Americans will have to put up with fewer shopping choices than usual at the supermarket and other retailers “for the foreseeable future,” according to Geoff Freeman, former head of the American Gaming Association.
“We’re not going to have a food shortage in this country … but it’s not like it was in 2019,” Freeman said Wednesday at the AGS GameON summit at the Hard Rock Casino in Hollywood, Florida.
Now president and CEO of the Consumer Brands Association, Freeman described the ways in which the COVID pandemic “bent” the finely tuned supply chain for all types of goods, from peanut butter to slot machine components, and how subsequent events stressed it further. The Consumer Brands Association represents the $2.1 trillion food, beverage, and consumer-products industry.
“The first thing the industry did to manage the supply-chain problems was reduce the number of SKUs; in other words, reduce the number of choices that you have as a consumer,” he said. SKU is short for “stock keeping units,” the bar code and alphanumeric label that identify the size, manufacturer, price, and other attributes of virtually everything sold in all types of stores.
For example, Freeman said Smucker’s reduced the number of JIFF peanut butter SKUs from 72 to about eight. Maybe crunchy JIFF now is available in only one size of jar instead of several.
“That’s how they manage to get this output continuing,” he said. “Those SKUs are very slow to come back.”
In the gaming industry and others throughout the United States and other countries, the pandemic forced millions to lose their jobs or work from home. That led to unanticipated shifts in demand for products and where they’re used, Freeman said.
“(People) weren’t using more toilet paper, but everything changed in terms of where they used it,” he said, recalling the shortage at the beginning of the pandemic. “The example with toilet paper happened across the industry. Every product you can imagine that was being consumed in restaurants or in other commercial spaces all moved into homes overnight. These precise manufacturing capabilities were in no way positioned to instantaneously adapt to that.”
In addition, people concentrated on buying televisions and other items to make staying at home easier. “And now we have a shift where no one’s buying any of them,” Freeman said. “The money is shifting to experiential activities and away from what Target and Walmart may be selling. We’ve come full circle in the supply-chain problems.”
He said several additional factors put extra strain on the supply chain, including lockdowns in Shanghai and other parts of China. Russia’s war on Ukraine cut off the source of almost all sunflower oil consumed in the United States, where it’s widely used for cooking and cosmetics.
Freeman said the supply-chain problems and recent high inflation have led some in the industry to speculate privately that a “good recession” might reduce economic pressures, but he looks in a different direction.
“The one bright sign that comes out of all of this is that no one paid attention to the supply chain before the pandemic,” he said. “Nobody knew how it happened. Everyone just expected it. The truth is our industry has made this look really easy and it’s damn hard.”
Even considering the prospect of unintended consequences, he suggested a federal agency take a bird’s-eye view of the supply to help prevent bottlenecks.
Freeman predicted an increase in U.S. manufacturing as companies move facilities out of China, but said automation is becoming increasingly important to save production costs. Trucking companies, which contend with an 89 percent annual turnover rate among drivers, are looking at driverless trucks, he said, and talking about specially built lanes for such vehicles.
More change is ahead in the consumer world, too.
“The way people are spending their money is shifting faster than ever before,” Freeman said. For example, a General Mills executive told him the company used to tweak the makeup of Lucky Charms cereal once every four to five years to meet customers’ changing tastes. Now it’s every six to 12 months, which is difficult because of food regulations.
“Across the board, you’re seeing the consumer shift,” Freeman said. “Who could have predicted six months ago that no one’s buying a TV right now?”
While some sectors, including the travel industry, have shown growth recently, another shift could be around the corner.
“It’s going to be much trickier placing those bets (on consumer desires),” Freeman said, “because we don’t have the consistency and continuity that we had before the pandemic.”