Hoarding cash during a pandemic might seem prudent, but America’s packaged food companies are finding it’s better to stock up on stuff they can sell.
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.
“We just wanted to have an insurance plan for our business. If we ran out of oats, we’d be in trouble,” he said. “In a first-time situation like this pandemic, there’s a lot of questions we can’t answer.”His company is currently buying about 50% more of its main ingredients. This 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.
“Retail has below-average inventory, they’re trying to get as much as they can from producers,” Moskow said.More money tied up in physical goods may also mean fewer new products — referred to as “innovation” in the industry. Saffron Road, for example, recently cut two ramen bowls because they didn’t sell as well as other items and it’s cheaper to focus on core offerings.
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 three months before the pandemic hit, founder Kal Freese said.
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