US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

… And Not Enough: Products Can’t Be Produced If Even One Ingredient or Component is Missing

A lot has been made recently of the supply chain challenges and rapidly shifting demand trends messing with ordering as suppliers and retailers hope have enough, but not too much on hand. Well, in some cases, the outcome ended up being…not enough.

Companies across the economy are finding that they have to limit production in key areas, discontinue brand lines, or close factories either temporarily or permanently. A key example from the last few years has been automobile production facilities idled or with stocks of mostly completed cars on their lot which they can’t ship until they receive that missing part or component. Suppliers can’t sell a product if one ingredient, part, or component is missing:

Sometimes, suppliers can find a new source for that missing part or can find an alternative and keep things moving. But sometimes, they can’t. Here are a few recent examples:

  • Pregis announced it would be closing a Kentucky-based plant that made polypropylene sheet foam and eliminate that Microfoam brand product for lack of a key ingredient when no suitable alternative could be found. Microfoam sheets were primarily used for protective packaging applications.
  • Packaged food companies – including giants like General Mills, Hostess, Conagra, Beyond Meat, and Mondelez – have been feeling the pressure from supply chain challenges, especially for cooking oils (particularly sunflower oil) and wheat. These companies have reported difficulties in reaching production targets and fulfilling orders. In some cases, other ingredient options exist, but in other cases, the key ingredients must be rationed among the best selling or most profitable items and new releases are delayed.
  • Lack of replacement parts needed to maintain aircraft at keeping planes grounded. Lack of pilots, flight crew, maintenance staff, baggage handlers and more aren’t the only problems airlines are dealing with to keep flights running and on time.  

Freedonia analysts continue to watch factors such as stock levels, shifts in consumer demands, evolutions in supply chains, and inflationary trends for direct and indirect effects throughout the economy.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, especially coverage in Construction & Building Products, Consumer Goods markets, and Automotive & Transport industries, as well as Food & Beverage coverage from our sister publisher Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Food & Beverage    

Rising Prices Are Another Reason for Out-of-Stocks at Grocery Retailers

Grocers are pushing back against food suppliers over rising prices.

Some grocers are refusing to stock goods if the food suppliers can't justify their price increases, won't negotiate, or won't delay price increases...especially if they have a similar item (e.g., another brand, same product in a different package size, fresh v. frozen) that is selling well.

This is expected to have an effect on product assortment at your local grocery store. There will likely be fewer new products, more store brands, possibly fewer specialty items, and different cuts/types of meat, among other effects.

Even if the negotiations with food suppliers don’t result in lower prices, it's good press for the grocers to be able to tell their shoppers they are fighting for them.

On the other side of the coin, food suppliers know they have to watch out for customers who might find alternatives and start switching which products they buy. While they have to guard against loss of profit margins, it's expensive to win back a customer after they have developed new shopping habits.

Our expectation is that this trend is not limited to food and will also be happening – where it isn’t already – in other markets and industries hit harder by inflation. More companies are pushing back (where they have the power) and seeking alternatives.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, especially coverage in the Consumer Goods markets, Packaging industries, and Automotive & Transport industries, as well as Food & Beverage coverage from our sister publisher Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods      Custom Research      Food & Beverage    

Trouble For Ultrafast & On-Demand Delivery

In the past week, there has been a flurry of announcements of cut-backs, closures, and staff reductions from delivery firms, particularly the ultrafast, on-demand delivery service providers.

The home delivery industry more broadly has seen its share of innovations, developments, and growing pains… but what’s going on now?

  • A tight labor market and rising labor costs are making it hard for delivery companies of all stripes to find the workers they need at a cost that allows them to keep prices at a level consumers will accept.
  • Rising grocery costs are leading consumers to think twice about convenience spending for delivery services.
  • Supply chain troubles are making it harder for on-demand delivery firms to ensure that they will have what a customer needs when stocks are low and out-of-stocks are common.
  • More grocery stores have developed their own in-house delivery services, including Walmart’s in-home delivery option.
  • Curbside pickup operations have matured to function better and more seamlessly, with a greater number of pickup times run more efficiently to accommodate more customers with less waiting.
  • More consumers are willing to venture out and do their own grocery shopping as pandemic fatigue is rampant despite ongoing high infection rates.
  • Getting enough early state funding is problematic for some, particularly as a few on-demand service providers relied on investments from Russia.

Still, there are opportunities as better established delivery firms expand beyond an initial grocery or foodservice scope. The more broad use of predictable subscription orders will also add efficiencies. Technological improvements from electric vehicles to AI-assisted ordering and drone delivery (for small orders anyway) will allow for cost reductions and greater efficiencies in more areas.

The delivery industry will continue to innovate and Freedonia analysts will continue to watch trends for additional opportunities.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, especially coverage in the Consumer Goods markets, Packaging industries, and Automotive & Transport industries, as well as Food & Beverage coverage from our sister publisher Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods      Food & Beverage    

Inflation, the US Food Market, & Consumer Behavior

There are a lot of factors behind rising prices in food, including still high demand for cooking at home, rising cost to transport food, supply challenges as processors shut down temporarily or issue recalls, seasonal/climate/weather challenges to crops, and global shifts in supply due to crisis points such as the war in Ukraine and sanctions on Russia.

Many consumers are concerned about rising or otherwise inflated prices in several product categories, but concerns are highest for food. In the Freedonia Group National Online Consumer Survey conducted in October-November 2021, 56% of respondents reported being very concerned about rising food prices. In the November-December 2021 edition of the survey, 50% of consumers strongly agreed they were concerned about rising food prices. By the February 2022 survey, this figure had jumped to 60% of consumers.

Similarly, in the October-November 2021 survey, 49% of consumers reported they were very concerned about food shortages. In the November-December 2021 survey, 27% of consumers strongly agreed they were concerned about shortages of food they typically buy, and this figure grew to 39% in the February 2022 survey.

Shortages typically mean higher prices; low supply and/or high demand brings on higher prices. So, people who are concerned about shortages are also showing their concern for rising prices. Consumers who are expecting the things they buy (in this case food) to become less available and for prices to rise will stock up now, thus assuring themselves of enough stock locked in before prices increase even more.

However, that is a self-fulfilling prophesy. As more consumers buy ahead of their need, that messes with supplies as manufacturers can’t keep up with demand, resulting in more shortages on shelves and driving prices up even more.

Freedonia analysts continue to watch inflationary trends for direct and indirect effects throughout the economy.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, especially coverage in the Consumer Goods markets and Packaging industries, as well as Food & Beverage coverage from our sister publisher Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods      Food & Beverage      Packaging    

One Company's Waste is Another Company's Raw Material

The circular economy is not just a chance to improve green-cred or as a marketing tool. It can be a financial benefit to a company’s bottom line too. If a company finds a market for something they otherwise would have to pay to dispose of, it's a financial win and a sustainability win.

We're looking at food waste for Packaged Facts this year as it’s a major issue food suppliers/retailers are targeting for sustainability goals (oh so very much waste), but not all food waste is edible or at least not edible in the same way, so...

Interesting case: Ford is using a plastic made using McDonald's coffee chaff (apparently that's coffee bean skin that comes off in the roasting process) for some of its headlight housings. They started working on this in late 2019, but talked about it recently in light of their pledge to reduce virgin conventional plastic use. Such material creativity has become more important, given the fact that recycled plastic materials are not available in large enough amounts to allow all the companies that need it for their sustainability pledges to hit their targets.

Others are also getting creative in making unconventional and more sustainable plastics. Loliware has developed a process using seaweed pellets that can be run through the same equipment that makes plastic straws, utensils, cups, etc. Right now, the company is only making straws and is able to offer these products at a competitive price because it doesn't need special equipment to make these straws. However, Loliware is expecting to expand into other areas with their molder partner Sinclair & Rush.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, especially coverage in the Packaging industries, as well as Food & Beverage coverage from our sister publisher Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Food & Beverage      Packaging