Recipe for a grocery revolution

NICK EICHER, HOST: Most of us have seen empty grocery store shelves firsthand, and not just in the aisle where you’d ordinarily find the toilet paper. Grocers are having to ration quantities of household staples like eggs and milk, as well as TP and tissues.

MARY REICHARD, HOST: So, is it a matter of supply or demand? Could grocers have better anticipated the demand with more supply? Maybe not. But some were better prepared than others. And the lessons learned may permanently change things in the grocery business. 

WORLD reporter Katie Gaultney has the story.

AUDIO: [Attention, deli department]

KATIE GAULTNEY, REPORTER: The sounds of rolling grocery carts, overhead music, and the occasional loudspeaker announcement are all you really hear in this North Dallas grocery store. More than half the shoppers have masks covering their noses and mouths, so there’s little talking, even among employees. 

Red squares on the floor mark out the proper “social distance” customers should observe. And yellow fliers remind customers to limit their quantities of certain items: eight yogurts, two dozen eggs, and one package of toilet paper—if there were any toilet paper buy. 

It feels like most grocers are still playing catch-up. But a few are getting gold stars for how they’ve handled the enormous influx of shoppers.

Texas grocery favorite HEB is one of them. The company’s president told  Houston CBS affiliate KHOU that foresight was the key. 

NEWS: As COVID came on, we began to call retailers from around the world whom we have a relationship with to say, “What are you seeing happen?” And through that research we were able to put an action plan in place early on… 

Lane Cohee teaches supply chain management at Palm Beach Atlantic University. He told me HEB was quicker to identify future challenges than many of its industry counterparts. 

COHEE: So things like rationing things, like having procedures in place with regard to social distancing and keeping, taking care of their employees because they know that, you know, if we lose our employees then we’re not going to be able to deliver product. I think they were just earlier than perhaps some of the other grocers were in anticipating that…

But could anyone have foreseen the toilet paper rush? Doug Baker is with FMI, a food industry association that counts major grocery chains—including HEB— among its members. He said toilet paper shortages are a demand problem, not a supply problem. 

BAKER: You go back to natural disasters, we’re sort of programmed to buy certain items when there’s a national disaster, milk, eggs, bread, bleach, paper towels, toilet paper, water, right? So those things that people are typically programmed to they just automatically go and get.

Baker also pointed out that people are at home—using their own toilets more than normal. So, most families do actually need more toilet paper. 

Shortages won’t last. But will this type of COVID-spurred buying behavior impact the industry long-term? Both Baker and Cohee say yes, but not in ways you might think. 

First, consider how the balance of food consumption has shifted. Baker told me that in “blue sky days,” when we’re not in a global pandemic, anywhere from 51 to 54 cents on the dollar is spent on food eaten outside the home, in restaurants.

BAKER: So all of that has shifted back to home. And that’s also put additional demand on those grocery stores. If you were spending that money and you were going out to a restaurant a couple of times a week and now you’re not. I think at one point we identified it was about there’s like 145 meals a year that actually now came back into the home, per person. 

And that has caused the wholesale-retail food dynamic to shift. Traditionally, restaurant suppliers and retail grocery stores are competitors. But now, wholesalers have a glut of food that restaurants aren’t buying. And grocery stores have a need for more inventory. 

BAKER: We’re actually doing matchmaking between retailers and wholesalers in food service distributors to redeploy product, equipment, and labor in order to help ease some of that demand on the supply chain that the grocery retail side is feeling.

The new demand for delivery options is also set to have a lasting impact on the grocery landscape. Now more than ever, people are turning to apps and online services to do their shopping, hopefully with less exposure to illness. That’s a trend supply chain analysts like Cohee have been watching for some time. 

COHEE: For the last several years we’ve been talking about basically who’s going to win at the last mile of delivery of groceries to the home. And I think this has accelerated that consumer behavior. I think they’re going to be people who will never go back.

But powerhouse retailers like Amazon and Walmart are also jockeying for top marks in online delivery. And they are now having to ramp up their already robust operations to meet surging demand. 

COHEE: The companies that are getting, that are positioned directly or indirectly to being able to do home delivery, I think, I think it will be somewhat transformational. I think it’s just going to accelerate a trend that was going to happen anyway…

Big grocers have the infrastructure to manage crisis shopping behaviors—and the technology to drive online ordering, delivery, and curbside pick-up. But small to mid-sized grocers don’t. When the fog of pandemic lifts, shoppers may find toilet paper supplies are back to normal but fewer stores are selling it.

Reporting for WORLD, I’m Katie Gaultney in Dallas, Texas.

(Photo/HEB Grocery)

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