Shortage of take-out containers and coffee cups

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Consumers are returning to restaurants in droves, but continued demand for take-out is exacerbating shortages of items like plastic straws, coffee mugs and take-out containers.

Grunts in the global supply chain have rippled through the economy for months as the health crisis created bottlenecks and other new challenges for businesses. Integrated components like semiconductors have been scarce, sending shock waves through a number of industries.

For the restaurant industry, supply chain challenges have led to increased food costs and shortages of key ingredients like chicken. And as consumers return to ordering from restaurants more often, many still do not eat their meals in dining rooms. Orders at off-premises restaurants were up 20% in September compared to the same period two years ago, according to the NPD Group. The increased demand for on-the-go containers, napkins and on-the-go cups is putting even more pressure on restaurant supply chains.

“It’s more than food. It’s paper products, it’s plastics, that’s just all – the packaging of the products we get,” said Craig Dunaway, president of Penn Station East Coast Subs .

Packaging companies that make take-out containers, straws and take-out cups for restaurants have faced soaring shipping container costs, a labor shortage at scale national and additional expenditure on key materials, such as resin and paper.

No quick fix

For example, International Paper said in late October that it absorbed an additional $ 50 million in supply chain costs for its export operations in its most recent quarter. The company no longer manufactures foodservice containers but manufactures corrugated cardboard packaging and absorbent pulp, both of which can be used for take-out packaging. CEO Mark Sutton told investors he didn’t know when the supply chain would normalize, potentially suggesting the second half of 2022.

David Pokorny, a food packaging expert for Imperial Dade, counts Eataly, Bluestone Lane and Bareburger as clients. The sharp decline in restaurant demand and the wave of closures have affected orders, especially for Manhattan restaurants, but he said demand has now returned to about 70% of pre-pandemic levels. Even with fewer orders, Pokorny still spends most of its day researching enough products for its customers.

“There is literally no straw and very, very few clear iced coffee cups,” he said. “There was such a shortage that people were like, ‘I don’t care about the price, just send it to me.'”

These shortages can be, in part, attributed to the February ice storm in Texas. The state’s petrochemical plants shut down, triggering a plastic shortage that was not fully addressed months later. And while petrochemicals are a key component of plastic straws and iced coffee mugs, they are also used in making pizza and cake boxes for the latex that binds the layers of the packaging together.

Pokorny said Imperial Dade’s size has helped the company find alternatives for restaurants, although some items cannot be replaced. The company has also stopped selling key products to other distributors, choosing to focus on fulfilling orders for its major restaurant customers. He said a big problem is that the company imports its private label products, so delays at ports have been a challenge. And many manufacturers have relocated their production, so it is not possible to simply add more capacity domestically.

“It’s been a tough time for lack of a better way to put it,” Pokorny said.

Inventory management

For some restaurants, take-out containers have been more difficult to find due to broader supply issues. US Foods limited the number of cases some Penn Station Subs franchisees could order due to labor issues, pressuring operators to decide how they should manage their inventory. Dunaway said he is encouraging franchisees to stock up on non-perishable items like branded napkins and cups before stocks run out.

“We have taken aggressive steps to minimize the impact of workforce and supplier challenges on our customers. … To further mitigate potential impacts, we may also work closely with certain customers on specific markets to temporarily adjust their orders while we manage local challenges, ”a spokesperson for US Foods said in a statement to CNBC.

Rival food service provider Sysco declined to comment on the supply chain challenges it faces. However, he said he would brief investors when he released his first quarter results on Thursday.

And it’s not just regional chains like Penn Station Subs that are struggling to find enough cups and containers. The Wall Street Journal reported this summer, coffee giant Starbucks was running out of cups in some cafes, although CEO Kevin Johnson denied CNBC’s “Mad Money with Jim Cramer” report.

But shortages can create opportunities. Sara Burnett, who leads Panera Bread’s sustainability efforts, said her difficulties finding packaging for her hot sandwiches prompted the chain to find an alternative that is more readily available and has less impact on the environment.

“We have moved to compostable thermal packaging, which uses 60% less material, is easier to transport and has a significantly smaller footprint in terms of how it is shipped,” she said. “It’s one of those things that is really really sustainable, which means it both benefits the business and it’s better for the environment.”


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