Food manufacturers

Food manufacturers are cutting capacity in the face of challenges

A section of empty shelves are seen at a Walmart store in Teterboro, NJ, Wednesday, Jan. 12, 2022. THE CANADIAN PRESS/AP-Seth Wenig

Canada’s food makers are cutting capacity and focusing on key products as they face labor shortages and supply chain bottlenecks that show no signs of appeasement.

Shipping backlogs, delays in obtaining packaging and ingredients, and high worker absenteeism due to COVID-19 isolation protocols are interfering with the availability of some products, experts say.

The situation has prompted some food suppliers to notify grocers of steps they are taking to fulfill orders, including finding new sources of materials, adding transportation capacity and even changing product formulations in some case.

Buyers should expect intermittent issues with product availability, said Michael Graydon, CEO of Food, Health and Consumer Products of Canada.

“Some goods come and go and are a bit sporadic,” he said. “But the main thing in life will be there.”

Many food manufacturers are dealing with labor and product shortages by focusing on key product flavors and sizes with the highest demand to maximize efficiency, Graydon said.

Yet others have been forced to cut production as absenteeism reaches up to 20% at some factories, Graydon said.

“You end up having to significantly reduce your manufacturing capacity because you don’t have the manpower,” he said. “We already have strong product demand because the catering industry is basically down and household consumption has increased.”

Meanwhile, supply chain issues are also impacting the flow of goods, especially across the border.

Shipping issues are delaying the delivery of U.S.-made products to Canadian fulfillment centers as well as the availability of raw materials like packaging, experts say.

“There is a massive shortage of truckers,” Graydon said. “The goods do not move and the cost of transporting them increases.”

The situation is made worse by a new federal vaccination mandate for truckers, he said.

“It’s the timing,” Graydon said. “This new variant has had a significant impact on absenteeism…we cannot afford to lose more drivers at this time.”

Sylvain Charlebois, professor of food distribution and policy at Dalhousie University, said access to food in Canada will be a challenge for some time.

“There are bottlenecks all along the supply chain, especially in processing,” he said. “It’s impacting distribution and eventually the ability of grocers to restock shelves.”

As a result, consumers will see fewer discounts and products on supermarket shelves, Charlebois said.

“Promotions are going to be really, really rare,” he said. “And shoppers can sometimes notice half-empty shelves.”

Meanwhile, the shortage of truckers will make the border less fluid, causing delays in getting raw materials and finished goods, Charlebois said.

Av Maharaj, managing director of Kraft Heinz Canada, said his company is not immune to today’s supply chain challenges in the food industry.

Shipping costs have risen dramatically and there is a shortage of some raw materials, he said.

Still, Maharaj said Kraft Heinz’s plant outside Montreal has rigorous safety protocols and a low absenteeism rate, allowing it to operate at full production.

“The plant continues to operate at maximum capacity to meet the demands of Canadian consumers,” he said.

Lores Tomé, spokesperson for Kellogg Canada Inc., said higher at-home consumption coupled with supply chain issues have impacted the availability of certain products in Canada, such as Rice Krispies cereal from Kellogg.

These “intermittent shortages” reflect the difficult operating environment that all manufacturers face, she said in an emailed statement.

About 1,400 unionized workers at Kellogg’s factories in the United States had been on strike for several weeks last year. An agreement was reached on December 21.

This report from The Canadian Press was first published on January 19, 2022.