Labor availability issues widespread, acute in CPG
The consumer packaged goods industry experienced plenty of labor issues during the pandemic, from strikes at cereal and snacking manufacturers to absenteeism at meatpacking plants. Some food companies have tried to rehire their old employees or boosted investments in automation. As the worst of the pandemic becomes more distant, I wonder whether labor availability is a generational issue rather than a temporary one. Have American families been small enough for long enough, and are immigration rates now low enough, that labor-sourcing challenges will more closely mirror labor scarcity in parts of Europe and Asia?
Tyson investing heavily in automation
Tyson Foods’ management team seems to share my concern that labor availability issues are here to stay. During the pandemic, the company took action to address sticking points that prevented workers from coming in. Examples included providing on-site childcare services or making transportation arrangements.
Tyson is well suited to add automation to its facilities because they are typically located in remote areas where it’s difficult to hire and there are lots of routine jobs at the processing plants. The worker absenteeism during the pandemic added urgency to Tyson’s automation plans and it wants to invest more than $1.3 billion in that area in the next three years, which is expected to eliminate more than 3,000 jobs by 2024.
A Just Food article goes into detail on the company’s plans. Benefits of automation include:
- Worker safety.
- Facility productivity, including sharing best practices across facilities.
- Food safety, as less variation exists in a more controlled environment.
- Upgraded and more engaged workforce, with smaller number of higher-skilled positions.
Some examples of Tyson automation include:
- Automated bone saw that cuts large slabs of meat (dangerous when not automated).
- Automated sandwich hand wrap and burrito assembly.
- Chicken debone automation.
- Robotic tray packing.
More labeling requirements — this time on product manufacturing geography
On March 6, the Department of Agriculture proposed a new regulation for meat, poultry and eggs carrying a “Product of USA” claim on its label. To obtain the designation, animals must be born, raised, slaughtered and processed domestically.
To comply with a similar regulation in Switzerland, Toblerone, a property of snacking giant Mondelez, will revise its label from carrying the country’s Matterhorn mountain to instead showing a generic mountain range. The “Swissness” laws require that any product carrying Swiss iconography — the flag, Alps, etc. — be made in Switzerland, so the Toblerone label change reflects that a portion of the production being moved to Slovakia. The rationale of the Swiss law is to protect local industry, but I think it makes more sense for watches and high-end chocolates than a mass-produced Mondelez brand.
Conagra offers contrarian views on divestitures, plant-based meat alternatives
Based on comments in a Food Drive article, Conagra’s management has no plans to reorganize in a manner similar to what Kellogg’s has announced — plans to split its faster-growth snacking business and its stable North American cereal business. The rationale for Kellogg’s strategy appears to be to market the shares of the snacking and the North American cereal business to growth and income investors, respectively.
Conagra’s management doesn’t intend to do something similar despite it being in the comparable categories. The company cites the benefits of economies of scale related to retail negotiations in keeping those segments — snacking and frozen and plant-based meat alternatives — under one umbrella.
In the plant-based meat alternative category, Conagra draws a distinction between frozen plant-based products – which are often incorporated into brands consumers already are familiar with — and other category sub-segments, such as food service and meat counters. The frozen segment has actually grown and was up 5.8% year over year during the final week of January. It’s surprising given the struggles of the companies in the plant-based meat alternatives category the past two years. That can be seen in Beyond Meat’s share price, the delay of the Impossible Foods initial public offering and layoffs at Beyond Meat, Impossible Foods and the plant-based segment of Maple Leaf Foods.
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