Looking back on 2020, the Consumer Brands Association notes that the CPG industry can take great pride in including rapidly adjusting supply chains and hiring employees to meet relentless consumer demand that drove sales up 21% and up in March in March grew 9.4% to $ 131 billion for full year 2019. And while the industry outperformed the overall economy in many ways over the past year, it continues to struggle with unique constraints that, if left unchecked that could affect year-over-year results.
In this episode of FoodNavigator-USA’s Soup-To-Nuts podcast, Consumer Brands Association President and CEO Geoff Freeman acknowledges the strength and creativity of the industry in tackling many of the unexpected challenges of 2020 and shares what this is for What is needed is ongoing and new but related issues including labor shortages, rising inflation and persistent supply chain constraints.
“2020 was a test the industry has never seen before, and hopefully different from one we’ll see again. And I think it was a test on different levels, ”Freeman said, noting the amount of product consumers needed, where they needed it (at home versus work or in restaurants) and over time, any CPG players challenged.
But he added, “The industry could give American consumers what they were looking for.”
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“The workforce in this industry has adapted to the occasion and done incredible things.”.
One way for the CPG industry to balance increased demand with limited resources has been to streamline production by prioritizing essential and best-selling products – temporarily or, in some cases, permanently, to disrupt others’ production.
The CPG industry also relied heavily on its employees, hiring new staff when other industries went on vacation and let employees go. In many cases, Freeman finds that employee contributions and sacrifices have been recognized with bonuses and salary increases, making the CPG industry an attractive segment.
“What enabled the industry to meet demand was the workforce. The workforce in this industry has adapted to the occasion and done incredible things. We saw an increase in our regional facilities, which operated five days a week and now operated six and seven days a week. Facilities that ran two shifts typically did not run three shifts. Facilities that were now closed on various public holidays operated during those holidays, ”Freeman said.
“And that was a great achievement”, which was reflected in wage increases and bonuses, with the result that the CPG industry paid an average of 3.5% more than in the previous year – an increase that was compounded by the 1% decline in wages in the economy as a whole became more evident during the period, he added.
The higher wages made the CPG industry more attractive to potential employees, but Freeman warns that continued increased consumer demand for products is creating unsustainable pressures on the workforce that may require government intervention to alleviate it.
As a result, the CPG industry is struggling to find people in a wide variety of areas to meet demand for manufacturing, transportation and specialty skills.
In the past, companies in tight labor markets hoping to be hired have sweetened offers with additional benefits, perks and higher wages or salaries. With many companies running higher wage bands lately and rising inflation limiting the potential for additional wage hikes, industry players need to get creative to attract and retain qualified candidates. These decisions must also be weighed against other cost management strategies.
Right now there is no doubt that we are in a period of inflation where costs are skyrocketing and this is happening in every aspect of the CPG industry, from the basic materials to the ingredients to the materials that these products are made in are packaged, and the transport aspects of these products to the workforce. Every one of them has seen a dramatic spike in costs, so it’s hard for me to look at large companies in a vacuum and say that by paying more, we will compete, ”Freeman said, adding Generally, the pays Industry its will and must instead find more creative ways to keep attracting qualified candidates.
Management of restrictive costs and supply chains.
With limited opportunities to pass the price on to consumers, many CPG actors are pursuing other cost-efficiency strategies, including within their supply chains. You need to be careful, however, as many of the pandemic-affected supply chain vulnerabilities remain despite concerted efforts to reinforce weaknesses.
With this in mind, Freeman praised the American employment plan proposed by the Biden Administration in late March, which includes measures to strengthen supply chains and possibly alleviate the current labor shortage. Specifically, the proposal proposes investing US $ 50 billion in the establishment of a new office in the Department of Commerce “dedicated to monitoring domestic industrial capacity and funding investments to support the production of critical goods” and the partnerships of the community Empower colleges to promote vocational training for in-skills.
“We were thrilled that the infrastructure package, the president said, presented significant funding for a supply chain office within the Department of Commerce that no longer exists. At the national level, there is no one who has their finger on the pulse of the supply chain, both in the US and the US, on how the product goes to market, where the robberies are, and what can be done to address some of these things, we need one Having part of that perspective at a higher level within the government and we are thrilled to see investment in this area as it is an area that needs more attention than in the past. “Said Freeman. He added that the supply chain is more than just road and rail – it also includes the ports where “we have big problems”.
Some of the pressures in the supply chain are due to inadequate staffing, and Freeman also praised the plan, which is to be addressed through funding for community colleges, as well as technical skills and professional training.
Ease of inflation and increase costs.
The Consumer Brands Association also urges the government to take additional steps to address challenges related to rising costs, labor demands, and consumer demands. The trading group stated all this in a letter to the National Economic Council on May 13th, stating levels not seen since March 2020.
“We understand that there are so many factors driving this that government policy will not solve all aspects of the problem, but there are things that can be incremental,” Freeman said.
For example, he noted, “Part of this addresses the shortage of shipping containers we see in our ports,” and another part safely adjusts how much weight trucks can move to maximize space and transportation.
CBA also urges the National Economic Council to ensure efficient permits, inspections, security controls and other necessary measures to avoid delays in the supply chain. She also calls on the government to encourage return to work through educational programs and to increase flexibility in unemployment and relief programs. The CBA is also calling for updated workplace guidelines to reflect vaccination status and is calling on the government to accelerate efforts by the Federal Maritime Commission to address shipping company consolidation and declining maritime performance and port delays.
A national regulatory approach creates more even competitive conditions.
CBA also advocates greater federal government oversight of key regulations currently administered at the state level. This creates an uneven playing field that hinders the ability of reputable brands to meet consumer demand.
“One of the biggest disruptions to our business – a business of this magnitude – is that California is going one way, New York is going another way, a third state is going in a completely different direction. We are destroying the power of scaling, ”said Freeman.
By creating uniform rules across the country, businesses can deliver more efficiently to meet consumer demand.
Ultimately, Freeman says that an industry-government collaborative approach is essential to post-pandemic rebuilding and ensuring that the lessons learned over the past 15 months are in support of smart growth for the CPG industry and the entire American economy and Population are used.
“We have made it to the other side of a pandemic here and there are a lot of lessons being learned and these lessons are about the importance of partnership, these lessons are about the power of scaling, these lessons are about that Newfound trading, that is, you know, kitchen table discussion in the supply chain that the details matter and how we care for the American people is important. And we need partners within government who will help us do this for many, many years to come, ”Freeman said.
He added: “We have been very pleased with our initial interactions with the Biden administration, the steps they have taken in the supply chain, the interest they have shown in some of the priorities that we have presented to them. We therefore hope for a strong and lasting partnership with the Biden administration. “