How the supply chain is affecting what you can and cannot buy at grocery stores

On any given week, Cleo's Bodega Grocery & Café, a small-scale market on Doctor MLK Jr Street, could have difficulty getting a specific food item, thanks to the supply chain issues.

"It's not necessarily about products getting to us slower," said Sibeko Jywanza, director of food justice at Flanner House. "It's whether or not they are available at all."

Recently, it's been Atlantic salmon and shrimp. The store also found that certain varieties of Lunchables, ready-to-eat meals popular with kids, are hard to get. And Jywanza said the store competed against bigger stores and nonprofits to get turkeys and Cornish hens for Thanksgiving.

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Anecdotes about so-called food shortages and empty grocery store shelves dominated headlines in recent months. While not as extreme, jams in the food supply chain are all too real for some local markets like Cleo's Bodega which has learned to be flexible in finding ways to get food products to customers.

Jywanza's department oversees the bodega, a small grocery store and café that opened in 2019. Even before the pandemic, the store found itself competing against larger grocers for items.

Supply chain constraints have exacerbated the problem. For instance, Jywanza said distributors sometimes have a certain quantity of products for order; but large-scale major-market grocery stores may buy up all the units before Cleo's can make an order.

"Something might not be available one week or the next because it's all gone," he said, adding that a product shortage affects Cleo's harder than it would bigger stores selling a wider variety of brands. "If we're only limited to getting one particular brand of that particular item, it just limits how many things that we could put on our shelves."

How COVID impacted the food supply chain

National organizations representing large and independent grocers say there's plenty of food in the supply chain. However, demand issues on the supply-side are impacting what consumers can serve for breakfast, lunch or dinner.

The food supply chain has three key components: production, involving farmers and ranchers; processing, involving manufacturers; and retail. Each part of the chain contributes to the price of food, which can also be influenced by outside factors such as trade and weather.

On its website, the Food Industry Association, also known as FMI, notes that cost increased at every stage of the food supply chain during the pandemic.

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At the beginning, many restaurants closed as communities sought to contain the spread of the coronavirus. As a result, ranchers and growers lost one of their buyer channels making it costly to harvest, produce and store raw and intermediate food. Meanwhile, more Americans began cooking at home, increasing their demand for grocery products. .

"Grocery shopper demand doubled overnight, and now, the demand pressures we felt in March 2020 have not returned to pre-pandemic levels," FMI said via email.

The average household spent $161 on groceries at the height of the pandemic, compared to $113 in 2019, the association notes. Though spending has decreased, it's held steady at $144 per week since then.

"You still see a lot of people who are eating at home much more than they used to, who are eating more meals a day at home, and so there's a lot of demand for products," Andy Harig, FMI's vice president of tax, trade sustainability and policy development, told IndyStar in a telephone interview.

When asked about supply constraints, Ohio-based Kroger, which has at least 49 stores across the Indianapolis area, deferred to comments CEO Rodney McMullen made during the company's Q3 earnings call with analysts.

McMullen said Kroger customers continued to eat at home because it was more affordable, convenient and healthier.

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"We also saw them continuing to cook at home leading up to and during the holiday and select more premium products to elevate the food experience," he said. "These are all reasons why we believe the food at home change is structural and not temporary."

While consumer demand for food to cook at home remains high, labor shortages, increases on input costs —the price to create a product — and other COVID-related expenses are contributing to supply chain issues and creating conditions that make certain products harder to get.

Production and processing costs increased during the pandemic as companies adapted plexiglass barriers and frequent sanitization as safeguards to protect products from contamination.

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Labor costs are up as companies offer higher wages to entice workers. Industry experts says fewer truckers are available to help move product and a backlog at US ports are contributed to slowing the delivery of imports.

Harig said the system cannot move product along fast enough to consistently meet consumer demand at stores.

"We see these kind of issues playing out where you have that sort of perfect storm," he said.

Like 'Black Friday'

It can be difficult explaining the supply chain and the grocery business to customers — especially if an item is for sale one week and not the next, or consistently available for several weeks before disappearing.

Still, Cleo's tries, Jywanza said. If a product is not available, apologies are given and offers are extended for customers to check again in the next week.

"The essentials and the basics are what we try to do as a small scale store, and yeah those are the things that people are always looking for," Jywanza said. "Those are also the things that people are always getting from other stores."

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Harig notes a manufacturer may scale back on their product offering if they don't have enough of an item such as a imported spice they are waiting to arrive from overseas.

Food demand is regional, making it harder to determine where product shortages are occurring. How quickly a product can get to grocery shelves depends on where it's going and how long it takes to get there.

And, as Harig explains typically it's a piece of a product — rather than the entire product — that gets jammed in the supply chain. Ingredients in processed or frozen foods are more likely to be snagged by the slower movement through the chain.

"A lot of our spices, things like cinnamon or cardamom, they come from overseas," he said. "You also have a lot of packaging that comes from overseas. Sometimes that can be the challenge too. Whether that's a milk carton, or if it's a bubble pack on something like a frozen pizza, you have to make sure that that's available as well."

Harig advises consumers to buy what they need and want. Still, he said they should feel confident enough to resist the urge to stockpile products.

McMullen told analysts Kroger had planned for today's supply chain constraints this past spring.

"We kept the additional warehouses originally brought on to support business or COVID to ensure we were able to provide for customers throughout the holiday season as well," he said, adding that the chain leverage what it learned from the pandemic and the chain has its own fleet to transport products. "Because of our team's agility, we are better in stock today than we were a year ago."

Supply chain jams can hinder sales for businesses like Cleo's Bogeda. Jywanza said customers seeking a specific item are more likely to leave without purchasing something else if they don't find what they're looking for.

And, customers aren't always forgiving — especially if they leave feeling like they've wasted a trip to the store or dinner plans go awry.

"If we don't have other brands of that particular item available — some people don't want to switch brands, but they will get it if they're looking for that — if they walk out and go somewhere else their comfort and their confidence in that store will decrease," he said. "They will build more confidence in the store that they went to that either, they got their particular item or had the off-brand."

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To be fair, Jywanza said this is an issue Cleo's has always had to deal with, given its size. The bodega switched distributors in September 2020. It doesn't have the ability to stockpile like bigger stores given its space and storage limitations.

Cleo's opened more than two years ago at Flanner House, a nonprofit social services center, to make fresh, healthy foods available to the Dr MLK Jr. Street corridor on near northwest side. The stores sells produce, meat and dried goods.

Jywanza said Cleo's is getting better at figuring out which products it can order week to week.

The store has learned to be flexible in how it gets products, such as sourcing from different vendors or possibly linking up with other smaller grocers to negotiate an exchange.

"When it time to do your inventory, you pretty much have to almost be like you're Black Friday shopping or something like that and be the first person to kind of get to it," he said jokingly.

The impact on food prices

In addition to inflation, the confluence of factors impacting the supply chain contribute to the prices consumers pay at check out.

Recent data from the Department of Labor reflects a 7.1% increase in food prices across the Midwest for the 12-month period ending in November, as determined by the Consumer Price Index which measures the change in retail prices.

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"A change of $1 or 2 can make a difference on a product," Jywanza said.

Beef and pork prices are up. And, Harig said input prices — wheat and corn for feed and fertilizer prices for produce — also have increased.

During the earnings call, Kroger CFO Gary Millerchip said Kroger saw higher product cost inflation in most categories during the third quarter. Kroger said it passes along prices to the customer where it makes sense.

In a statement, the Washington D.C.-based National Grocers Association said via email that independent grocers and their wholesalers are working closely with suppliers to keep prices as steady as possible.

Price inflation is driven by a perfect storm of factors including an ongoing shortage of labor across the entire supply chain, acute shortage of truck drivers, increased ingredient inputs and occasional disruptions in product packaging production, the association said.

"As costs rise from producers and the supply chain, our members are following the same pricing structures and policies that they always have," the association said. "While there is plenty of food in the supply chain, we anticipate consumers will continue to experience sporadic disruptions in certain product categories as we have seen over the past year and half due to the ongoing supply and labor challenges."

Looking ahead

Economists expect supply chain issues to continue into the first quarter of 2022, but they don't expect the supply side issues to be permanent.

"We have to get through COVID," Harig said. "We have to get sort of back on a path where people feel there's a little bit more more normalcy."

He expects supply chains to even out in the second or third quarter.

For Cleo's, the uncertainty makes it hard to strategize.

"If things aren't there, things aren't there," Jywanza said. There's not really anything that you can do about that except for trying to have alternatives for people to get."

He's seeking to do just that.

Jywanza expects the competition for products to remain fierce as bigger stores have greater buying power and can leverage their relationships with suppliers.

"The big whale gets gets most of the fish, right?" Jywanza said.

Contact IndyStar reporter Alexandria Burris at aburris@gannett.com or call 317-617-2690. Follow her on Twitter: @allyburris.

This article originally appeared on Indianapolis Star: How the supply chain is affecting what you can buy at grocery stores