The impact of supply chain woes on grocer goods

Supply chain issues have long been a feature of the Covid-19 pandemic.

However, the latest outcome of the Omicron variant has further strained the workforce involved in food production. Investors are anticipating a longer period of high costs in food, transportation, and labour.

Bloomberg recently reported on how supermarkets in Australia and the US have been running out of groceries, not unlike the experience from 2020, when lockdowns triggered panic hoarding amongst shoppers.

The difference now is that grocers and supermarkets are struggling to get produce into stores, as key staff remain isolated after contracting the Omicron strain, or are close contacts of confirmed cases.

Aside from restocking difficulties, grocers are also having problems getting hold of certain meats, breads, vegetables, fruits, and herbs.

Supplies from food manufacturers on processed items like cereal and soup are declining as well, with many food inspectors calling in sick.

Technology poses some solutions. Albertsons in the US, for instance, is set to deploy an AI powered platform from Afresh Technologies, which aims to optimise fresh food forecasting, inventory, ordering, merchandising, and operations.

Although technologies can assist in managing variables, there are few long-term solutions to the existing vulnerabilities in global food chain systems.

The UK, in particular, is facing food supply chain issues due to the effects of Covid-19, labour shortages, and Brexit. The weekly shop has posed an endurance test for many.

One survey suggests that 17% of buyers cannot find essential food items needed on a weekly basis, while 24% face hurdles in finding “other food items”.

Key grocer products that are affected include:

Meat

The meat industry has faced its fair share of issues in the past year. Meat processing is a labour intensive endeavour, requiring farmers, butchers, and truck drivers onboard.

It’s difficult to automate because skilled butchers need to work on the production line, and it’s physically challenging, which further limits the number of suitable candidates.

The UK also faced a crisis with regards to carbon dioxide, which is required for the humane slaughter of animals like pigs and chickens; the government needed to broker an industry deal to enable CF Fertiliser plant to continue operations. The result is low availability and much higher costs.

Bread

Bread, along with pasta, crackers, cereal, and other grain-based items, are produced with wheat. Currently, however, geopolitical instability and rising tensions are affecting the wheat supply chain.

Rising tensions between Russia (the largest wheat exporter in the world) and Ukraine (Europe’s breadbasket for barley, corn, and rapeseed supplies) have left commodities in short supply. Moreover, these threats have driven up prices on both sides of the Atlantic. 

FXCM notes that wheat futures are currently at 6.33%, but the supply and demand of any agricultural commodity is often subject to risk due to ever-changing factors.

Droughts, wildfires, and excessive wet weather have affected wheat, corn, and soybean production, as these conditions have led to lower yield.

Fresh produce

The pandemic and Brexit has revealed how vulnerable the UK’s fresh food supply chain is.

The country imports half of its food and 84% of fresh fruit from overseas, particularly European Union countries like Spain for vegetables and Italy for tinned tomatoes and pasta.

Locally, the UK is dependent on seasonal migrant labour in the agrifood sector as well, with 70,000 - 80,000 agricultural workers entering the UK every year — mainly from Romania and Bulgaria — to harvest crops.

On this end, the strain on the UK’s food supply chain could have been avoided, by protecting the seasonal workforce with increased long-term visas.

Overall, major food supply chain disruptions in the UK and all over the world are unlikely to go away any time soon.

However, these structural inefficiencies and problems can be mitigated by investing in technologies that can improve inventory tracking, livestock systems, and condition monitoring to avoid waste.