It has been an interesting year, with challenges in every aspect, Sterling Marketing Inc. president John Nalivka told an International Foodservice Distributors webinar this week regarding the food supply chain challenges surrounding the COVID-19 pandemic.
Several years ago, Nalivka warned that the efficiency of the meat industry could create problems if a challenging situation were to arise. “I think we found that this year,” he said.
According to Nalivka, one thing that kept coming up during the pandemic was that the U.S. was going to run out of meat. “The issue was not with our production potential but, rather, with available supply,” he noted.
From a positive standpoint, he said the supply chain challenges showed that there is good demand for meat. The negative side of this, however, was that people were rushing to stores but finding meat cases empty.
Several months down the road, consumer demand appears to be strong, although there is a question of whether consumers will have money to spend in the future. Nalivka did relay that the September Consumer Confidence Index was released this week and showed a large increase to 101.8, up from 86.3 in August.
“That is the highest we’ve seen that Consumer Confidence Index since this pandemic even began back in March. That is very positive,” he said.
The retail side has been very positive, with double-digit increases in beef and pork purchases, he said. Also, while foodservice remains an issue as many dine-in restaurants are still closed or at limited capacity, Nalivka said quick-serve restaurants have done well with takeout.
Industry structure needs 'serious consideration'
“I think there’s going to be serious consideration on the structure of the industry and how we manage risk going forward. The changes we’ve seen this year over the last six months I think will continue forward, with additional change with regard to how our industry is restructured,” Nalivka said.
For example, he said there may need to be two plants that slaughter the same number of cattle or hogs as one large plant, which would allow the plants to better manage risk.
The COVID-19-related plant closures and the subsequent large backlogs of market-ready animals in the second quarter created the largest share of the problems.
Nalivka pointed out many times that holding cattle is one thing, but the way the pork industry is structured today, with farrow-to-finish operations, means the flow must not be disrupted.
“I think it’s somewhat incredible [how] this industry adjusted in a very short period of time coming from the bottom of that trough, when we were running at 55% of our total capacity in the industry, then coming right back up in the low 90-94%,” Nalivka said.
From a packer perspective, he said risk has to be managed, which is a discussion that is currently taking place. “There will be continued change in these plant operations, and there needed to be,” Nalivka noted.
Julie Anna Potts, president and chief executive officer of the North American Meat Institute, noted during the webinar that the meat industry will increasingly look at automation and robotics as well as other ways of reducing the reliance on a labor force, especially since labor was an issue even prior to COVID-19. However, she said the changes will require a longer-term investment that will be made over time.
“Plants will look very different in the coming years,” she added.