Patti McConville / Alamy via CNN
Food makers are telling grocery stores and their distributors they will have limits on products such as Sour Patch Kids and Swedish Fish in the coming months due to a host of labor and supply chain pressures.
If you hoped grocery stores this fall and winter would look like they did in the Before Times, with limitless options stretching out before you in the snack, drink, candy and frozen foods aisles, get ready for some disappointing news.
Many of the country’s biggest food makers are telling grocers that they will have limited quantities of a number of their products, including items such as Rice Krispies Treats, Sour Patch Kids, some Ben & Jerry’s ice cream flavors, McCormick gourmet spices and Marie Callender’s pot pies because of labor, commodity and transportation constraints throttling supply chains, according to emails viewed by CNN and interviews with grocers. Some suppliers are also telling grocers to cancel their promotions of these items and more over the holidays so products won’t disappear from store shelves as quickly.
These latest limits mean that stores won’t have all things for all customers heading into the holidays, and shoppers may not be able to find some of their favorite products, flavors or niche items. But shoppers will still have plenty of options, including most of these companies’ core products, which they are prioritizing over items in less demand — meaning, for instance, that if you’re a fan of Ben & Jerry’s popular Phish Food, you shouldn’t have a problem, but the company’s less-well known Cold Brew Caramel Latte might be harder to find.
Major food and consumer product manufacturers being short of supply on some items “will be a challenge in the grocery industry” in the final months of the year, said Steve Howard, vice president of merchandising at Bristol Farms, a grocery chain in California. Suppliers are warning the company of “potential shortages” of foods, glass jars and packaging containers. In response, Bristol Farms is working to bring in inventory “earlier than any other holiday ever,” Howard said.
Ron Adar/SOPA Images/SIPA
Ben & Jerry's ice cream seen in a cooler less desirable shelf at Morton Williams in Manhattan in New York City.
Purchase limits from manufacturers were rare before the pandemic and are creating “lesser than full conditions” for customers in Morton Williams stores, said Steve Schwartz, director of sales at the New York area chain. Morton Williams is trying to tap secondary suppliers when its primary vendors for food and household essentials can’t fulfill orders.
“It’s not your ideal situation,” Schwartz said. Some customers have been forgiving when they are unable to find what they’re looking for. But others “just want to know why they can’t get their item.”
Shortages at grocery stores are nowhere near as visible as they were at the beginning of the coronavirus outbreak, when shoppers flocked to stores to stockpile food and household staples. But supply in grocery store aisles has not fully recovered to pre-pandemic levels, and companies such as Costco and Sam’s Club have recently reinstated purchase limits for customers on paper products and cleaning supplies.
Around 18% of beverages, 15% of frozen foods, 16% of snacks, 15% of candy and 18% of bakery items were out of stock at stores during the week ending on Oct. 3, according to the latest data from IRI, which tracks in-stock levels at leading US grocery chains, big box stores, pharmacies and wholesale clubs.
Before the pandemic, 7% to 10% of products were typically out of stock on shelves, according to IRI.
When supply is tight, manufacturers often eliminate some of their fringe items to focus on ramping up production of top-selling products, said Krishnakumar Davey, president of IRI’s strategic analytics practice. They also tend to cut products that are more expensive to make, according to Davey.
‘The new norm’
Some food brands are imposing allocations, or purchase caps, for certain products on grocery stores and distributors, while other vendors are warning more generally of limited availability. Suppliers typically put products on allocation when there are supply shortfalls.
The allocations have not been confined to one area of the country or a single type of retailer, said an executive at a leading regional wholesaler. Instead, they are happening nationally, according to the executive, who spoke on the condition of anonymity to protect the company’s relationships with suppliers and other wholesalers. But the limits could pose particular challenges for independent grocers, who have raised concerns in the past year that suppliers prioritize larger competitors over small stores.
Patti McConville / Alamy via CNN
Rice Krispies Treats "will remain below service expectations," Kellogg said in an email last month and requested that stores don't promote the products.
Kellogg told at least four grocery distributors last month in an email that Pringles Snacks Stacks, Eggo pancakes and MorningStar Farms plant-based hot dogs and bacon will be on allocation and Rice Krispies Treats snacks “will remain below service expectations” through the end of the year. The company also requested that stores cancel their promotions for Rice Krispies and Corn Pops cereal “to allow for recovery.” Kellogg said in the email that it was experiencing “constraints” in capacity and packaging materials and labor pressure. (This was before 1,400 Kellogg cereal factory workers went on strike Tuesday.)
The four distributors shared the email with CNN Business on the condition of anonymity to avoid jeopardizing their relationships with suppliers.
Kris Bahner, a spokesperson for Kellogg, said in an email that the company has seen increased demand since the start of the pandemic as people eat more meals at home. Bahner said the company works with retailers “to ensure our food flows through their systems” and, in instances where capacity is tight, it limits orders over certain time periods. The company did not say how many retailers received allocation notifications.
Mondelez is experiencing “limited availability” on items such as Sour Patch Kids and Swedish Fish candy, Toblerone chocolate and Halls cough drops “due to supply chain constraints,” the company said in an October 1 email to a distributor. Mondelez estimated in the email that the “recovery date” for these items will be in February or March of next year.
A spokesperson for the multinational food and beverage company said in an email that the company is facing “high demand for labor” and “logistics challenges.” Mondelez believes it is “relatively well-positioned to face the marketplace challenges and will continue to keep a close eye on things” to get products to retail customers and shoppers on time. The company also did not say how many retailers received limits on such items, but said “we prepare communications which our sales team has the ability to use, as appropriate, as they engaged with their customers.”
Unilever told a distributor in an email on Sept. 14 that “labor shortages continue to drive a limited ability to meet demand” and it was de-prioritizing production on certain products including Ben & Jerry’s Cold Brew Caramel Latte and Ice Cream Sammie flavors, Breyers vanilla fudge twirl ice cream and Firecracker popsicles “until we are able to return to a supply steady-state.” The company said it would instead “focus labor hours on our top-selling items.”
“Like many sectors, at times there are challenges in getting all our product to stores, for a variety of reasons related to supply and distribution,” a Unilever spokesperson said in an email.
Packaging issues also continue to be a problem. For example, some seasonings are in tight supply due to challenges procuring glass bottles.
A McCormick representative said in an email to two distributors on Sept. 20 that “our U.S. bottle supplier shut down due to a COVID-related issue and we have not received bottles for several weeks” for its gourmet spices line. “The lack of bottles has impacted our production and is eroding our safety stock across the entire line,” the representative said. As a result, McCormick said, it would ship approximately 70% of what it had previously forecast, and the company was encouraging customers to cancel their promotions in November and December for the spices line.
Lori Robinson, a spokesperson for McCormick, said in an email that “Gourmet is the only product line impacted by this packaging shortage,” and the company’s more recognizable red-cap spices will be fully in-stock throughout the holidays, which customers can use as a substitute for the gourmet spices, she said. The company did not say how many retailers received allocation notifications on gourmet seasonings.
And some sizes of Marie Callender’s frozen pot pies could be harder to find.
Conagra said in a Sept. 27 email to a distributor that it was putting an allocation on Marie Callender’s 10-ounce and 15 ounce-pot pies until Nov. 29 because it “encountered packing material challenges from our tray and carton supplier resulting in a production interruption.”
Conagra did not respond to requests for comment.
Chieh Huang, CEO of online bulk goods retailer Boxed, said “allocations are the new norm” from food and packaged goods’ makers and are impacting the levels of products in stock at Boxed. Still, he said, “the industry is better off than we were this time last year.”
CNN Business’ Danielle Wiener-Bronner contributed to this article.
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Grocery store shelves aren’t going back to normal this year
AP
SILVER SPRING, Md. (AP) — As if a cup of coffee wasn't expensive enough, a confluence of factors is driving up farmers' costs to grow the beans and it could begin filtering down to your local cafe before the end of the year.
After hovering for years near $1 per pound, coffee futures — the price large-volume buyers agree to pay for coffee upon delivery months down the road — doubled in late July, reaching heights not seen since 2014. Though prices have eased a bit, they remain elevated at about $1.90 per pound.
Coffee lovers already paying $8 or more for a bag in the supermarket or up to $5 for a cup may despair over even-higher prices, but a spike in coffee prices on the international futures market doesn't always trickle down to the consumer.
Here's a look at some factors that could determine whether Americans will be paying more for their morning jolt in the near future.
AP
SILVER SPRING, Md. (AP) — As if a cup of coffee wasn't expensive enough, a confluence of factors is driving up farmers' costs to grow the beans and it could begin filtering down to your local cafe before the end of the year.
After hovering for years near $1 per pound, coffee futures — the price large-volume buyers agree to pay for coffee upon delivery months down the road — doubled in late July, reaching heights not seen since 2014. Though prices have eased a bit, they remain elevated at about $1.90 per pound.
Coffee lovers already paying $8 or more for a bag in the supermarket or up to $5 for a cup may despair over even-higher prices, but a spike in coffee prices on the international futures market doesn't always trickle down to the consumer.
Here's a look at some factors that could determine whether Americans will be paying more for their morning jolt in the near future.
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Grocery store shelves aren’t going back to normal this year
AP
A sustained drought followed by two July frosts blew a hole in Brazil's coffee output, immediately sending wholesale prices for the popular Arabica bean to more than $2 per pound. The frost will significantly affect the 2022-23 harvest, said Carlos Mera, who analyzes the coffee markets at Rabobank.
The Brazil frosts followed COVID-related supply chain snarls, a dearth of shipping containers, labor shortages and other production hiccups. Add in rising costs for virtually everything and you have a bitter cup brewing for coffee drinkers.
"This is unprecedented," said Alexis Rubinstein, the managing editor of Coffee & Cocoa for commodities brokerage StoneX Group. "It's never been this perfect storm before. It's usually just been a supply-and-demand scenario.
"We've never been dealing with a supply and demand issue on top of a logistics issue, on top of labor issues, on top of a global pandemic."
AP
A sustained drought followed by two July frosts blew a hole in Brazil's coffee output, immediately sending wholesale prices for the popular Arabica bean to more than $2 per pound. The frost will significantly affect the 2022-23 harvest, said Carlos Mera, who analyzes the coffee markets at Rabobank.
The Brazil frosts followed COVID-related supply chain snarls, a dearth of shipping containers, labor shortages and other production hiccups. Add in rising costs for virtually everything and you have a bitter cup brewing for coffee drinkers.
"This is unprecedented," said Alexis Rubinstein, the managing editor of Coffee & Cocoa for commodities brokerage StoneX Group. "It's never been this perfect storm before. It's usually just been a supply-and-demand scenario.
"We've never been dealing with a supply and demand issue on top of a logistics issue, on top of labor issues, on top of a global pandemic."
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Grocery store shelves aren’t going back to normal this year
AP
While it’s difficult to determine the size of the crop loss in Brazil, Mera said estimates vary between 2 million and 6 million fewer bags of coffee. That's about 12% of the output from the world’s largest producer of Arabica, the bean used for most coffee sold around the world. Lower supplies almost always mean higher prices.
Grace Wood, an industry analyst for market research firm IBISWorld, said if consumers don’t see coffee prices rise by the end of this year, they almost certainly will in 2022, as per capita demand is expected to increase.
“That is just going to contribute to more demand that is going to further disrupt operations and make it more difficult for operators who are already experiencing supply issues,” Wood said.
Mera said people who buy coffee beans in the grocery store will likely see a more noticeable increase in prices because about half the cost of that bag on the shelf comes solely from the bean itself. However, in large coffee shops, he added, the cost of the bean only represents about 5% of your cup of hot coffee, so roasters “may not need to carry over the increases right away.”
AP
While it’s difficult to determine the size of the crop loss in Brazil, Mera said estimates vary between 2 million and 6 million fewer bags of coffee. That's about 12% of the output from the world’s largest producer of Arabica, the bean used for most coffee sold around the world. Lower supplies almost always mean higher prices.
Grace Wood, an industry analyst for market research firm IBISWorld, said if consumers don’t see coffee prices rise by the end of this year, they almost certainly will in 2022, as per capita demand is expected to increase.
“That is just going to contribute to more demand that is going to further disrupt operations and make it more difficult for operators who are already experiencing supply issues,” Wood said.
Mera said people who buy coffee beans in the grocery store will likely see a more noticeable increase in prices because about half the cost of that bag on the shelf comes solely from the bean itself. However, in large coffee shops, he added, the cost of the bean only represents about 5% of your cup of hot coffee, so roasters “may not need to carry over the increases right away.”
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Grocery store shelves aren’t going back to normal this year
AP
It seems likely, although higher coffee prices on the international future market is not a guarantee that prices at your favorite roaster will go up. The damaged crop in Brazil is still more than a year from harvest, plenty of time for many factors to reverse course.
Rubinstein said higher prices on the international market can often stimulate production — farmers will have more money to invest in their crop — and if there's more coffee on the market, prices will retreat. But that will also depend on whether the big roasters have enough beans hoarded to get them through however long prices remain elevated.
Starbucks, the world's biggest coffee retailer, suggested that it won't need to raise its prices because of Brazil's lower output. On a call with investors at the height of the Arabica price spike, the Seattle-based coffee chain's President and CEO Kevin Johnson said his company has 14 months of supply, which he says will get it through 2021 and most of fiscal 2022.
AP
It seems likely, although higher coffee prices on the international future market is not a guarantee that prices at your favorite roaster will go up. The damaged crop in Brazil is still more than a year from harvest, plenty of time for many factors to reverse course.
Rubinstein said higher prices on the international market can often stimulate production — farmers will have more money to invest in their crop — and if there's more coffee on the market, prices will retreat. But that will also depend on whether the big roasters have enough beans hoarded to get them through however long prices remain elevated.
Starbucks, the world's biggest coffee retailer, suggested that it won't need to raise its prices because of Brazil's lower output. On a call with investors at the height of the Arabica price spike, the Seattle-based coffee chain's President and CEO Kevin Johnson said his company has 14 months of supply, which he says will get it through 2021 and most of fiscal 2022.
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Grocery store shelves aren’t going back to normal this year
AP
Even smaller, independent specialty roasters sign contracts to buy their beans well in advance, enough so that when shortages like the ones in Brazil happen, it doesn't paralyze them. They also source from countries all around the world, so gaps from one place can often be filled by another.
Chris Vigilante (pictured), co-owner of Vigilante Coffee with stores in the Maryland suburbs of Washington, D.C., said most specialty roasters don't buy beans on the same international commodities market with the big players like Nestle and Keurig Dr. Pepper. "So we're not as impacted by (Brazil), but we will feel the pressure of it," Vigilante said.
Vigilante said he pays between $3.50 and $5.50 per pound for most of his beans, which are higher quality and produced by smaller farms. He has no plans to raise prices, but if other small shops raise theirs, he said it's likely because the cost for other essentials have risen.
"I've seen other specialty coffee roasters talking about raising their prices, but I think that's more not because of the cost of coffee, but maybe because the cost of some of our other supplies, like cups and equipment," Vigilante said.
AP
Even smaller, independent specialty roasters sign contracts to buy their beans well in advance, enough so that when shortages like the ones in Brazil happen, it doesn't paralyze them. They also source from countries all around the world, so gaps from one place can often be filled by another.
Chris Vigilante (pictured), co-owner of Vigilante Coffee with stores in the Maryland suburbs of Washington, D.C., said most specialty roasters don't buy beans on the same international commodities market with the big players like Nestle and Keurig Dr. Pepper. "So we're not as impacted by (Brazil), but we will feel the pressure of it," Vigilante said.
Vigilante said he pays between $3.50 and $5.50 per pound for most of his beans, which are higher quality and produced by smaller farms. He has no plans to raise prices, but if other small shops raise theirs, he said it's likely because the cost for other essentials have risen.
"I've seen other specialty coffee roasters talking about raising their prices, but I think that's more not because of the cost of coffee, but maybe because the cost of some of our other supplies, like cups and equipment," Vigilante said.
