AGA_Issue_2.0

I NS I DE THE BELTWAY

N ew Y e ar Br i ng s C on t i nu e d S u p p ly Cha i n Cha l l e ng e s – And O p p o r t un i t i e s

JENNIFER HATCHER CHIEF PUBL IC POL ICY OFF ICER AND SVP, GOVERNMENT RELATIONS FOOD MARKETING INSTITUTE

The pandemic altered the grocer-customer relationship. Now, we’re working to articulate what this means moving forward.

stocking-up to long-term, widespread lifestyle changes in which consumers continue to cook and eat more at home than at restaurants. A combination of supply chain challenges are likely to persist as we move further into 2022. For example, in-demand products may be sitting idly in warehouses because there aren’t enough truck drivers to distribute food throughout the country, resulting in shortages on store shelves. According to the American Trucking Associations, the nation is facing a record shortage of 80,000 drivers. Like almost every industry in the U.S. economy, the food industry is reporting worker shortages driven by a host of factors including childcare responsibilities, health concerns, and difficulty recruiting and retaining workers. According to FMI’s annual The Food Retailing Industry Speaks report, 80 percent of responding retailers said their inability to attract and retain quality employ ees is negatively impacting their business. The cost of raw materials used to produce popular products is also increasing due to labor shortages, extreme weather events, higher fuel costs, and backups at ports. Supplies of cardboard boxes are low due to increased online shopping and higher costs for freight and raw materials. If we drill down into the issue of packaging, we get a real sense of how many moving

stores to stock up on essentials. This panic buying, combined with the fact that shoppers increasingly embraced – or were forced to embrace – the idea of cooking their own meals at home rather than dining out, caused consumer demand for groceries to jump 50 percent almost overnight. Prior to the pandemic, in February 2020, 52 percent of all household food spending was at restaurants. Two months later, that number fell to 34 percent, creating an enormous spike in demand for food retailers. This shift presented a huge challenge to the supply chain as retailers struggled to keep up with the sudden surge in demand at their stores. As the pandemic progressed, the demand evolved from short-term

As America enters year three of the pandemic, it’s clear that the last couple of years have been challenging for consumers and retailers alike. Our industry continues to grapple with inflation, supply chain complications, and record-setting consumer demand for food at home. Because these pressures are not expected to subside immediately, the food retail industry is addressing these issues in both the short and long-term. Through congressional briefings and press conferences, FMI is working to explain the complexities and intricacies of these challenges to public policy officials, the media, and consumers who want to understand why they are spending more at the grocery store. Due to the essential nature of grocers and food manufacturers, our industry has embraced the responsibility and privilege of serving our communities during the pandemic while continuing to provide a sense of normalcy for customers. The food industry’s supply chain challenges have evolved over time. In the early weeks of the pandemic when many were uncertain of how long lockdowns would last, consumers turned to their neighborhood grocery

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