How do we future-proof food supply chains?

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Welcome to your weekly food & beverage report, where we cover everything you’ll need to know for the week ahead. This week, we look into how food and beverage supply chains can future-proof their operations, dive into the avocado drama between the US and Mexico, and see how delivery services are performing with the current state of the pandemic. 

What can be done to stop supply chains from falling apart in the future?

Even before the pandemic, the food supply chains were facing mounting pressure for revamps and innovation. This lack in preparation came with a hefty price tag: food and beverage retailers missed out on $82B in sales from out-of-stock items last year. “Lack of availability can be difficult for grocery stores to predict, as it’s often regional,” says Leslie Sarasin, president and CEO of the Food Industry Association. Now, supply chains are seeing a record shortage of 80,000 truck drivers; 7,500 food and beverage store workers left their positions in January alone, carrying on a trend from December. 

• Specific specialties… Many growers, shippers, processors, and manufacturers have become extraordinarily specialized over the past 15-20 years. In order to future-proof supply chains, flexibility and adaptability will be increasingly important to help move labor and other inputs from one marketing channel to another.
• Beating the bottlenecks… “The industry is also examining ways to find a more resilient balance between a maximum efficiency just-in-time supply chain model, and a more robust system that relies on slightly more inventory, so that unanticipated bottlenecks at one link in the chain will have less of an impact at other points along the chain,” said Sarasin.

Avocado imports from Mexico have been suspended for an unspecified amount of time

The US Federal government has suspended all imports of Mexican avocados after a US safety plant inspector received a threat while in Mexico. Of avocados bought in the US, between 80-90% are sourced from Mexico.  The suspension came without warning, leaving grocers, restaurants, and consumers no time to prepare for the shortages (and price hikes) that are likely to be felt within weeks.  

• ‘Cados from Cali… California avocado production is up 15% from last year’s numbers, which may provide at least some relief to the lacking supply. From 2001-2018, Americans quadrupled their avocado consumption.
• Touch-and-go timeline… While the US government hasn’t given any official timeline for how long the suspension will last, Rabobank senior fruits and vegetables analyst David Magana said the suspension could take several weeks to get lifted.

While you’re here, check out the latest episode of our new podcast The Food Biz, streaming across all podcast platforms. If you have any feedback or input, reach out to us at news@barchart.com. We’d love to hear what you think!

Public sentiment around the pandemic is shifting; how does this impact food delivery services? 

Here to stay?... As the pandemic continues to slow down (depending on who you ask), food delivery apps are remaining optimistic despite significant volatility. DoorDash (DASH) reported a record high number of orders and better-than-expected revenue in its fourth quarter results last Wednesday, bumping stocks up by 21% the following Thursday. 

• Pandemic performance… The strong sales numbers are on trend with DoorDash’s growth since March 2020, however the company is still down nearly 60% from its 3-month peak of $250 per share. CEO Tony Xu is planning to expand its grocery delivery service, building on the 14% of DoorDash customers already using the offering.

Overcautious… European food delivery firm Delivery Hero (DELHY)  also saw a jump in fourth quarter sales, however after the company announced cautious projections for the coming year, shares plummeted over 30%. Reports showed Delivery Hero estimating overall sales volume to increase from $50B to $51B in 2022; the company forecasted negative margins on core profit. 

• Hero to (not quite) zero… Since last Wednesday’s market close, Delivery Hero has lost around $7.4B in market value. Over the course of the past year, the company has lost nearly two-thirds of its value. Competitors like Deliveroo (ROO.LN) and Just Eat Takeaway.com (JET.LN) have fallen 50% and 60% respectively, at least partially thanks to a rollback in pandemic restrictions.

Other stories…

• Whole-cut competition… Planterra (JBSAY) is launching a new line of True Bite Plant-Based Chicken Cutlets and Shreds in competition with Conagra Brands’ (CAG) Gardein line, which includes plant-based filets, tenders, and nuggets.
• McMetaverse… McDonald’s (MCD) is working towards joining the Metaverse (FB), allowing users to walk into a VR storefront to get food delivered to their homes in reality.
• Dieting differently… For many consumers today, dieting isn’t necessarily about weight loss. About a quarter of adults in the US are on a diet, and 16% of those are on “their own diet” versus a formal diet plan. 
   

That’s all we have for you this week, do you have anything for us? We’d love to hear from you with stories or recommendations for new sections to include! Drop us a line at news@barchart.com with any feedback or input.