Coronavirus worries are leading to stockouts. The coronavirus is spreading quickly across the country and causing stockouts once again. As consumers become more fearful, the run on goods that certain parts of California and New York are experiencing now may accelerate further.
Walmart is one of the retailers experiencing a drop in inventories.
“I was in stores last week and I saw variance from one state to the other, one location to the other; just depends on how people are feeling in that moment,” said Doug McMillon, Walmart’s President and CEO, in the company’s Q3 FY2021 earnings call.
McMillon’s comments underscored that part of the reason that the CPG supply chain is struggling is that forecasts are essentially irrelevant due to changing consumer behaviors based on an invisible virus. These problems are not easily solvable although supply chains have focused on producing goods that are in high demand to help alleviate some of the strain.
(Chart: FreightWaves SONAR. Outbound Tender Volume Index, Harrisburg, PA (white) and Outbound Tender Reject Index (green).
Procter & Gamble, the number one toilet paper producer in the United States is currently working around the clock to maximize production. Procter and Gamble’s largest manufacturing plant is located in Mehoopany, Pennsylvania. This factory is responsible for producing Charmin brand toilet paper.
The Outbound Tender Volume Index and the Outbound Tender Reject Index have both spiked over the past week out of the Harrisburg market. With relative capacity already tighter out of the Harrisburg market than the nation as a whole, it could prove to be costly for Procter and Gamble in the spot market.
Smaller turkeys for smaller gatherings. In the second edition of The Stockout, I touched on tight capacity in the Fayetteville, Arkansas market due to its importance as a turkey-producing market leading up to the Thanksgiving holiday. Refrigerated capacity has tightened further over the past week but that isn’t the only issue tied to this Thanksgiving holiday.
Due to the coronavirus pandemic, fewer extended families are meeting together and are instead sharing a more intimate dinner with their closest relatives. In turn, the demand for smaller turkeys is skyrocketing.
While it was impossible to foresee the magnitude of change in consumer behavior and shrink fully-mature turkeys, supply chains have made some modifications to make the best of a difficult situation. Farmers are slaughtering turkeys earlier than normal and feeding them a stricter diet to keep the birds smaller for families who want a smaller turkey.
Consumer behavior has changed dramatically over the past year. Some grocers such as Gelson’s expect to sell 30-40% more turkeys than they did last year, apparently on the belief that smaller Thanksgivings mean more Thanksgivings, which means more—and potentially smaller—turkeys. According to the National Turkey Federation, turkey sales at retailers have expanded y/y.
Walmart has increased inventory of turkey breasts by 30% in preparation for smaller family dinners. Kroger is also preparing for an increase in demand and has ordered more turkeys along with alternatives such as ham, seafood and plant-based alternatives.
The jump in demand isn’t in only the large retailers but local farms too. Root Down Farms, an organic farm in California, sold out all 200 of their turkeys in record time this year. The farm’s owner, Dede Boies, said that she was concerned at the beginning of the year that they were going to be sitting on a lot of turkeys come fall but that was not the case.
Butterball, one of the nation’s largest turkey sellers, has adapted to the changing times by selling smaller items such as boneless turkey roasts. These smaller choices will provide flexibility for consumers that don’t want an excessive amount of leftovers from the holiday.
Kraft Heinz is preparing for an “unprecedented holiday season.” As more states and cities implement strict social distancing guidelines due to rising coronavirus cases, consumers are flocking to grocery stores to buy goods they can cook at home.
Source: Worldometers.info
Kraft Heinz has experienced an uptick in business once again during the second half of September when the “third wave” of coronavirus began. In order to keep up with demand, Kraft Heinz has added factory capacity and altered some manufacturing lines to focus on in-demand items which has resulted in increased production of 20%.