NEW YORK — The redeployment of food production and distribution resources from foodservice to retail is actively underway and will be key to meeting heightened supermarket demand witnessed since mid-March, said industry experts participating in a conference call hosted by the North America Food Staples and Retailing group at Barclays, New York.
The food supply is adequate to meet consumer needs, said Douglas E. Baker, vice president of industry relations at FMI – The Food Industry Association, and Joel Rampoldt – managing director at AlixPartners, during the March 19 call. The call was summarized in a report issued March 23 by Barclays.
Making sense of the greatly increased incidents of out-of-stocks at supermarkets, the analysts attributed the problems to a “temporary misallocation of labor.” Food manufacturers have stepped up production by running 24/7 and limiting production runs to key stock units that allow them to enhance efficiencies and throughput.
Adding to the analysts’ confidence that the out-of-stocks do not mean Americans are out of food, they noted that about 21% of food purchased is wasted, mostly at home. Additionally, they said there is typically about 26 days of food supply in the system at any given time. Transporting food to markets has been a principal challenge.
“The current focus is to get supply out as soon as possible, utilizing as many trucks as necessary,” the analysts said. “Regular shipping schedules are being forgone in order to mobilize as many vehicles to meet demand, keeping in mind that certain products (i.e. fresh) have different capital and labor requirements.”
Truck availability has emerged as a significant bottleneck in keeping supermarkets filled, a challenge exacerbated by the large size of many products in high demand at present, the analysts said.
FMI and the International Foodservice Distributors Association have been playing a role in facilitating the sharing of resources, the analysts said.
They estimated that the largest distributors account for 30% of the foodservice industry, operating 25,300 trucks. Overall, Barclays estimates 84,300 trucks are used for distribution of products to foodservice customers.
“Clearly there is significant excess capacity to redeploy these multi-temperature assets and drivers,” the analysts said.
With waivers from the Food and Drug Administration, products manufactured for foodservice customers may be diverted to the retail sector, the analysts said.
“If a retailer puts a product on the retail shelf, this product needs to have certain information that is required by the FDA for the consumer to be able to see and make a decision,” they said. “For products going into foodservice, the same labeling is not required.”
Baker said FMI is working with the FDA to suspend some of the current retail labeling requirements to get product on the shelf as quickly as possible.
He said such a change would also include allowing the retailer to add the UPC codes at the store, changes that typically take weeks to complete. FMI is working to reduce these changes to hours.
Food retail sales are jumping 20% to 100% amid the demand surge with fresh categories, including meat, lagging. Barclays said this performance is not unlike the holiday season.
Retailers continue to hire employees, though with many engaged on a temporary basis.
The analysts warned that if other countries are indicative, sales will slow significantly when consumers have completed building their stockpiles.
“Sales in China and Italy have started to decline,” they said.
The initial stimulus package added $500 million to the SNAP program, but that represents only a 1% addition, the analysts said.
“Individuals on SNAP are somewhat constrained with respect to e-commerce utilization due to current regulations that require SNAP participants to physically input a SNAP pin on-site — therefore requiring person-to-person contact and/or the participant (customer) to physically go to the store,” the analysts said.
Pilots are being conducted for SNAP and e-commerce, but the program is not yet ready for deployment by the US Department of Agriculture, the analysts said.