Tag Archives: supermarkets

Global supply chains buckle as virus variant and disasters strike

By Jonathan Saul, Muyu Xu and Yilei Sun

LONDON/BEIJING (Reuters) – A new worldwide wave of COVID-19. Natural disasters in China and Germany. A cyber attack targeting key South African ports.

Events have conspired to drive global supply chains towards breaking point, threatening the fragile flow of raw materials, parts and consumer goods, according to companies, economists and shipping specialists.

The Delta variant of the coronavirus has devastated parts of Asia and prompted many nations to cut off land access for sailors. That’s left captains unable to rotate weary crews and about 100,000 seafarers stranded at sea beyond their stints in a flashback to 2020 and the height of lockdowns.

“We’re no longer on the cusp of a second crew change crisis, we’re in one,” Guy Platten, secretary general of the International Chamber of Shipping, told Reuters.

“This is a perilous moment for global supply chains.”

Given ships transport around 90% of the world’s trade, the crew crisis is disrupting the supply of everything from oil and iron ore to food and electronics.

German container line Hapag Lloyd described the situation as “extremely challenging”.

“Vessel capacity is very tight, empty containers are scarce and the operational situation at certain ports and terminals is not really improving,” it said. “We expect this to last probably into the fourth quarter – but it is very difficult to predict.”

Meanwhile, deadly floods in economic giants China and Germany have further ruptured global supply lines that had yet to recover from the first wave of the pandemic, compromising trillions of dollars of economic activity that rely on them.

The Chinese flooding is curtailing the transport of coal from mining regions such as Inner Mongolia and Shanxi, the state planner says, just as power plants need fuel to meet peak summer demand.

In Germany, road transportation of goods has slowed significantly. In the week of July 11, as the disaster unfolded, the volume of late shipments rose by 15% from the week before, according to data from supply-chain tracking platform FourKites.

Nick Klein, VP for sales and marketing in the Midwest with Taiwan freight and logistics company OEC Group, said companies were scrambling to free goods stacked up in Asia and in U.S. ports due to a confluence of crises.

“It’s not going to clear up until March,” Klein said.

MORE PAIN FOR AUTOMAKERS

Manufacturing industries are reeling.

Automakers, for example, are again being forced to stop production because of disruptions caused by COVID-19 outbreaks. Toyota Motor Corp said this week it had to halt operations at plants in Thailand and Japan because they couldn’t get parts.

Stellantis temporarily suspended production at a factory in the U.K. because a large number of workers had to isolate to halt the spread of the virus.

The industry has already been hit hard by a global shortage of semiconductors this year, mainly from Asian suppliers. Earlier this year, the auto industry consensus was that the chip supply crunch would ease in the second half of 2021 – but now some senior executives say it will continue into 2022.

An executive at a South Korea auto parts maker, which supplies Ford, Chrysler and Rivian, said raw materials costs for steel which was used in all their products had surged partly due to higher freight costs.

“When factoring in rising steel and shipping prices, it is costing about 10% more for us to make our products,” the executive told Reuters, declining to be named due to the sensitivity of the matter.

“Although we are trying to keep our costs low, it has been very challenging. It’s just not rising raw materials costs, but also container shipping prices have skyrocketed.”

Europe’s biggest home appliances maker, Electrolux, warned this week of worsening component supply problems, which have hampered production. Domino’s Pizza said the supply-chain disruptions were affecting the delivery of equipment needed to build stores.

U.S. AND CHINA STRUGGLE

Buckling supply chains are hitting the United States and China, the world’s economic motors that together account for more 40% of global economic output. This could lead to a slowdown in the global economy, along with rising prices for all manner of goods and raw materials.

U.S. data out Friday dovetailed with a growing view that growth will slow in the last half of the year after a booming second quarter fueled by early success in vaccination efforts.

“Short-term capacity issues remain a concern, constraining output in many manufacturing and service sector companies while simultaneously pushing prices higher as demand exceeds supply,” said Chris Williamson, chief business economist at IHS Markit.

The firm’s “flash” reading of U.S. activity slid to a four-month low this month as businesses battle shortages of raw materials and labor, which are fanning inflation.

It’s an unwelcome conundrum for the U.S. Federal Reserve, which meets next week just six weeks after dropping its reference to the coronavirus as a weight on the economy.

The Delta variant, already forcing other central banks to consider retooling their policies, is fanning a new rise in U.S. cases, and inflation is running well above expectations.

‘WE NEED TO SUPPLY STORES’

Ports across the globe are suffering the kinds of logjams not seen in decades, according to industry players.

The China Port and Harbor Association said on Wednesday that freight capacity continued to be tight.

“Southeast Asia, India and other regions’ manufacturing industry are impacted by a rebound of the epidemic, prompting some orders to flow to China,” it added.

Union Pacific, one of two major railroad operators that carry freight from U.S. West Coast ports inland, imposed a seven-day suspension of cargo shipments last weekend, including consumer goods, to a Chicago hub where trucks pick up the goods.

The effort, which aims to ease “significant congestion” in Chicago, will put pressure on ports in Los Angeles, Long Beach, Oakland and Tacoma, specialists said.

A cyber attack hit South African container ports in Cape Town and Durban this week, adding further disruptions at the terminals.

If all that were not enough, in Britain the official health app has told hundreds of thousands of workers to isolate following contact with someone with COVID-19 – leading to supermarkets warning of a short supply and some petrol stations closing.

Richard Walker, managing director of supermarket group Iceland Foods, turned to Twitter to urge people not to panic buy.

“We need to be able to supply stores, stock shelves and deliver food,” he wrote.

(Additional reporting by Anna Ringstrom in Stockholm, Lisa Baertlein in Los Angeles, Hilary Russ in New York, Joe White in Detroit, Lucia Mutikani and Howard Schneider in Washington and Heekyong Yang in Seoul; Editing by Simon Webb, Dan Burns and Pravin Char)

Britain tells shoppers food is plentiful but supermarkets fret about next week

By James Davey

LONDON (Reuters) – Britain said there was plenty of food in the shops on Tuesday but industry groups repeated warnings of shortages of some fresh produce from next week unless freight routes to mainland Europe are swiftly restored.

Interior minister Priti Patel said Britons should not be concerned despite Tesco and Sainsbury’s, Britain’s two biggest supermarket groups, raising the alarm on Monday that gaps could start to appear on fruit and vegetable shelves within days.

Freight from France is being disrupted as part of a wider suspension of travel links with Britain to try to curb a new faster-spreading strain of COVID-19.

“I don’t think anybody should be worried – there is plenty of food in our shops,” Patel told LBC radio.

British supermarkets are facing record Christmas demand due to COVID-19 restrictions on the hospitality industry and on travel and there are fears of panic buying.

“UK shoppers need have no concerns about food supplies over Christmas, but impacts on local on-shelf availability of certain fresh foods look likely from next week unless we can swiftly restore this link,” said Ian Wright, CEO of the Food and Drink Federation, which represents over 300 food and drink businesses.

The British Retail Consortium (BRC), which represents more than 170 major retailers including the big supermarkets, is also concerned about supplies shortly after Christmas, highlighting possible shortages of salad, vegetables and fruit, including raspberries and strawberries.

“The borders really need to be running pretty much freely from tomorrow to assure us that there won’t be any disruption,” Andrew Opie, the BRC’s director of food and sustainability, told BBC radio.

He noted that 90% of the lettuces consumed by Britons and about 70% of soft fruit comes through the Channel ports at this time of year.

TESTING

The BBC cited France’s Europe Minister Clément Beaune as saying that Britain and France would announce a deal to restart freight by Wednesday. One option is to roll out mass testing for truck drivers.

“Whatever is agreed, we need to be careful it doesn’t add too much friction to the supply chain which in itself causes disruption by causing delays to the drivers whilst they’re being tested,” said Opie.

Though large queues again snaked around supermarkets across Britain on Tuesday and some shelves were stripped bare, food retailers said they had not seen any major changes in customer buying behavior.

Opie said supermarkets had expected and planned for Christmas queues.

“You need to remember these are the busiest days for shopping…and remember all the stores are still operating all of their COVID protocols, which means you can’t get as many people into a supermarket as you would do normally,” Opie said.

“We’re not seeing the sort of excessive buying in any kind of volumes that we saw around that period in sort of mid-March,” he added.

(Reporting by James Davey; Editing by Guy Faulconbridge, Alexander Smith and Louise Heavens)

Here’s why you can’t find frozen fries, while U.S. farmers are sitting on tons of potatoes

By Lisa Baertlein

(Reuters) – Shopper Lexie Mayewski is having a hard time finding frozen french fries in Washington, D.C.-area supermarkets in the wake of coronavirus-fueled stockpiling.

On the other side of the country, Washington state farmer Mike Pink is weighing whether to plow under 30,000 tons of potatoes worth millions of dollars that would have been turned into french fries for fast-food chains like McDonald’s Corp, Wendy’s Co and Chick-fil-A.

Their incongruent experiences underscore how America’s highly specialized and inflexible retail and foodservice supply chains are contributing to food shortages and waste in the wake of demand disruptions from the COVID-19 pandemic that has killed almost 50,000 people in the United States.

Frozen french fry sales at grocery stores spiked 78.6% for the four-week period ended April 4, according to Nielsen data, resulting in shortages at many U.S. supermarkets.

Mayewski, 25, a construction manager, has not seen frozen fries at the Giant Food or Safeway supermarkets near her Maryland home.

“There’s not a single french fry to be found,” said Mayewski, whose supply of frozen shoestring and waffle fries was running low.

Frozen fries are an ideal pandemic staple – offering comfort, convenience and long-shelf life for U.S. families accustomed to fast-food meals and school cafeteria lunches.

The main hurdle is the extra-large size of foodservice packages that are meant for kitchens that turn out dozens if not hundreds of meals each day.

“Think Costco, but bigger,” said International Foodservice Distributors Association (IFDA) CEO Mark Allen, referring to the oversized products sold at warehouse retailer Costco Wholesale Corp.

Nondescript foodservice packaging also does not have the ingredient and nutrition labels required by the U.S. Food and Drug Administration (FDA) or the bar codes needed in grocery checkout lanes.

While the FDA has said it would temporarily relax labeling rules and protect consumers with food allergies, foodservice suppliers still face significant hurdles switching to retail-friendly formats. New equipment for packing and labeling product is expensive, and plastic containers are in short supply.

FREEZERS FULL OF FRIES

Kraft Heinz Co’s Ore-Ida, the main producer of frozen fries for supermarkets, is rushing to bolster supplies.

“Our Ore-Ida factory is running at full capacity to keep up with demand,” Kraft spokesman Michael Mullen said.

At the same time, major fast-food french fry suppliers McCain Foods, J.R. Simplot Co and Lamb Weston Holdings Inc are canceling potato orders.

Fast-food suppliers’ freezers are full of frozen fries, hash browns and potato skins and their storage sheds are packed with potatoes, farmers and experts told Reuters.

Their demand is down because four in 10 U.S. restaurants are closed, as are schools, hotels and workplaces. Fast-food chains are doing drive-through only, and with no set date for lifting stay-at-home orders, the outlook for the foodservice industry is dim.

Lamb Weston, McCain and Simplot – which supply the lion’s share of McDonald’s french fries – did not respond to requests for comment. Lamb Weston also does retail sales.

Pink, who farms near Pasco, Washington, said fast-food french fry suppliers canceled orders for 1,000 acres of potatoes. He has already invested $2.5 million on those crops. Each acre produces roughly 30 tons of potatoes and getting them ready for sale would cost Pink another $1.5 million. He may have to plow the potatoes under – adding to food destruction in the U.S. produce and dairy sectors.

“Do I continue to invest or do I stop and try to minimize my loss?” asked Pink. “It’s just devastating.”

The National Potato Council said there are $750 million to $1.3 billion in potatoes and potato products clogged in the pipeline.

“It’s a huge challenge. Nobody was prepared. Nobody could imagine that this could happen,” Rabobank food analyst JP Frossard said.

Grocery consultants and retailers told Reuters that foodservice products like toilet paper, cleaning supplies and meat have found their way into the retail channel, while many others have not.

Compounding problems, most foodservice operators do not have connections at supermarkets – where adding a new product can take several months.

“It would be a Herculean task,” Allen said of rerouting supplies. And with all the uncertainty around demand, he added, “the investment would be tough to justify.”

(Reporting by Lisa Baertlein in Los Angeles, Chris Walljasper in Chicago and Hilary Russ in New York; Editing by Lisa Shumaker)

Britain won’t run out of toilet paper but fruit could be in short supply after Brexit

By Alistair Smout and Noor Zainab Hussain

LONDON (Reuters) – Britain is unlikely to run out of essentials like toilet paper in the event of a no-deal Brexit but some fresh fruit and vegetables could be in short supply and prices might rise, warned supermarket bosses on Thursday.

Retailers John Lewis and Co-Operative Group and the government’s reluctant publication of a report late on Wednesday shed light on what shoppers might expect to find, or not find on supermarket shelves after October 31.

The government has demanded that supermarkets prepare for a potentially chaotic no-deal Brexit by stockpiling food, but supermarket bosses say it is almost impossible to store fresh food for any length of time and people might not find everything they want on the shelves.

Steve Murrells, Chief Executive of the Co-op, said that the firm had secured extra storage space but he expected shortages in some fresh food and subsequent price rises.

“We are very clear on where we think inflation will come through, which will be, in the main, fruit,” he said.

“We would be stockpiling the essential items that you would expect. Water, toilet paper, long life cans.”

Murrells said that fruit like apples, pears, blueberries and strawberries might have to be transported more expensively via air freight from the Southern hemisphere to avoid congested ports.

The availability of vegetables in Britain is also at risk as the European Union provides some 86% of lettuces and 70% of tomatoes, according to the British Retail Consortium (BRC).

“Clearly… in short-life fresh produce that’s imported from Europe, that would be harder, if the flow of stock is interrupted,” Rob Collins, the managing director of John Lewis’ supermarket group Waitrose, told reporters.

Prime Minister Boris Johnson has pledged to take Britain out of the European Union with or without a deal on Oct. 31, and has said he will not ask for a delay despite lawmakers voting that he seeks one to avoid a no-deal Brexit.

The “Operation Yellowhammer” report on the worst-case scenario released by the government pointed to potential problems snarling up cross-Channel trade routes and disrupting supplies of fresh food.

John Lewis Chairman Charlie Mayfield said the assessment chimed with what his department store and supermarket group expected from a no-deal scenario.

“The publication of the Yellowhammer documents gives a bit more insight, but frankly I don’t think it tells us anything particularly new that we didn’t already know,” Mayfield told reporters after warning that the impact of a no-deal Brexit could be “significant”.

Mayfield went on to say that the continuing uncertainty meant that consumer confidence had taken a battering and John Lewis was seeing a reluctance by consumers to make big-ticket purchases in its department stores.

David Potts, Chief Executive of grocer Morrisons, agreed that consumer confidence was weak but the grocer is somewhat shielded from any Brexit chaos as two-thirds of what it sells is British.

While supermarkets say they are restricted in what goods they can stockpile, there might be some solace in the fact that they say so far, customers have shown little sign of panic-buying.

(Reporting by Alistair Smout in London and Noor Zainab Hussain in Bengaluru; Additional reporting by James Davey; Editing by Elaine Hardcastle)