After a dramatic few months of stockpiling and panic buying groceries, the shopping habits of Americans have somewhat eased up. Now, America’s packaged food companies are the ones stocking up. Businesses are spending more on raw materials like oats and sugar so they can maintain production in case supply lines get disrupted or imports are held up if there is a second wave of COVID-19.
Campbell Soup Co. is buying more ingredients amid a boom in demand for pantry staples. But it’s not just large companies that are being cautious. Bobo’s, a Boulder, Colorado-based producer of snack bars and toaster pastries, has stocked up on organic oats, sugar and coconut oil. The company is currently buying about 50 percent more of its main ingredients, which affords it an extra 90 days to solve any potential supply-chain hiccups.
This is a striking shift in strategy for food companies that for years built up just-in-time inventories, which minimize storage costs. It also underscores the lessons that were learned after the coronavirus outbreak upended supply chains and sparked concerns over shortages of some ingredients. Food companies are bringing in more raw materials and packaging to help guarantee they can meet demand from retailers, where stocks of goods have fallen.
More money tied up in physical goods may also mean fewer new products — referred to as “innovation” in the industry. This represents another big change for food companies, which before COVID-19 had turned to new, experimental products, such as Kraft Heinz Co.’s mayochup, to create buzz.
One of the things weighing on the minds of consumers and scientists alike is whether cooler weather will cause coronavirus infections to spike again — potentially creating another boom in grocery demand. Second waves of the virus have been reported in China, South Korea and Hong Kong.
Saffron Road, which makes frozen beef bulgogi meals and chickpea masala meal pouches, is buying 50 percent more inventory than before and has plans to boost purchases even more later in the year. It’s a risk to cash flow, but one that’s worth taking amid a surge in demand.
Taika, a canned coffee startup in San Francisco, has loaded up on ashwagandha powder, a plant-derived ingredient used in its coffee that’s seen limited supply recently because it’s sourced from India. With lockdowns there limiting the producer’s ability to ship, Taika is now holding about six months of supply instead of just the three months worth they had before the pandemic hit.
Campbell, which has seen a surge in demand for pantry staples including Prego pasta sauce and Kettle potato chips, has stocked up on certain ingredients to make sure it doesn’t run out. The company is betting consumer demand will remain high — it now sees sales from continuing operations rising as much as 6.5 percent this year, a big jump from its previous range.
Higher demand is likely to persist as the pandemic will continue to cause radical transformations across industries until a vaccine or treatment is developed.