By Jaewon Kang and Annie Gasparro
Grocery stores and food companies are preparing for a possible
surge in sales amid a new rise in Covid-19 cases and the impending
Supermarkets are stockpiling groceries and storing them early to
prepare for the fall and winter months, when some health experts
warn the country could see another widespread outbreak of virus
cases and new restrictions. Food companies are accelerating
production of their most popular items, and leaders across the
industry are saying they won't be caught unprepared in the face of
another pandemic surge.
Southeastern Grocers LLC secured holiday turkeys and hams over
the summer, months before it normally starts inventory planning,
said Chief Executive Anthony Hucker. And grocery wholesaler United
Natural Foods Inc. has loaded up on extra inventory of cranberry
sauce, herbal tea and cold remedies, said CEO Chris Testa.
"We started talking about Thanksgiving in June. That's earlier
than we ever have," he said.
Associated Food Stores recently started building "pandemic
pallets" of cleaning and sanitizing products so it always has some
inventory in warehouses, said Darin Peirce, vice president of
retail operations for the cooperative of more than 400 stores. The
company is establishing protocols so it can better manage scenarios
of high demand.
"We will never again operate our business as unprepared for
something like this," he said.
These changes, a reaction to the sudden and massive shortages
grocers experienced in the spring, amount to a shift from the
just-in-time inventory management practices that have guided the
fast-moving retail business for decades.
Now, food sellers are stockpiling months, rather than weeks,
worth of staples such as pasta sauce and paper products to better
prepare for this winter, when people are expected to hunker down at
home. Ahold Delhaize USA, SpartanNash Co. and others say they are
buying more food as soon as they can, stocking warehouses with
wellness and holiday items. Many retailers are expanding
distribution capacity, augmenting warehouse space and modifying
They say they want to be ready for a potential Covid-19 surge
that experts are warning could hit as soon as this fall, as daily
reported cases are increasing again in many states after falling in
the summer. More than 200,000 people have died from the coronavirus
in the U.S.
A fresh increase in demand in the event that officials reinstate
restrictions on restaurants or workplaces would also run up against
the normal holiday boom in grocery sales, further elevating demand
for items like baking products, pasta, meat and paper towels.
Back in March, "we didn't know what we didn't know," said Chris
Lewis, executive vice president of supply chain at Ahold Delhaize's
Retail Business Services.
Ahold Delhaize, owner of the Giant and Food Lion chains, already
has its holiday inventory in its warehouses. The grocer is also
storing 10% to 15% more inventory than it did before the pandemic
to ensure it won't run out of fast-selling items.
Industry executives say they don't think a potential wintertime
burst in grocery demand will be as extreme as it was in March, when
people panic-shopped, fearing grocery-store closures or food
shortages. Consumers are better prepared this time around, said
Sean Connolly, chief executive of Conagra Brands Inc.
Some retailers are also betting that recent investments in
warehouses and e-commerce will help them meet demand for home
deliveries in the coming months.
Still, some products such as cleaning wipes and canned
vegetables remain hard for stores to obtain, partly because of
continued high demand and because manufacturers are still trying to
keep up. Some manufacturers are worried they will lose production
capacity if infections break out among their workers or if other
issues, such as lack of child care, prevent people from
Hormel Foods Corp. CEO Jim Snee said on a recent conference call
that the company has 24% less inventory than a year ago. Its bacon,
pepperoni, Skippy peanut butter and SPAM canned meat could run
short if Covid-19 cases among workers interrupt production again,
"We can't afford any disruptions," he said.
General Mills Inc. said it hasn't caught up with demand for
Progresso soup, Betty Crocker cake mixes and Pillsbury refrigerated
dough. It is increasing its production capacity and has hired 30
new outsourcing partners since March. The company said the entire
industry is still struggling to rebuild inventory on similar
Manufacturers have given priority to making their
fastest-selling products, which has helped some items recover
inventory in recent months.
General Mills and Kellogg Co. said they have been able to
rebuild inventory in their cereal businesses, for instance. "Even
if the consumer can't find the exact flavor they want, we'll still
have something on the shelf," General Mills CEO Jeff Harmening said
in an interview Wednesday.
Campbell Soup Co.'s overall inventory is only about halfway
recovered, and the team is pushing hard to fully catch up by
January, according to CEO Mark Clouse. It is racing to get its
Chunky and condensed soups and Swanson broths back in stock and
adding production capacity for snacks such as Pepperidge Farm
Goldfish crackers and Cape Cod potato chips.
"A lot of this is going to boil down to how much capacity we're
able to generate," Mr. Clouse said.
Hy-Vee Inc., a chain of more than 240 supermarkets in the
Midwest, is stockpiling additional sanitizing, cleaning and paper
products when possible, but full variety hasn't returned, said CEO
Walmart Inc. Chief Financial Officer Brett Biggs said the
company is overriding its grocery-ordering algorithms in many
stores to build up extra inventory now, after decades of becoming
"We've been playing catch-up," Mr. Biggs said at a recent
conference. "But you've got to have supply down the chain with our
suppliers to be able to do that."
Coca-Cola Co. and its bottling network are still making fewer
varieties of drinks to meet demand for its top beverages. That has
made it difficult for shoppers to find things like Fresca and
caffeine-free Diet Coke in the pandemic. Meanwhile, Coke's business
serving restaurants and other venues has suffered declines.
Coke CEO James Quincey said at a recent investor conference: "We
have a clear strategy for how we want to come out of this crisis,
but getting through the winter in the Northern Hemisphere will be
the big test."
--Jennifer Maloney contributed to this article.
Write to Jaewon Kang at email@example.com and Annie Gasparro
(END) Dow Jones Newswires
September 27, 2020 05:44 ET (09:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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