or resized for retail consumers. Despite significant disruption due to covid outbreaks in meat-processing facilities, total red meat and poultry production has been increasing and, according to the U.S. Department of Agriculture, is expected to continue to increase for the remainder of 2020 and for 2021.
“While we saw out-ofstocks in many cases in retail meat cases during the spring, product availability is now essentially back to normal,” says Bridget Wasser, senior executive director of product quality and education at National Cattlemen’s Beef Association, an industry organization.
And dairy, which saw huge disruptions in March and April, is strong going into the holiday season, according to IRI, a market research firm.
“In the first two weeks of the pandemic, retail dairy sales were up 54% — a grocery may carry a four-day supply of milk and suddenly you had people loading up on a two-week supply — but we’ve plateaued,” says Paul Ziemnisky, the executive vice president of global innovation for the trade organization Dairy Management. He says to expect plenty of milk, cheese and sour cream (although he says butter is always a little tight around the holidays).
And from row crops to specialty fruits and vegetables, the supply chain is solid, according to USDA cold storage data released Oct. 22.
“Much has changed since March in terms of preparation and adaptation throughout the food supply chain,” says American Farm Bureau Federation President Zippy Duvall. “While the system is better prepared for a spike in purchasing, we’re hoping the public now realizes our food supply is safe and strong, so we don’t see widespread panic purchasing.”
SALES OF ESSENTIALS
Boxed.com, a website that sells household products in bulk, says sales of essentials have doubled mid-month, as shoppers stock up on cleaning and disinfecting products (up 134% from a week ago), baking mixes (132%), wine (126%) and toilet paper (123%).
“People are hunkering down again,” said Chieh Huang, the company’s cofounder and chief executive. “It’s not the ‘Oh, my gosh, the world is ending’ panic we saw in early April, but we’re definitely moving in that direction.”
Darleen Gillyard, who lives in Passaic, N.J., is preparing to stock up on kitty litter and refrigerated food for her two cats, TeeCee and Choo Choo.
Back in March, when the first round of shutdowns took hold, she struggled to find basics such as paper towels, tissues and masks. Since then, she has begun stashing packages of toilet paper in her attic and keeps her freezer stocked with extra meals.
“Right now, everything is OK — most of the stores are still stocked, but I’m scared that we’ll have to scramble for basic items again,” the 63-year-old said. “The last time, I went crazy looking for things because the shelves were completely empty.”