Heinz nearly ran out of ketchup packets this year, practically triggering a nationwide ketchup shortage. A surge in demand caused by the delivery and take-out boom is partly the reason. But the root cause of the current food chain crisis and rising food prices runs deeper than that.
Supply chain disruptions and shortages like these are hitting every part of the food service industry hard. And a respite is not yet on the horizon.
Here we investigate the factors behind the disruptions. Learn how this affects your business, from restaurant suppliers struggling to keep up, to rising food prices led by labor shortages and increased consumer demand for quick, cheap food.
Labor Issues Exacerbate Food Chain Crisis
Three major issues are spurring on the current food chain crisis and rising food prices:
- A shortage of labor
- A shortage of food
- Limited supply chain capacity
All three have been pushed to the max due to the COVID-19 pandemic and this year’s extreme heat waves.
The labor crisis is not slowing down and the situation across the entire supply chain is dire. There’s a deficit everywhere, from fruit pickers to truckers, from slaughterhouse workers to cooks and waiters. Bloomberg reported that American meat factories are incentivizing new hires with Apple gadgets after 60 days of employment.
One study found that line cooks suffered the highest mortality rate of any profession during the pandemic. News like this and continued poor working conditions are partly to blame for the difficulty in filling these stations lately.
Because there are more jobs available, people who do want to work have more options. Understandably they choose the less physically demanding, more controlled environments this makes filling third shift employees and delivery drivers incredibly difficult.
On top of all this, the Delta variant is still impacting primary production, as factory staff is continuously sent home due to illness and group quarantines.
Summer Heat Wave Inflames Food Shortage
The summer heat waves wreaked havoc on crops and kept workers away from fields. As a result, raspberries, strawberries, and much other produce quickly rotted rather than ripening. As grazing crops were scorched and shriveled, food for livestock has also come at a risk, influencing the meat market.
Everyone is finding ways to adapt. Wingstop, for example, adapted to the chicken wing shortage with a creative solution, launching thighs instead of wings.
This is a global problem. The UK, France, Brazil, China, India, and many other countries have been suffering from the same issues. For example, English dairy farmers discarded fresh milk due to a lack of transport trucks, and 20% of Italian tomatoes were lost this year to the heat.
Restock Surge & Labor Shortage Result in Slow Down
Ports, railroads, transporters, and distributors like Cheetah are the links that hold the food supply chain together, from picking to plate. The disruptions restaurants are experiencing result from extreme pressures on the hubs, warehouses, and distributors.
After a year of relatively low demand, consumers can’t wait to get out of the house and into restaurants. But supply chain capacities are set up for a regular flux of goods, not the current surge they are experiencing.
Backlogs have built up at all critical seaports as suppliers across the US rush to replenish deficits from the past two years. As a result, ships are anchored at sea, waiting for their turn to dock, and this congestion is likely to continue well into 2022.
Because of all this ‘bobbing around’, there is even a lack of containers. Many had been sold off at the height of the pandemic, and all the rest are underway or waiting to be offloaded.
The labor shortage is only making things worse. Although there may be products to ship, there are not enough hands to sort at warehouses and drive trucks. this results in severe bottleneck at every stage in the distribution process.
Energy prices are very high right now too. So there is an uptick in the cost of refrigerating and transporting perishable and frozen foods. This all trickles down the food chain.
Restaurants Deal with Rising Food Prices and Delays
Increasing food costs, shortages, and delays affect every part of the food chain, from suppliers like Cheetah to restaurants like yours. But, in the end, it boils down to consumers and the restaurants that interact with them.
Commodities, fuel prices, freight costs, and labor costs are all rising. Combining that with lacking supply causes food prices to skyrocket. Compared to August 2020, this year’s food prices increased by 33%, especially in oils and sugars.
Rising prices and supply chain issues have been around long before COVID-19 and will persist long after it’s defeated. Acknowledging these challenges and preparing to meet them is the best thing restaurant operators can do right now.
However, it is essential to understand that while the pandemic might have boosted these trends, they were not started by it. There’s no going back once COVID-19 is defeated. So restaurant operators who plan to be around in the next few years need to start adjusting now.
While cutting costs and increasing efficiency are part of the solution, increasing menu prices are too. Increasing menu prices will allow restaurants to hire and retain staff by offering higher wages and more comprehensive benefits. Read more on increasing profit margins, reducing prep costs, and retaining workers during a labor crisis.
How Cheetah Is Handling the Food Chain Crisis
As a relevant food distributor to restaurants across San Francisco and the Bay Area, Cheetah is not immune to the situation. We are doing everything in our power to ensure our customers continue to enjoy the same quality service they are used to.
Here are some of the actions we have been taking.
- Until the port-based congestion eases up, we are looking beyond existing 2nd (back-up) supplier options, often moving to a 3rd, 4th and 5th supplier on items manufactured overseas. Unfortunately, current projections tell us that will be mid-2022 or beyond.
- We continue to focus our efforts on efficient ways to communicate product shortages and estimated recovery dates through the Cheetah app. If an item goes out of stock after an order has been made, we will notify you well in advance and work together to find solutions. We certainly welcome feedback from our customers on what we are doing well and what we could improve from a communication perspective.
- We continue to introduce innovative new products to compensate for the items that are suffering from the current worldwide shortages.
- As a way to overcome understaffing and ensure the continuity of service to our customers, Cheetah keeps all our staff fully employed under ethical contracts and working conditions. We want our employees to be happy at work and proud of serving the best restaurants around.
4 Ways Restaurants Can Adapt to the Food Chain Crisis
The labor shortage is a wake-up call for the foodservice industry. It has forced everyone to deal with food shortages, from your local Mom n’ Pop restaurant to Pizza Hut. As a result, restaurants have no choice but to adjust. Here’s what you can do:
- Menu flexibility – Prepare alternative menus for similar but different sets of base ingredients. So, in a shortage of a particular item, flip it and showcase the situation as a novelty. ‘Meatless Monday’ is a trend that can not only save you a few bucks but address shortages and save the planet. Cheetah carries countless plant-based products; check them out here.
- Alternative Distributors – Even if you’re used to working with a major broadliner, don’t put all your eggs in one basket. Seek out trusted and honest distributors that you can rely on at times like these.
- Think ‘Employee Retention’ – Structure employment packages towards incentivizing commitment and long-term retention. This involves health and social benefits, revisiting working conditions on a regular basis, and contributing to employees’ personal development with training programs based on both their preferences and your needs.
- Communicate with customers – Price increases are inevitable. Explaining to customers what’s happening and why will lay the groundwork for what’s coming and help you secure their loyalty.
Need Support? Don’t Be Afraid to Reach Out!
As always, we encourage you to reach out to us at Cheetah for support. We have deep insights into what trends and shortages are developing. We also have a vast network of partners that can help, from menu planning to financial planning.