Dive Brief:
- Grocery suppliers are not likely to reach pre-COVID-19 stock levels again until the fall, said food distributor and grocery operator United Natural Foods (UNFI) CEO Steve Spinner on a Wednesday earnings call.
- Pantry-loading and closed restaurants have created unseasonal demand for grocery stores and suppliers are struggling to catch-up. "The fill rate is certainly the lowest that I've ever experienced by or seen by 1,000 plus basis points," said Spinner.
- Stockouts and low stock levels are hampering UNFI's sales, Spinner said. Still, net sales increased 12% year-over-year in the quarter ending May 2.
Dive Insight:
Fill rate, meaning the portion of UNFI's orders with suppliers that are actually fulfilled, is the number one sales driver right now for the distributor — it's also the number one limiting factor. Without revealing the specific number, Spinner called the fill rate "painful" and a "terrible loss [of sales] for us and for the retailer."
When it comes to essential products like cleaning supplies and basic grocery items, UNFI did not paint a picture of immediately easing demand as restaurants reopen.
"First, beyond the question of, are our restaurants open and am I allowed to eat out, is the question, do I feel comfortable doing so," Spinner said. Continuing high demand, combined with the spike of panic-buying in March, will keep some suppliers in catch-up mode for a few more months, the CEO said.
In addition, several major CPG companies like Coca-Cola, Clorox, Campbell's, Procter & Gamble and Mondelez have taken SKUs out of production during the pandemic to focus efforts on the most popular items amid shifting supply chain disruptions.
For distributors, these streamlining efforts are another drag, said Spinner.
"The largest manufacturers had discontinued on a temporary basis thousands of items to focus solely on producing the ones that consumers need the most. And so that will also start to come back as the overall growth rate stabilizes and manufacturers can get back to some state of normalcy," he said.
