It’s basic human sense: when a needed item becomes scarce, we hold onto as much of it as we can for future security. That was true at the beginning of the pandemic lockdowns, and on farms, it’s likely still true today. Supply chain disruptions mean that if you can finally get your hands on some necessary product or treatment, you’re probably hanging on to as much of it as possible.
The same thing is becoming reality with dairy products at grocery stores as lower national milk production, labor shortages, and packaging issues all play into how much product stores can get.
“We basically have identified products where we’re concerned on supply and reliability, and so we’re keeping more inventory so we have more time to recover,” Mike Brown described of Kroger on the April 27 Hoard’s Dairyman DairyLivestream. Brown is the director of the dairy supply chain for the grocery giant, which has 2,800 stores nationwide.
He said they are keeping an eye on supply risk for the rest of the year, particularly for butter. “We’re putting away more packaged butter than we usually would just because we want to make sure we have enough for fourth quarter,” Brown explained. Butter sales in that fourth quarter of the year are basically double any other quarter, he noted. That’s because of the uptick in baking around Thanksgiving and Christmas.
Keeping shelves stocked
Supply is a concern even beyond butter, as the whole company is looking to make sure they can get the products their consumers need, he said. But that means the supply has to exist and must be able to get to the stores. Both of those factors remain difficult. In fact, Brown shared that the on-time delivery rate to grocery stores has fallen below 50% for national brands.
“That means of the orders you made, 50% got there on time,” he said.
Late orders make keeping a grocery store stocked very difficult, which makes it even more attractive to build up inventory on a variety of items. When grocers across the county feel that’s necessary, more dairy products end up in warehouse cold storage.
“Our goal is to not be out of stock on shelves,” Brown emphasized of why Kroger has been expanding its inventory. Still, disruptions make that difficult. “I would be dishonest to say we haven’t had out of stock issues, but at least we’re not alone. The entire grocery business is struggling to keep shelves full.”
To watch the recording of the April 27 DairyLivestream, go to the link above. The program recording is also available as an audio-only podcast on Spotify, Google Podcasts, Apple Podcasts, and downloadable from the Hoard’s Dairyman website.
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