Return of empty shelves
Walk around a supermarket in the United States or Europe and you will see empty shelves. This is not because people panicked for toilet paper, like they did at the start of the pandemic; it’s because supply chains are clogged at almost every step between Asian factories and grocery stores.
Rising prices and spotty availability mean it’s only a matter of time before buyers start buying wholesale again, this time to avoid a future shock with the stickers.
Supply lines are struggling as producers such as Vietnam, responsible for making everything from sneakers to coffee, are affected by the covid restrictions. Soaring virus cases and consumer demand are leading to congested ports. Shipping containers are in the wrong place. Shipping costs are on the rise. If the goods arrive at the destination ports, there are too few truck drivers to transport them to the retailers.
Beverages suffered from a shortage of packaging, especially aluminum cans. Coffee and tea are hot commodities as many Americans continue to work remotely. Why visit Starbucks when you can still be a home barista?
In-person learning has fueled a rush for school supplies, including those that go in lunch boxes. After a year quaintly characterized by homemade baking and family dinners, parents are now in a frenzy with a run for prepackaged Lunchables from Kraft Heinz Co.
Pet food is another challenge. Purina maker Nestlé has already increased its capacity. Some grocers report struggling to find enough dog treats and cat cookies to meet the demand for all of these new pandemic animals.
Stores may need to reduce product varieties, which means less product choice for consumers. With the system so fragile now, what would happen with further price increases, demand and panic buying?
Energy drinks, eggs, meat and non-alcoholic drinks are increasingly expensive, according to IRI’s Consumer Packaged Goods Inflation Tracker.
When prices rise, buyers first switch from more expensive products to less expensive products. Next is bulk buying and crowdsourcing. With food costs set to rise further, consumers can choose to stock up on products such as pet food while they can.
While slight inflation is generally good for supermarkets as it increases the overall value of sales, the danger arises when it exceeds manageable levels and consumers turn to cheaper items.
Even more pernicious is when people flock to hard discounters, like Aldi and Lidl, which have already conquered Europe and are now expanding into the United States.
So far, grocers have not experienced a bad pandemic. This may be about to change.