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Consumers are returning en masse to restaurants, but continued demand for take-out food exacerbates shortages in commodities such as plastic straws, coffee cups and food containers.
Challenges in the global supply chain have been hovering across the economy for months as the health crisis has created bottlenecks and other new challenges for companies. Integral components such as semiconductors were in short supply, which caused a shockwave across a range of industries.
For the restaurant business, supply chain problems have led to higher food prices and shortages of key ingredients like chicken. And as consumers increasingly return to ordering from restaurants, many are still not eating in canteens. Outdoor restaurant orders in September were up 20% from the same period two years ago, according to the NPD Group. Increased demand for take-out containers, napkins and take-out cups is putting further pressure on restaurant supply chains.
“This is more than just food. These are paper products, these are plastics, this is just everything – the packaging for the products we receive, ”said Craig Dunaway, president of Pennsylvania’s East Coast Divisions.
Packaging companies that produce takeaway containers, straws and takeaway cups for restaurants faced skyrocketing shipping container costs, a nationwide labor shortage, and increased costs for basic materials such as resin and paper.
No quick fix
For example, In late October, International Paper said it had covered additional supply chain costs of $ 50 million over the last quarter for its export operations. The company no longer manufactures food service containers, but produces corrugated packaging and absorbent cellulose that can be used for take-out packaging. CEO Mark Sutton told investors that he is not sure when the supply chain will normalize, suggesting potentially in the second half of 2022.
David Pokorny, food packaging expert at Imperial Dade, counts Eataly, Bluestone Lane and Bareburger as customers. A sharp drop in restaurant demand and a wave of closings have hit orders, especially at eateries in Manhattan, but he said demand is now back around 70% of pre-pandemic levels. Even with fewer orders, Pokorny still spends most of his day sourcing products for his customers.
“There are literally no straws and very, very few clear iced drink cups,” he said. “There was such a shortage that people said, ‘I don’t care about the price, just send it to me.”
This shortage may in part be attributed to the February Texas ice storm. Petrochemical plants in the state shut down, causing a plastics shortage that was not fully resolved a few months later. And while petrochemicals are a key ingredient in plastic straws and iced coffee cups, they are also used to make pizza boxes and latex cake that binds the layers of packaging.
Pokorny said the size of Imperial Dade has helped the company find restaurant alternatives, although some items cannot be replaced. The company also stopped selling key products to other distributors, focusing on fulfilling orders for its main restaurant customers. He said that the big problem is that the company is importing products under its own brand, so delays in ports were a problem. And many manufacturers have offshore production, so it is not possible to simply add more capacity domestically.
“It was a difficult time for lack of a better way to express it,” Pokorny said.
For some restaurants, it was more difficult to get takeout containers due to broader supply issues. US Foods limited the number of boxes franchisees of some Penn Station Subs divisions could order due to labor constraints, forcing operators to decide how they should manage their inventory. Dunaway said he is encouraging franchisees to stock up on durable goods such as branded napkins and cups before they run out.
“We have taken aggressive steps to minimize the impact of supplier difficulties and problems on our customers. … To further mitigate potential impacts, we may also work closely with selected customers in certain markets to temporarily adjust their orders while we deal with local issues. “A US Foods spokesman said in a statement to CNBC.
Rival food service provider Sysco declined to comment on the supply chain challenges it faces. However, he said he will tell investors when he releases first-quarter financial results on Thursday.
And it’s not just regional chains like Penn Station Subs who have trouble finding enough cups and containers. The Wall Street Journal reports Coffee giant Starbucks was short of cups in some cafes this summer, although CEO Kevin Johnson denied reporting on CNBC’s Mad Money With Jim Kramer.
But scarcity can open up new opportunities. Sarah Burnett, who leads Panera Bread’s sustainability efforts, said the trouble finding packaging for hot sandwiches prompted the chain to find an alternative that is more affordable and has a lower environmental impact.
“We switched to a shrink wrap that is compostable, uses 60% less material, is easier to transport, and takes up significantly less footprint during shipping,” she said. “It’s one of those things that is truly truly sustainable, which means it benefits both the business and the environment.”