Change of course

Food, beverage producers adjust to supply, demand challenges

Posted on Sep 14, 2020 :: Back Office Operations
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Posted by , Insight on Manufacturing Staff Writer

When Safer at Home orders were put in place last March due to the pandemic, Grant Pauly, the brewmaster of 3 Sheeps Brewing Co. in Sheboygan, knew his business would face challenges. And while he expected changes in consumers’ buying habits, Pauly did not expect difficulty finding enough aluminum cans.

“Our biggest headache has been finding cans. We’ve had can manufacturers tell us a week before we’re expecting a big order that they had to cancel,” he says. “People are drinking more at home and they like the experience of drinking from a can. Last year, 70 percent of what we sold (direct to consumers) was in bottles and now it’s 70 percent in cans. There’s only 30 can manufacturers in the United States right now and they’re all at capacity. And being smaller, it’s harder for us to compete against larger operations for them.”

Another product that’s been in short supply: sugar.

“In our Cloudless (hard seltzer) product, we use sugar and that’s been tough to find,” Pauly says. “I think we’re all just consuming more sugar as we’re stuck at home.”

3 Sheeps’ experience is not unique. The pandemic has created challenges for food and beverage manufacturers with getting the supplies they need while at the same time seeing a shift in product demand.

Compared to supply chains that manufacture widgets, food supply chains tend to have less flexibility, says Jason Woldt, an assistant professor in supply chain management at the University of Wisconsin-Oshkosh. For example, an automaker can do a global search for what it needs, while supplies for food and beverage producers are limited to a region or two by the very nature of the product.

“The pandemic has changed consumer habits for many food-based supply chains, making them less predictable. For example, because fewer people are going out to restaurants, more product is flowing through grocery stores and less product is flowing through distributors serving the commercial channel,” he says. “In some cases, consumers are buying the same product through a different channel, sometimes the same product packaged differently, and in some cases a different product altogether.”

That’s something Lakeside Foods in Manitowoc has seen firsthand. A manufacturer of canned and frozen vegetables, the company saw an increase in demand for its canned and frozen products and changed some of its offerings to better meet consumer demand as
Safer at Home orders went into effect, says Anne Smith, communications manager for Lakeside Foods.

“Our can sales went up. We decided to prioritize some of our SKUs to eliminate some production line changes so we could produce more. We would make more of certain sizes since those are more popular with consumers,” she says. “Consumers are shopping less often, preparing more food at home and looking for shelf staples.”

Woldt says the key for food and beverage manufacturers in the current economic environment is flexibility.

“Firms must ensure that they have agile operations. In many cases, demand in certain channels will slow while others will accelerate,” he says. “Firms must be able to quickly shift their operations to meet this changing consumer demand.”

Nueske’s in Wittenberg found ways to adapt when its supply chain briefly tightened in early summer, including adjusting some orders due to the amount of product on hand. “We had to decide what to make,” says CEO Tanya Nueske.

Changing markets

Food and beverage manufacturers have been affected less than other industries during the pandemic since people still need to eat, says Chuck Sizer, an instructor in Lakeland University’s food safety and quality program.

“What has changed is where people are eating and drinking. More people are eating at home and manufacturers need to shift the sizes or types of products they’re making to keep up with that demand,” he says.

That’s what 3 Sheeps did when bars and restaurants closed, shutting down the market for the brewery’s kegs, Pauly says.

“We had kegs we just had to dump. That was a big expense for us,” he says. “But people started drinking more at home and just drinking more overall, so sales of our bottled and canned beer increased.”

Pauly says the pandemic caused a total shift in 3 Sheeps’ market — instead of selling one pint of beer, it sells one can
of beer.

“We want the balance back (between commercial and consumer sales). That’s better for business,” he says. “Our margins are tight now, but we’ll come out fine.”

Nueske’s saw a definite increase in the amount of mail order sales. “That’s where you need to be flexible and look at your offerings,” Nueske says. “With the mail orders, we saw an increase in bulk orders that we hadn’t seen before.”

Smith says the demand for canned vegetables forced Lakeside Foods to do something it hadn’t done before: It created a Lakeside Foods label. The company’s products are normally sold under its customers’ private label.

“With that move, we were able to make products that could be sold in multiple stores,” she says. “We could work faster since we only had one label to place on the cans.”

Besides seeing increased demand for canned vegetables — especially those in larger sizes — Lakeside Foods saw sales of its whipped topping skyrocket.

“It was surprising to see the huge jump,” Smith says. “We’ve attributed it to people doing more baking while at home and just wanting more treats.”