Labor problem prove challenging for CPG industry

Labor problem prove challenging for CPG industry

In most cases, executives said they have been able to find ways to navigate shortages. But the challenges, they said, are wide-ranging and extend all across the supply chain.

KANSAS CITY — Labor, always a challenging issue for food manufacturers to navigate, has become even more so since the onset of the coronavirus pandemic back in March 2020. In presentations at the recent virtual Barclays Global Consumer Staples Conference held Sept. 8-9 executives of many of the leading consumer packaged goods companies were asked to what degree they are addressing the labor issue.

The report also says that consumer spending has reached pre-pandemic levels during Q2 2021, but there isn’t the workforce available to keep up with the demand. Demand for CPG products grew 8.7% in Q2 2021.

“The CPG numbers reflect the optimism of reopening, with purchases of personal care products up 20.6 percent over the prior year,” the report noted. “Items for food service—like popcorn at the movies or hot dogs at the ballpark—that suffered early in the pandemic have likely seen increases as events return.”

Still, at-home consumption has been the biggest driver of CPG demand and will continue to put pressure on the industry at a time when the supply chain is straining.

The CPG industry remains the largest manufacturing employer and currently has approximately 826,000 openings in manufacturing. Of those, 362,000 are in non-durable manufacturing, where CPG industry openings are recorded.

It’s not salaries keeping people away from jobs, however, as food manufacturing wages increased 4.6% in July 2021 year over year, while production and nonsupervisory roles saw wage increases of 6%.

SUPPORT NEEDED
CBA recently reached out to government leaders to launch new workforce initiatives to advance education, apprenticeships, and support of skilled trades and supply chain professions greatly in need of new talent. They also asked for legislation to support education tax credits, public-private job initiatives and targeted visa reforms to secure the next generation of talent.

The report also revealed that food and beverage manufacturers are experiencing supply chain constraints, caused by delays in shipping and fuel price increases. That has resulted in the producer price index jumping 6.1% in April 2021, 6.5% in May, and 7.1% in June over 2020 rates. Looking ahead, the CBA found it hard to predict what the data in the next report might look like. “At the start of the summer, COVID-19 may not have seemed like it was the past, but it didn’t feel like part of the future either,” the report stated. “The vaccination rate is improving, but not quickly enough to stop the march of the more contagious Delta variant. The economic effects of the Delta variant have not shown up in data yet. It’s the biggest variable in a sea of unknowns that make the economic future difficult to predict.”

With that in mind, the organization is following three big questions that could shape the CPG landscape in the months ahead: Will the Delta variant keep Americans home more, leading to even higher demand on an already-stressed CPG industry?
Will job gains in the broader economy start to be seen in the CPG industry?
When will the pressure release on a strained supply chain?

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