The nation’s supermarket chains are stocking more products in their warehouses in anticipation of inflation in food and other fast-moving consumer goods. Faced with growing demand from Americans and supply chains constrained by the pandemic, grocery stores are scrambling to implement new strategies to keep their shelves full.
According to the U.S. Census Bureau data, retailers have been increasing the size of their inventories in anticipation of rising inflation since April. They are buying 15 % to 20 % more than their usual inventory.
During the first quarter of 2021 domestic demand in the United States grew by 6.4 % above the federal government’s own expectations. Grocery sales grew by 15 % by June, showing strong demand from Americans.
Although cumulative inflation totals 5 % annually, there is still no consensus as to whether the rise in prices is transitory and a product of the economic recovery or will remain in place for some time in the U.S. economy.
Growing demand from supermarket chains has made it difficult for suppliers to satisfy their corporate customers. In the last twelve months, the price of processed food has grown by 2.5 % for intermediate demand (supermarket chains, stores, warehouses, restaurants) and the price of unprocessed food has grown by 6.4 %.
Some supermarket chains and other platforms have had problems with suppliers. Retailers such as Walmart and Sysco have sued several of their suppliers for missing delivery deadlines or shipping incomplete orders. Retailers have apologized for supply chain constraints caused by the pandemic.
Supermarkets hit by transportation costs, China and labor shortages
U.S. supply chains have been affected by rising transportation costs, which in turn are having trouble satisfying their customers due to a shortage of skilled labor (both to drive trucks and service warehouses) and the rising cost of fuel.
During June alone, 11,000 new jobs were created in the transportation and warehousing sector nationwide. This is evidence of a weak recovery in this sector, which is crucial for the movement of goods and services. There is currently a deficit of 94,000 transporters and warehouse personnel.
On the other hand, retailers have also been affected by rising import costs, especially from China. Trade tariffs had already had a strong impact on imports from China, but with the closure of the port of Yantian (through which a quarter of China’s trade to the United States transits), costs have become prohibitive. According to data from the Freightos platform, the cost of shipping a container from China to the United States has almost quintupled in one year.
Imports of groceries and agricultural products from China total nearly $4,000 billion, including processed fruits and vegetables, knick-knacks, spices, fresh vegetables and tea.
Together, high fuel prices, rising transportation costs, labor shortages and ever-increasing demand have created a pressure cooker for supermarket chains, forcing them to hold more inventory to protect against possible shortages and higher prices in the future.