Dive Brief:
- McCormick will transition all of its factories to 24-hour operations by the end of 2020 to handle increased demand as the pandemic created an uptick in home cooking. The manufacturer saw a "depletion of inventory to meet the incredible surge in consumer demand," CEO Lawrence Kurzius said on a Thursday earnings call.
- "By the end of the year we will have added the equivalent of an additional plant of U.S. manufacturing," Kurzius said, remarking on the hiring necessary to dial up capacity.
- The company has also onboarded new co-manufacturers to keep up with 26% year-over-year sales growth in the company's consumer segment.
Dive Insight:
As pandemic buying patterns driven by increased home cooking persist from spring into summer, the major kink in grocery supply chains moved from logistics to manufacturing, said Kurzius.
"We took a lot of steps to initially expand just our logistics capabilities and capacity to meet the surge in demand ... and then as we debottlenecked that, our manufacturing capacity became a pressure point," he said. Beefing up manufacturing capacity around the world is intended to build-up backstocks in time for holiday baking.
In stores, however, receiving departments are still bogged down with constant restocks of essential goods like cleaning materials — some of which are bulky and take up extra time and space in the back of house, said Kurzius. There is roughly a one-week lag within grocery operations, preventing restocking orders from getting to vendors as fast as product is needed.
"It's been a challenge for us, primarily on manufacturing capacity in the Americas, and it's been a challenging time for the retailers because of the surge in demand and their ability to actually receive product," the CEO said. However, stores have been prioritizing paper and sanitation products, giving McCormick some breathing room to work on replenishing its own inventory, he said.
The company has also rationalized SKUs to an undisclosed degree to drive efficiency and speed the catch-up process.
