Welcome to the New Year

by Peter Thor, BFC

What a year 2021 has been, but then we said that about 2020. Is life under masks and restrictions the new normal? On the other hand, the Covid pandemic has not been “cured” and rather successfully continues to exact a toll in both lives and how we live. It does seem likely that health precautions like mask wearing and preventative medicines and vaccines will be “normal” at least for the next year. What impact will this have on the pizza industry?

To date, we can count the number of restaurants closed with the pivot toward take-out, outdoor dining, and restricted indoor activities. This has impacted not only restaurants but everywhere food is served, including schools, hospitals, and sporting events. Consumer demand is back albeit different than before. Most consumers are aware and more cautious about their dining environment as well as how it is delivered to them. Restaurant workers are masked in most states even when patrons don’t have to be. Table spacing, barriers between them, and other measures designed to make diners comfortable are smart marketing even if not required.

Food supply and rapidly rising costs have been most crippling. From a restaurateur’s perspective, 2021 brought negative news from their distributors mostly in the form of price increases. The unseen story is much bigger as it is a tale of shortages and delays at every level, coupled with insufficient labor and hobbled by changing regulatory requirements. To comprehend what 2022 has in store, here is a quick review of how we got here. In early Spring 2020, demand fell off a cliff and the supply chain had a forced stop at every level. Farms and animal production stopped, manufacturing plants closed, and workers were laid-off. Food service demand bottomed while retail grocery demand spiked. Everyday items ran out on shelf and when food service started to reopen, the supply chain had to be replenished at every level which has been an excruciating process. Restarting production at farm level requires a lead time measured in months. Factory production encountered new regulatory requirements, and worker illness and precautionary measures meant capacity limits well below pre-Covid levels.

Altered demand patterns are still uncertain as debates rage on simple matters like mask wearing and social distancing. Imagine how complicated work rule changes are inside a processing plant with 1000 workers standing shoulder to shoulder. Government regulations are still not settled, and worker subsidies are held by many to be responsible for worker shortages throughout the supply chain. Logistics has become a nightmare, especially internationally where rates are 3-5x prior year and delays are measured in months. Domestic transport has also doubled in cost and there is an acute driver shortage.

Unfortunately, the restaurant industry has not been spared in terms of worker shortage. As ingredients and foodstuffs improve, an availability of labor has not, at least not yet. It has become common in our travels to see restaurants freed to resume indoor dining unable to reopen due to lack of workers. Raising wages and benefit offers have not always resolved the shortage. It is interesting to note that the (just released) official unemployment rate of 4.2% ignores the number of idle potential workers. While 18 million jobs have been added since the depths of the covid shutdown, the number of employed workers is still about 5 million less than pre-pandemic. Where are they and who is helping them pay the bills? Will they re-enter the workforce?

We’re convinced that 2022 will be better, hopefully in all respects. We see peak prices having been passed in many ingredient cost categories, though short supply will remain a transient problem. Capacity additions are in the works in dairy and specialty meats, like pepperoni and sausage toppings. Grain harvests will determine pricing for feedstocks and edible oils. Certain cheese ingredient shortages will continue to limit appetizer production. Manufacturing capacity and improvements in labor should improve as medical treatments and testing become available and government welfare subsidies are weaned. Despite some improvements, industry experts are pretty unanimous in the opinion that things won’t really get significantly better until the second half of 2022.

If ever a truth that we are all in this together, the time is now. Delco Foods has experienced all the issues you’re experiencing. The more you communicate and the closer you partner with them the better your opportunity to get both the supply and the service you hope for to profitably grow. Product quality integrity is extremely important to Bellissimo and Delco Foods. Partnering requires trust and building relationships, but it is the best way to build long term growth and profitability. We wish you every success!

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