As products fly off grocery store shelves amid the novel coronavirus outbreak, big food manufacturers are adjusting their manufacturing processes to keep up.
In the first week of March, Nielsen found huge sales growth for pantry staples and other food products, from oat milk to tuna. As a result, companies like Tyson Foods, Sanderson Farms, Cargill, Perdue Farms and Kraft Heinz are extending production hours and shifting their manufacturing operations to meet the increased demand.
From restaurant to retail
As statewide mandates force restaurants to temporarily shut down or move to delivery and takeout-only models, manufacturing resources and production are shifting as well from foodservice to retail.
"While we've made moves like this before, this is the most significant shift we’ve ever initiated."
Dean Banks
President, Tyson Foods
Dean Banks, president of Tyson Foods, wrote in a blog post that the meat giant is transferring some of its chicken, beef and pork production from foodservice to meet the surge in demand for retail food products. Still, he said, the food supply in the U.S. is "more than sufficient."
With more than 100 U.S. production plants, Banks said that Tyson's scale allows it to quickly adjust and meet the current demand at grocery and retail stores. He said changing packaging from a foodservice product to a retail one can occur quickly because of "the built-in flexibility of our operations."
"While we’ve made moves like this before, this is the most significant shift we’ve ever initiated," Banks said.
But Tyson isn't the only company adjusting its operations to meet demand. Cargill Protein told Food Navigator that its demand for meat and poultry products in retail and foodservice is typically split 50/50, but has dramatically shifted to favor retail by about 85 to 15 in the last week.
"We are starting to see a shift in demand from foodservice to retail, but overall demand for protein has stayed fairly steady," Daniel Sullivan, media relations director at Cargill Protein and Animal Health, told Food Dive in an email. "We are not seeing tight quantities at this time — we have enough food available to feed people and animals during this crisis."
Sullivan said that foodservice orders have not stopped though, and to date, they have been able to meet all food manufacturer, retail and foodservice customer orders.
Mike Cockrell, chief financial officer and chief legal officer at Sanderson Farms, told Food Dive that if needed in coming weeks it could convert two plants in Mississippi handling mainly restaurant chicken to produce for grocery stores. He said Sanderson has done that before in 2018 when a customer asked for additional product and could do it again if high demand for grocery continues.
"You can only do that for a short period of time, but we could do that again and that would increase our production of retail grocery store product," Cockrell said. "Right now though, demand for chickens out of those plants is strong as well. So we're not going to do that in the immediate future. That is something that we could do, we have done, and will do if circumstances warrant."
Cockrell said that at least so far, the demand from retail grocery stores has offset any demand they have lost from foodservice, but that may not always be the case.
"The million dollar question I don't know the answer to is how long that lasts," he said. "How long will that retail grocery store demand remain strong enough to offset the erosion in demand from foodservice?"
Diana Souder, director of corporate communications at Perdue Farms, told Food Dive in an email that the company has seen a significant uptick in demand in both retail orders, as well as through its new direct-to-consumer e-commerce website. To keep up, Souder said Perdue shifted its total production to accommodate the variation in demand, with an increase toward retail. The company also added additional Saturday shifts in some locations and simplified the mix of products they're producing at this time to focus on pushing out its basic items like chicken breast, thighs, drums and nuggets.
"As the global situation with COVID-19 continues to evolve, we will continue to make adjustments based on demand to best serve the needs of our customers and consumers," she said. "Knowing that this situation is very fluid, we are assessing our policies as needed and are making sure we take thoughtful care of our associates in this uncharted environment as it continues to evolve."
Factories move to longer hours, greater safety measures
For now, Sanderson and other manufacturers are keeping up with the increased demand with extra hours. Cockrell said Sanderson has seen a "significant amount" of purchasing from retail stores and as a result, the company had to run its plants the past two weekends to keep up, but they "can only do that so much."
Amid the increased production, the company said hand sanitizing stations appropriate for use in food processing facilities have been installed, company nurses have been trained on CDC protocols and the company increased how often they clean common areas.
"We're taking a lot of precautions in our plants to try to keep our employees safe," he said. "That is our first priority every single day."
But even with prevention efforts, the virus continues to spread. Sanderson Farms confirmed on Monday that an employee at its McComb, Mississippi, processing plant tested positive for coronavirus.
"We're taking a lot of precautions in our plants to try to keep our employees safe."
Mike Cockrell
Chief financial officer, Sanderson Farms
The company said it is following CDC and local health department guidelines and procedures developed in consultation with an infectious disease physician. Sanderson identified six people in the work area who could be at risk, and those employees, along with the infected worker, have been sent home to self-quarantine with pay. They also conducted a thorough cleaning of all facilities over the weekend, but will continue normal operations.
Sanderson is far from the only company asking its employees to work more hours. Tyson, which is the largest U.S. meat supplier by sales, also had employees working through the weekend to ship its chicken, beef and other products to stores, The Wall Street Journal reported. Kraft Heinz CEO Miguel Patricio told CNBC that some factories are working three shifts a day.
"I have to say that our teams in our factories, in our distribution systems, are incredibly proud and understanding of the duty they have ahead of them," Patricio said.
Manufacturers may not, however, be able to maintain these longer hours. Representatives and analysts are already warning that the beef and pork industry are feeling strained and could face labor shortages as workers may have to stay home because of school closures or illnesses.
While there have only been a handful of confirmed coronavirus cases in food-making facilities like Sanderson Farms and Blue Diamond Growers, it's possible more could get sick. And at a Perdue Farms facility in Georgia, some employees walked out Monday in a wage dispute, with one employee noting in a video that they were putting in more hours with no increases. These labor issues have potential to ramp up as the pay and benefits of frontline workers in both food and grocery draw national attention.
Foodservice distributors want in on the action
As food manufacturers race to meet demand and produce enough product to keep grocery stores fully shelved during the pandemic, all kinds of foodservice distributors are also making a change and offering up its food for the retail supply chain.
The International Foodservice Distributors Association and the Food Industry Association announced a partnership last week to create a matching program that will connect foodservice distributors that have excess capacity — like products, transportation services and warehousing services — to assist food retailers and wholesalers that require additional resources to fulfill needs at grocery stores.
Rick Stein, vice president of fresh foods at FMI, told Food Dive that until demand slows down, supermarkets have to look at every potential opportunity to bring products into their stores.
"Right now, it's a stopgap kind of measure," he said. "It's until the demand slows down."
Although that could bring more competition to traditional food companies, Stein said that once it smooths out, grocery stores will likely go back to more traditional supply chain channels, but may form some new relationships in the process.
Stein said quite often foodservice and supermarkets are completely distinct businesses; some companies like McCormick or Campbell Soup have two different divisions that don't coordinate often. He said the trade group has done a great job in a "very short amount of time under a crisis, bringing those two worlds together" and working with the trade association network.
"These are unprecedented times with unprecedented needs, but if we can think in terms of partnerships and problem solving, we can get through this together," FMI President and CEO Leslie Sarasin said in a statement.
