Operations

The Supply Chain Disruption and Restaurants

Shortages seem to be on the minds of most restaurant operators these days, whether the supply chain or the labor pool. As a result, chefs are switching menu items, not because of seasonal variations, but because there isn’t enough product to go around.

The drop in manufacturing and food processing brought on by the pandemic along with pent-up demand has left producers, suppliers, and operators scrambling. Add to that the trouble seen in transportation with cargo ships, trucks, and drivers, and it’s not clear when the supply bottlenecks will clear.

Reuters reported that several restaurants received partial orders, missing items like lettuce, chicken, roast beef, ketchup, and mustard, while others ran out of paper bags.

Here’s a closer look at the latest upheavals in the restaurant supply chain.

Chicken

While restaurants had certainly faced a shortage in chicken wings before, this time, the supply chain disruption came from multiple sectors of the economy. Like restaurants, manufacturers are struggling to hire back employees and find enough workers to process chicken. This has led to a reduced supply of all chicken parts.

Tyson Foods, Cargill, Sanderson Farms, JBS, and other meat suppliers have reported operating under pressure in order to try and fill restaurant orders, The Wall Street Journal reported. Chicken prices continue to increase due to demand, rising prices for animal feed, packaging, transportation, and increased wages. Animal feed continues to skyrocket, with the cost of corn up 57% and soybean prices up more than 25% in 2021.

The conglomerate known as Tyson Foods is, once again, expanding with word out that they are joining forces with Continental Grain to purchase Sanderson Farms, the third-largest poultry producer in the U.S., for $4.53 billion. Sanderson employs about 17,000 people and processes around 13.6 million chickens each week. The deal is expected to close by the year’s end or early 2022.

Yum! Brands, parent company to KFC, reported that the popularity of their new chicken sandwich combined with the tightening domestic chicken supply has led to challenges keeping up with demand. Currently, the price for chicken breast has reached a seven-year high, and wings are up 125%. In addition, according to U.S. Foods, frozen chicken wing inventory has hit the lowest levels not seen since 2012.

Paper Bags and Cups

McDonald’s recently reported a major shortage in paper bags. Additionally, according to Consumer Affairs, the mega-fast food brand also faced shortages of ketchup packets and other condiments a few months ago due to the surge in take-out orders.

Back in July, Taco Bel posted this on its webpage, “Sorry if we can’t feed your current craving. Due to national ingredient shortages and delivery delays, we may be out of some items.”

Insider reported that Starbucks is also facing some supply challenges with a shortage in cups and other items like oat milk, baked goods, and flavored syrups. As a result, the coffee brand temporarily retired up to 25 menu items in June.

The Changing Menu

These supply chain disruptions have caused chefs to overhaul their menu in terms of both product and pricing. This comes from an industry that has long been wary of telling customers that they need to pay more for food. Many now see this as a long-standing problem that has been more clearly realized because of the pandemic.

Keeping prices down despite rising costs often correlated with limited advancement for the labor pool. Now, with employees demanding more in wages, a quiet reckoning is sweeping through the industry. Prices must increase, and consumers may have to adjust what they consider reasonable when dining out.

In June, restaurant prices increased an estimated 4.2% from a year ago, with Shake Shack, Denny’s, and Chipotle Mexican Grill a few of the brands that upped their prices.

To limit costs, menus are also changing in size, growing smaller and easier to manage. Even the physical menu may one day be a relic, as digital menus expand their presence.

It seems the pandemic brought into a clearer view some long-standing problems in an industry defined by low-profit margins and high turnovers. Like an old yet beautiful building in need of renovation, the restaurant industry is facing disruptions that, at their root, demand change. The motto for restaurants continues to be defined by a statement made by the Greek philosopher Heraclitus, “The only constant in life is change.”

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