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Keith Daniels, partner with Carl Marks Advisors, relates how the food supply chain — both on the restaurant and grocery sides — fared during the pandemic, and what permanent changes the industry is likely to experience in the years ahead.
The pandemic is showing signs of abating, and the economy is slowly reviving, but the food supply chain still faces a number of challenges, Daniels says. Demand is strong, but exporters and importers are having a difficult time obtaining sufficient containers and trailers to get their products to market. That’s leading to some shortages of staples such as coffee, fruits and vegetables, and the wood pulp needed to make tissue paper. To make matters worse, ports around the world are experiencing severe congestion, as well as sporadic closures caused by spikes in the COVID-19 virus.
The restaurant sector was hit hard during the pandemic by stay-at-home orders and the virtual disappearance of its customer base. Meanwhile, grocery suppliers and retailers struggled to keep critical items on the shelves, as consumers briefly engaged in panic buying. The result in some cases was a mismatch between supply and demand, causing spoilage of perishable products.
The grocery business has since bounced back, experiencing unprecedented growth in demand. But it must also deal with some possibly permanent changes in shoppers’ behavior, Daniels said. That includes the continued growth of online ordering. Larger grocery chains anticipate that e-commerce will account for 20% of total revenues in the months and years ahead. Many older shoppers, who had been reluctant to buy online, have changed their minds upon discovering the convenience of having orders delivered to the doorstep. But brick-and-mortar stores will continue to play a dominant role in the grocery business. “It’s going to be a balance,” says Daniels.
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