Return of empty shelves
Walk around a supermarket in the U.S. or Europe and you will see some empty shelves. This isn’t due to people panic-buying toilet paper, as they did early on in the pandemic; it’s because supply chains are clogged at almost every stage between Asian factories and grocery stock rooms.
Rising prices and patchy availability mean it’s only a matter of time before shoppers start purchasing in bulk again, this time to avoid future sticker shock.
Supply lines are struggling as producers such as Vietnam, responsible for making everything from sneakers to coffee, are hurt by covid restrictions. Surging virus cases and consumer demand are leading to congested ports. Shipping containers are in the wrong place. Sea freight costs are up. If goods do arrive at the destined ports, there are too few truck drivers to transport them to retailers.
Beverages have been hurt by a shortage of packaging including aluminum cans. Coffee and tea are hot commodities as many Americans continue to work remotely. Why visit Starbucks when you can still be a barista at home?
In-person learning has fueled a rush for school supplies, including those that go in lunchboxes. Following a year quaintly characterized by home-baking and family dinners, parents are now in a frantic state because of a run on Kraft Heinz Co.’s pre-packaged Lunchables.
Pet food is another challenge. Purina maker Nestle has already ramped up capacity. Some grocers are reporting a struggle to find enough dog treats and cat biscuits to meet the demand from all those new pandemic pets.
Stores may have to cut back on the varieties of goods, meaning fewer product choices for consumers. With the system so fragile now, what would happen with further spikes in prices, demand and panic-buying?
Energy drinks, eggs, meat and soft drinks are getting more expensive, IRI’s Consumer Packaged Goods Inflation Tracker shows.
When prices go up, shoppers first switch out of pricier products to cheaper ones. Then comes buying in bulk and crowdsourcing. With food costs expected to rise further, consumers may choose to load up on products such as pet food while they can.
While a little inflation is generally good for supermarkets as it elevates the overall value of sales, the danger comes when it exceeds manageable levels and consumers trade down to cheaper items.
Even more pernicious is when people flock to the hard discounters, such as Aldi and Lidl, which have already conquered Europe and are now expanding across the U. S.
Up until now, grocers haven’t had a bad pandemic. That may be about to change.