High demand, Omicron-related shortages create new grocery chain

19
4
High demand, Omicron-related shortages create new grocery chain

Jan 14, Reuters -- High demand for groceries combined with soaring freight costs and Omicron-related labor shortages are creating a new round of backlogs at processed food and fresh produce companies, leading to empty supermarket shelves at major retailers across the United States.

Growers of perishable produce across the West Coast are paying nearly triple pre-pandemic trucking rates to ship things like lettuce and berries before they spoil. Shay Myers, CEO of Owyhee Produce, which grows onions, watermelons and asparagus along the border of Idaho and Oregon, said he has been holding off shipping onions to retail distributors until freight costs go down.

Myers said transportation disruptions in the last three weeks have resulted in a doubled of freight costs for fruit and vegetable producers, due to the lack of truck drivers and recent highway-blocking storms. He said that we usually ship from East Coast to West Coast and we used to do it for about $7,000. It is located between $18,000 and $22,000. Birds Eye frozen vegetables maker Conagra Brands' CAG.N CEO Sean Connolly told investors last week that supplies from its U.S. plants could be constrained for at least the next month due to Omicron-related absences.

Over the next four to six weeks, Albertsons ACI.N CEO Vivek Sankaran said he expects the supermarket chain to confront more supply chain challenges as Omicron has put a dent in its efforts to address supply chain gaps.

Shoppers on social media complained about empty pasta and meat aisles at Walmart WMT.N stores, a Meijer store in Indianapolis was swept bare of chicken, a Publix in Palm Beach, Florida was out of bath tissue and home hygiene products while Costco COST.O reinstated purchase limits on toilet paper at some stores in Washington state.

Katie Denis, vice president of communications and research at the Consumer Brands Association, blamed the shortages on a scarcity of labor, and said the situation is not expected to abate for at least a few more weeks.

The consumer-packaged goods industry is missing around 120,000 workers, out of which only 1,500 jobs were added last month, she said, while the National Grocer s Association said that many of its grocery store members have less than 50% of their workforce capacity.

U.S. retailers are facing 12% out of stock on food, beverages, household cleaning and personal hygiene products, compared to 7 -- 10% in regular times.

The problem is more acute in food products that are out of stock levels are running at 15%, according to the Consumer Brands Association.

SpartanNash, a U.S. grocery distributor, said last week it has become harder to get supplies from food manufacturers, especially processed items like cereal and soup.

Consumers have continued to stock up on groceries as they hunker down at home to curb the spread of the Omicron-variant. Demand has been as high as it was in March 2020, as it was at the beginning of the epidemic, according to Denis. Similar issues are seen in other parts of the world.

More than 20% of employees at its distribution centers in Australia are off work because of COVID 19, according to Woolworths Group. At least 10% of staff have been out of action because of the virus.

Two packs per customer was reinstated on Thursday by the company on Thursday, in order to deal with the staff shortage in toilet paper and painkillers nationwide.

Food deliveries to grocery stores and distribution hubs were hampered by the recent snow and ice storms in the U.S. that snared traffic for hours along the East Coast. Those delays rippled across the country, delaying shipment of fruit and vegetables with a limited shelf life.

Producers like Myers are choosing to wait for backlogs to settle, while growers with perishable produce are forced to pay inflated shipping rates to attract limited truck supplies.

He said that the canned goods, the sodas, and the chips sat because they weren't willing to pay double, triple the freight, and their stuff doesn't go bad in four days.