Avendra 2022 Cost Outlook

AVENDRA

COST OUTLOOK

2022 FORECAST MARKET TRENDS I PRICING INFORMATION I UNIQUE PLANNING EXPERTISE 1

Dear Customers, I am pleased to present Avendra’s Cost Outlook with projections to help inform your budget for the rest of this year and 2022.

The pandemic that has gripped the world since early 2020 made an unprecedented impact on the hospitality industry, which was forced to make many operational adjustments to keep guests and workers safe.

While the public is regaining the confidence to travel, the global supply chain is still recovering from COVID-19. Staple items remain in short supply. There continues to be a shortage of manufacturing and transportation workers to make and then move product efficiently. Avendra continues to collaborate with our suppliers to find creative solutions to meet your needs. And we thank our customers for their feedback and flexibility as we navigate the fluid supply chain in the coming months.

Forecasting in such a dynamic environment is challenging. But as always, we are committed to keeping you informed and providing leading-edge solutions to help you successfully manage your business.

Finally, I want to thank my team of sourcing professionals for their expertise and dedication over the last several months. Their passion for our customers’ success is genuinely inspirational!

Best regards,

Chip McIntyre Senior Vice President, Strategic Sourcing QUESTIONS?

TELL US WHAT YOU THINK

Please contact Customer Service at customerservice@avendra.com or contact your account manager.

We value your feedback and want to hear what you think about this year’s Cost Outlook. Please take a minute to complete this brief survey.

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TABLE OF CONTENTS

04

Executive Summary: Key Category Inflation

06

Supply Chain Challenges ‒ ‒

10

United States ‒ ‒ ‒ ‒

22

Economic Outlook Commodities Short & Long-Term Outlook Pork Update Large Format Amenities

Canada ‒ ‒

29

Known Impacts Planting the Seed: The Life Cycle of the Cotton Plant

Economic Outlook Commodities Short & Long-Term Outlook

Mexico ‒ ‒

Economic Outlook Commodities Short & Long-Term Outlook

35

Additional Resources & Communications

36

Sources

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Disclaimer: Predicting the future carries a certain amount of risk. While every effort has been made to ensure accuracy, the information presented here is predictive and not intended to be taken as fact. This material is furnished for informational purposes only, is subject to change without notice, and should not be construed as a commitment by Avendra or our suppliers. While Avendra has made every effort to supply complete and accurate information, Avendra assumes no responsibility or liability for errors or inaccuracies that may appear herein.

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3

Executive Summary: Key Category Inflation For budgeting and planning purposes, the following is a high-level summary of expected inflation in key purchasing categories and suggestions to help mitigate price increases. While these estimates are intended to provide budgeting guidance on broad categories, some specific items will experience higher or lower price changes than indicated below.

Inflation Category

Inflation Projection

Mitigation

Food & Beverage U.S., Canada, Mexico

Expect inflation to be double in aggregate the recent historical norm – in the 4-6% range for the back half of 2021 and 2022. We expect center-of-the-plate protein increases this year to be in the range of 8-11%.

Adjust menu items, downsize items/portions, and/or adjust menu prices.

Disposables U.S., Canada, Caribbean, Mexico

Prices of packaging products have increased due to labor shortages, continued high demand for F&B ’to go’ packaging, and freight challenges. These impacts have put supply constraint pressures on resins and paper/pulp across the board. Expect continued disruptions across the industry and inflation of 3-8% through 2021 and into 2022.

Communicate with distribution for available alternatives.

Smallwares & Equipment U.S., Canada, Caribbean, Mexico, Central America

Expect inflation to more than double the recent historical norm – in the 6-9% range for the back half of 2021 and 2022.

Seek value/private label options for replenishment and smallwares purchases and consider value engineering opportunities on large scale renovations. Otherwise, consider postponing capital improvements until the market volatility normalizes.

Administrative U.S., Canada

Expect actual inflation to be in the 2-4% range for the back half of 2021 and 2022 (based on contractual safeguards).

Adjust shipping modes (overnight to 2-day saver) and institute controls on office supply orders.

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4

Executive Summary: Key Category Inflation Inflation Category

Inflation Projection

Mitigation

Rooms (Amenities) U.S., Canada, Caribbean, Mexico

Increased labor and freight costs, in addition to global shortages and allocation of key ingredients will keep the short-term cost drivers in place into early 2022. Customers should budget for a 312% short-term increase. The longer-term expectation for mid to late-2022 is that with stabilization and a retreat of historically high freight costs, in addition to greater availability of finished goods ingredients that pricing will retreat but not to pre-COVID levels.

Customers should budget for a 3-5% long-term increase (updated in Sept 2021 due to challenges detailed here.)

Utilize brand-approved substitutions where there are back orders.

Textiles (Linens & Towels) U.S., Canada, Caribbean, Mexico

With cotton now over $1 per pound, expect the price to continue to remain elevated in the short-term. Customers should budget for an 8-15% short-term increase. Long-term, we expect that supply and demand will stabilize and cotton prices will re-adjust based on market conditions and we will see lower than $1/lb pricing. The freight and labor cost inputs, however, are not likely to return to pre-Covid levels and we expect the increases on these cost inputs will be more permanent. Customers should budget for a 5-10% long-term increase (updated in Sept 2021 due to challenges detailed here.)

If possible, reduce PAR to slightly lower levels, and purchase available substitutions if needed.

Maintenance, Repairs and Operations (MRO) U.S., Canada

Expect inflation in the range of 4-6% for the second half of 2021.

Purchase private label products where available to offset the increase.

Chemicals U.S., Canada

Expect inflation to be similar to the recent historical norm, in the 57% range the back half of 2021 and 2022.

Purchase through the contracted chemical provider and seek product optimization from local chemical reps in order to optimize savings. Purchase through MFD (if not already) to improve bracket pricing.

Work with your distributor sales representative or Avendra Customer Service on availability of brandspecified products.

Customers in Mexico should consider buying products manufactured in Mexico to help reduce freight costs.

For more detail, please see the category-level forecasts by geography.

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5

SUPPLY CHAIN CHALLENGES: KNOWN IMPACTS US & CANADA KNOWN IMPACTS

WHAT YOU CAN DO TO HELP

Labor issues - Manufacturers, distributors and customers are struggling to find labor to meet the increasing demand. Many manufacturers aren’t running as many shifts as they would like. Some businesses are also dealing with positive COVID-19 cases, which cause further labor shortages and delays. Some service providers have had to increase pricing/implement surcharges, are unable to bid on new work, or have reduced their service area. This situation is also affecting ports and customs clearance, increasing the lead time for imports and exports.

1. Communicate with distributors and suppliers - As business returns, distributors are doing their best to forecast the demand. Communication and collaboration will be crucial throughout 2021. Make sure to communicate with distributors as early as possible when you’re planning for menu changes or anticipate an increase in demand.

Reach out to your distributors to discuss product needs and expected demand, especially for banquets menus, outlets reopening and occupancy spikes. Read Avendra’s Recommended Lead Times for Supplier Ramp-up document for the U.S. or Canada.

Availability of product - Both food and non-food suppliers have reduced the number of SKUs available to maximize output. Low-volume items have been temporarily or permanently discontinued. Avendra is working with our distributors to restock Avendra highly-leveraged items that were discontinued during COVID-19. Avendra is tracking weekly fill rates with our master food suppliers and working with our manufacturers to improve inbound fill rates.

Longer lead times - Current lead times from manufacturers to distributors could be 3-8 weeks or more, which can cause temporary outages as safety stock is being replenished throughout the supply chain. Longer lead times may exist for some items where manufacturing operations have ceased during the pandemic and for products made overseas.

We expect this to impact to last throughout 2021.

Cost increases - Manufacturers and distributors are impacted by higher inbound and outbound freight costs due to high demand, driver shortages and higher fuel costs. Additional triggers include labor cost increases, COVID compliance (PPE, plant adjustments to accommodate distancing) and commodity price increases that are expected to remain high (resins, wheat, sugar). Please refer to Executive Summary Key Category Inflation on p. 4 and 5 for high-level category information on F&B, Engineering, Rooms and more.

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2. Manage delivery days - Mondays and Fridays are typically the heaviest delivery days of the week. If possible, avoid taking delivery on these days, and work with your MFD to find a day/time that works best for everyone.

3. Reduce bulk purchases - Try to avoid placing once-amonth orders for products like bath tissue, chemicals, or can liners. Instead, order items throughout the month. This will help balance picking the load at the warehouse and will smooth demand as inventories are rebuilt.

4. Review menu pricing, portion sizes and specifications.

LEARN MORE: FREQUENTLY ASKED QUESTIONS AND ANSWERS

6

SUPPLY CHAIN CHALLENGES: KNOWN IMPACTS MEXICO KNOWN IMPACTS

WHAT YOU CAN DO TO HELP

Labor issues - Labor problems persist in the U.S., which puts export programs for Mexico and Central America at risk. Some businesses are also dealing with positive COVID-19 cases, which cause further labor shortages and delays.

Communication with suppliers is crucial.

The properties will have to look for substitute products in the national market with Avendra suppliers.

Longer lead times - Current lead times from manufacturers to distributors could be 3-8 weeks or more. Longer lead times may exist for some items where manufacturing operations have ceased during the pandemic and for products made overseas. We expect this to impact to last throughout 2021.

Communication with suppliers is crucial.

We recommend that you share a purchasing forecast to help suppliers prepare. Proactively, submit your order with extra lead time built-in to receive your product when needed.

SKU Consolidation – Both food and non-food suppliers have reduced the number of SKUs available to maximize output.

Low-volume items have been temporarily or permanently discontinued.

Review substitute products or different presentations of the same products. Some products and deliveries may take longer than expected, therefore it is imperative to have great communication with suppliers.

Inflation - An increase in inflation is expected, caused by several factors including, and not limited to, increases in labor costs, raw materials, freight, among others.

Monitor inflation rates especially for late 2021 and early 2022.

Properties will have to review the impact of costs and/or menu price adjustments to mitigate the impact.

Difficult to Forecast Demand by Geography - As businesses begin to operate with less restrictive measures and hotel occupancies increases significantly, suppliers are doing their best to forecast where demand will be.

Communication with suppliers is crucial.

We recommend that you share a purchasing forecast to help suppliers have better visibility of the products you require over the next several weeks or months.

Español

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PLANTING THE SEED: THE LIFE CYCLE OF THE COTTON PLANT It’s a scenario that plays out across thousands of hotel bathrooms every day: A guest turns off the sink or shower tap and reaches for a clean, soft towel. That towel will be collected by housekeeping, laundered, folded and returned for the next guest’s use. Rinse, reuse, repeat.

Over time, those towels are no longer viable for guest use and must be replaced. Pre-pandemic, a hotel supplier simply placed an order and received new towels with little delay or reason to pivot to an alternative product. But like many other products sourced from raw materials and dependent on a complex and still-in-flux supply chain, cotton towels are now a commodity that operators must acquire through foresight and flexible budgeting. To put this challenge into perspective, production and delivery can now take up to 120-180 days for a particular towel. Here’s why: While global cotton prices remained relatively stable over the last several years, the pandemic and other weather-related issues have forced an upturn in costs. In the U.S. alone, 2021 cotton production is estimated at approximately 25% below last season’s crop.* And, with consumption growing exponentially over last year, it is a classic case of tightened supply and increasing demand driving costs. From there, to understand the complexities of moving this product to market, the road from cotton plant to towel is one worth navigating.

1. PLANTING, HARVESTING AND GINNING Cotton is a seed hair fiber that develops from seed to boll over the course of 50 days. Once the boll has opened and dried, the cotton is ready for harvesting. Most cotton is harvested mechanically by one of two kinds of machines: cotton pickers or cotton strippers. It is then transferred to a module builder that allows the packing of an eight- to twelve-bale module in the field. Once full, the module is picked up by a truck and transported to the gin for removal of seeds. The ginning process separates the seeds from the cotton fibers, cleans the fibers and then presses them into 500-pound bales for textile production.

2. SPINNING COTTON INTO YARN Delivered to a textile mill, bales are opened by machine and the cotton is processed to produce fibers that are ideally 1 to 1.75 inches long. Modern spinning frames, twisting at up to 2,500 revolutions per second, spin these fibers into a yarn for weaving or knitting into fabrics. Unlike towels sold to consumers in retail stores like Bed Bath & Beyond or online at Amazon, hotel-quality towels must be constructed for sustained durability. Therefore, more resilient yarns, spinning methods and weaves all play a part in creating the final terry fabric that will extend the lifecycle of a hospitality-grade towel. *https://www.usda.gov/sites/default/files/documents/cotton-outlook.pdf

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PLANTING THE SEED: THE LIFE CYCLE OF THE COTTON PLANT 3. PRODUCTION The Process: From Weaving to Finishing Modern looms, working at great speeds, interlace the lengthwise and crosswise yarns into a woven fabric referred to as “gray goods.” It is subsequently sent to a finishing plant where it is bleached, pre-shrunk, dyed, printed and given a special finish before being cut and sewn into towels. While most hospitality operators opt for white towels, the size, design and finish may vary. At this step, the cloth is hemstitched and/or finished with decorative borders and distinct patterned weaves.

Production Time: Current Challenges The onset of the Coronavirus pandemic in 2020 placed an unprecedented challenge on the textile industry – hospitality demand for towels and sheets dropping to almost nothing -prompting mills and factories to shut down or severely curtail production as consumption declined. With countries now reopening and travel rapidly resuming, producers are challenged to rehire personnel and ramp up production in order to meet a steep demand spike. Subsequently, production time has extended from three to four months to a minimum of six months.

pallets of goods to their destination. Here, too, surging truckload demand and a shortage of drivers continues to exacerbate a supply chain challenge that will remain until late this year. Suppliers can expect a shipment that previously took three to four weeks via ocean freight now require eight to 12 weeks transit time.

THE BOTTOM LINE While the global supply chain is expected to rebound by the end of 2021, the slow recovery has caused crucial backups in both production and distribution of hospitality-grade cotton towels. To help you, Avendra’s strategic sourcing team has been utilizing its global reach for months to source alternative products that fulfill your immediate needs. While developing alternative sources, we have maintained the most competitive prices while ensuring the producers are meeting environmental and social responsibility expectations, thus mitigating client risk. Keep in mind that this pivot — like many others hotel operators may have had to make as supply chains readjust — is temporary but will adequately cover your inventory for the foreseeable future as occupancy continues to rise.

4. DISTRIBUTION Finished towels are polybagged, placed into case packs and sent to a warehouse. U.S. and Canadian orders are generally

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UNITED STATES: ECONOMY • U.S. hiring activity accelerated in June, mainly driven by sectors benefitting from the removal of public health restrictions.

U.S. nonfarm payrolls increased by 850,000 in June compared to a revised increase of 583,000 in May. The unemployment rate unexpectedly increased to 5.9% compared to market expectations for a decline to 5.6%.

Despite recent job recovery, the total employment level remains over 7 million below pre-pandemic level.

• U.S. retail sales dropped more than expected in May, but spending has rebounded above pre-pandemic levels.

Retail sales declined by 1.3% in May following a revised increase of 0.9% recorded in April. A benefit for travel and tourism is that consumer spending has shifted away from retail and increasingly towards services and travel as Americans resume away-from-home activities that were restricted at this time a year ago due to COVID-19.

• U.S. manufacturing activity accelerated at a record pace in June, despite challenges in underlying supply and costs of key inputs. IHS Markit’s Flash US Manufacturing PMI rose to a record high reading of 62.6 compared to 62.1 reported in May. Survey respondents indicated that supplier delivery times had lengthened further and selling prices have been raised at a faster pace to account for rising input costs.

• U.S. consumer confidence surged towards a 1 ½-year high in June as enthusiasm around economic recovery from the effects of COVID-19 offset concerns on inflation. The Conference Board reported its consumer confidence index for June climbing to a reading of 127.3 compared to a revised reading of 120.0 in May.

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KEY CONSIDERATIONS FOR 2021-2022 BUDGETING Market Conditions in the US COMMODITY

OUR EXPECTATION IS...

Food & Beverage – Changes relative to current prices

2-6%

SHORT TERM: • Ribeye, tenderloin, striploin: Industry labor shortage and strained productivity in the supply chain are expected to get better toward end of summer. Expect several months of price volatility. Eased dining restrictions that caused spikes in demand and drove prices higher will subside as forecasting and buying becomes more predictable.

3-6%

• Ground beef, burgers: Prices are expected to increase due to lower plant productivity as a result of ongoing labor shortages as well as continued high demand from both retail and foodservice.

3-7%

LONG TERM: • Ribeye, tenderloin, striploin: Inflationary pressures and higher export demand from China expected to be a strong dynamic in the beef market. Expect the large producers to keep up with the still-recovering foodservice demand as consumers gradually become more comfortable with dining away from home.

BEEF

5-8%

• Ground beef, burgers: Prices are expected to increase into 2022 due to anticipated feed cost increases and continued high demand.

1-3%

SHORT TERM: Overall chicken prices are expected to increase due to high demand, low industry supply and reduced plant operations because of ongoing labor constraints. Expect continued supply interruptions and limited availability on boneless breasts, thighs, tenders and wings. Customers should work closely with distributors to assist in forecasting and planning for potential shortages and should be flexible with menu items.

2-4%

LONG TERM: Prices are expected to continue to increase into 2022 due to continued high demand and low supply. Supply interruptions and low availability are expected to continue with boneless breasts, thighs, tenders and wings.

POULTRY

Short term refers to the expectation for the rest of 2021.

Long term refers to the expectation for calendar year 2022.

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Market Conditions in the US COMMODITY

OUR EXPECTATION IS...

2-4%

SHORT TERM: Prices are expected to show severe volatility as high demand and labor constraints impact plant productivity.

4-8%

LONG TERM: Prices are expected to increase as we enter 2022 when demand for Prop 12 & Bill H.3930 compliant product is needed (see p. 19 for details). Expect pork prices to differ from the normal seasonal pattern and reflect industry-wide swings as the supply adapts to the demand.

PORK

4-6% 10-15%

4-6%

SEAFOOD 4-6% 15-17%

6-8%

SHORT TERM: • Farmed Atlantic Salmon: There will be a slow price decrease from the historically high prices we saw in May 2021, but prices will remain much higher than the same period in 2019. As more, larger fish come into the supply chain and transportation obstacles improve, price relief is anticipated in Q4 2021.

• Shrimp: Ocean freight congestion and labor challenges continue to drive up shipping costs. Southeast Asia has supplemented the supply from India; however, expect volatility in pricing while easing global restrictions create rising foodservice demand.

• Pasteurized crabmeat: Prices remain high; however, supply improvements are anticipated, which will drive prices down slightly over the next few months. Expect some market normalization in Q4 2021.

LONG TERM: • Farmed Atlantic Salmon: Increased harvest of larger fish is expected. As global demand, supplies and freight challenges return to normal, pricing is expected to return to 2019 levels.

• Shrimp: Expect an increase in the category on average. There are fewer Black Tigers being farmed today versus Vannamei White shrimp due to the ease of production to meet global demand. Various larger sizes will see supply challenges and price volatility with rising food service demand in a postpandemic environment with shipping cost challenges (i.e., shipping container and labor shortages).

• Pasteurized crabmeat: Increased supply with leveled-off demand is expected to see favorable pricing, albeit not at the 2019 level. However, we should see improvements over the high prices experienced in Q1 and Q2 of 2021.

8-12%

SHORT TERM: Recent weather forecasts show cooler temperatures and more rain, which should help improve grain crop conditions in the Midwest. In addition, recent USDA reports gave the U.S. corn and soybean meal crops a more favorable outlook than previously predicted. Many analysts believe the recent commodity bull market has peaked, but this outlook could change depending on the weather.

12-15%

LONG TERM: If crops continue to look good through the summer and fall growing season, there will be downward pressure on grain prices. If we have any major weather-related events (drought, excessive heat, derecho, etc.), we could be in for more volatile price fluctuations and unpredictability in the market.

EGGS (LIQUID)

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12

Market Conditions in the US COMMODITY

4-12%

DAIRY

3-8%

OUR EXPECTATION IS...

SHORT TERM: • Butter: Expect 4–6% increase for balance of 2021. Market is forecast to increase in the mid-single digit range after a 30% increase from February lows. Production remains strong in expectation of second half demand pressure.

• Cheese: Expect 10–12% increase for the balance of 2021. Although inventory levels are high, rising exports, increasing domestic usage resulting from reopenings, and the USDA’s support of The Emergency Food Assistance Program (TEFAP) will support higher prices in the short term.

• Fluid Milk: Expect 6–8% increase for balance of 2021. Domestic dairy herd size and raw milk production remain higher than the three-year average. However, demand for raw milk to produce other products will drive prices upward for the balance of this year. Further pressure from K-12 and higher education reopenings will also impact price.

LONG TERM: • Butter: Expect 5-8% increase for 2022. Remains favorable against 3-year average.

• Cheese: Expect 3–5% increase. The introduction of two new, state-of-the-art production facilities within the U.S. will help take pressure off a steady increase in expected demand. Much will depend on weather, volatility of primary production cost inputs (labor, transportation, packaging) and the pressure of global demand as we transition out of a pandemic-influenced economy.

• Fluid Milk: Expect 3–6% increase. Demand for raw milk within the domestic market coupled with an increase in exports of dry milk powder to Asia will likely drive a steady escalation for fluid milk in 2022. A strong balance of continued retail sales added to the resumption of fluid milk sales within the food service sector will apply pressure to regional milk producers to keep up with strong demand.

5-10%

SHORT TERM: If recent weather forecasts predicting wetter and cooler days ahead are true, expect the price of soybean oil to drop from the recent historic highs. The main issue to pay attention to this summer is what the Biden administration will do regarding the biodiesel fuel mandates for 2021 and 2022, which have put pressure on supply and caused prices to skyrocket in recent months. If mandates are lowered, expect price decreases to follow.

10-15%

LONG TERM: Expect more volatility in the market as weather forecasts, demand fluctuations, and rumors regarding biofuel policy continue to play a role in supply and demand. If the mandate on biofuels is lowered, expect the overall trend on pricing to decrease. That said, we still expect prices to remain elevated over the same time period as last year.

COOKING OIL

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13

Market Conditions in the US COMMODITY

OUR EXPECTATION IS...

7-10%

SHORT TERM: West Coast growers planted aggressively this spring, expecting volumes to recover quickly from COVID, but uneven demand combined with recent high heat has constrained supplies. We expect volatile markets on many commodities through Thanksgiving.

5-10%

LONG TERM: The impacts of numerous inflationary pressures, including packaging, fuel, labor, and freight, will bring continued pressure across all commodities for the foreseeable future.

PRODUCE

SHORT TERM: While orange juice remains a volatile commodity, Avendra’s OJ prices are expected to

Unchanged remain stable through the end of the calendar year. Customers purchasing actual fresh-squeezed OJ

(not to be confused with “gently/lightly pasteurized OJ”) can expect an estimated 5% increase.

ORANGE JUICE

4.5%

LONG TERM: Avendra’s OJ prices are expected to increase ~4.5% due to the impact of higher freight and plastic (resin) costs, as well as an erratic climate and poorly marked seasons, resulting in fewer oranges.

To help mitigate cost increases, ensure you have our most competitive dispenser juice and not from concentrate (NFC) OJ programs for your beverage operations.

3-5%

SHORT TERM: While Avendra's coffee prices remained relatively stable throughout 2020 and the first half of 2021 due to advantageous positions we took on coffee, we will start to see increases of 3-5% in Q3 2021 as our prices get closer to the market. We expect the coffee price to remain relatively high driven by speculation, a weakening US dollar / strengthening Brazilian Real, smaller Arabica crops, and diminishing inventories into the end of the year. Freight (in the producing countries and ocean freight) and labor costs will also affect the price. Customers should consider brewing smaller throw sizes (2.5 oz instead of 3 oz), brewing smaller batch sizes to reduce waste or changing blends to mitigate the increases.

COFFEE

LONG TERM: Fundamentally, the coffee market will be in balance between 2020-2022, moving from 5-7%

a surplus in 20/21 to a deficit in 21/22 (entirely in Arabica). Fundamentals are mainly bullish: while the 20/21 crop in Brazil was bigger than expected, the off-cycle 21/22 crop will be on the smaller side, and current dry conditions could hurt the 22/23 crop. There is a strong sales recovery in the U.S., but Canada and Europe remain slow. Global out-of-home coffee consumption is below normal, but is expected to pick up in the coming months.

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Market Conditions in the US COMMODITY

OUR EXPECTATION IS...

3-6%

SHORT TERM: Bakery ingredients have experienced price increases driven by shortfalls in wheat production and an increase in demand from China. Additionally, ingredient (e.g., coconut) and labor shortages are adding inflationary pressure. Finally, to try to meet the increasing demand, many bakeries have rationalized their product mix to maximize production output. We expect a more stable market with the start of a return to broader selection toward the end of the year. In the meantime, Avendra contracts with a broad portfolio of bakeries that have alternatives (individually-wrapped, thaw-and-serve, readyto-bake) to help with your needs.

1-2%

LONG TERM: The price momentum may have subsided slightly with U.S. and world wheat production on the rebound. Wheat supply outlook is projected to increase by 6MM bushels, however increased demand could more than offset expected supply and production. Price risk will remain elevated.

3-8%

SHORT TERM: Resins have increased due to labor shortages (decreased supply from reduced production output caused by the pandemic), continued high demand for food and beverage take out packaging, and ocean/domestic freight. As a result, these impacts have put price pressures on resins and paper/pulp. The following relatively recent commodity increases will cause prices increases for the back half of the year: PLA is +8%, PET is +39%; PP +49%; PS: +13%; HDPE/LLDPE +10%; Paper is + 3%.

3-5%

LONG TERM: Cost pressures are projected to be transitory, so we anticipate some relief in 2022. Suppliers have indicated that prices should level down upon normalization in the market resulting from cost changes and shortages in the underlaying raw materials, freight and labor.

WHEAT/ BAKERY

DISPOSABLES

Rooms Operations – Changes relative to current prices 8-15%

SHORT TERM: With cotton now over $1 per pound, expect the price to continue to remain elevated in the short-term.

5-10%

LONG TERM: We expect that supply and demand will stabilize and cotton prices will re-adjust based on market conditions and we will see lower than $1/lb pricing. The freight and labor cost inputs, however, are not likely to return to pre-Covid levels and we expect the increases on these cost inputs will be more permanent.

TEXTILES

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15

Market Conditions in the US COMMODITY BATH AMENITIES

OUR EXPECTATION IS...

3-12%

SHORT TERM: Increased labor and freight costs, in addition to global shortages and allocation of key ingredients will keep the short-term cost drivers in place into early 2022.

3-5%

LONG TERM: The longer-term expectation for mid to late-2022 is that with stabilization and a retreat of historically high freight costs, in addition to greater availability of finished goods ingredients that pricing will retreat but not to pre-COVID levels.

Personal Protective Equipment (PPE) – Changes relative to current prices Unchanged

MASKS 10-15%

LONG TERM: Outlook for 3-ply masks will see a drop in pricing upwards of 10-15% due to vendors seeking to deplete excess inventory. We anticipate N95 mask supply to catch up with demand in the long-term at which time pricing will begin to level, but not to the extent of 3-ply masks.

5-10%

SHORT TERM: Global glove markets are in mid-recovery stages for nitrile, vitrile, vinyl and latex glove types now that we are on the back end of the pandemic. Pricing for all glove types is expected to come down as we head towards December. Expect supply availability and variety to grow through remainder of year, most notably in nitrile gloves.

10-15%

LONG TERM: Pricing for all glove types should continue to normalize in 2022 as supply and demand stabilize. To save money, use the appropriate glove for the many varied uses, click to learn more about ways to save.

DISPOSABLE GLOVES

HAND SANITIZER

SHORT TERM: As mask restrictions slowly ease across the U.S., we should see the availability and pricing of 3-ply masks hold steady as suppliers have ample inventory on hand. N95 masks continue to be in limited supply in the marketplace and only available with select suppliers in our network.

Unchanged 5-7% Unchanged

CHEMICALS 5-7%

SHORT TERM: No change in pricing through December.

LONG TERM: Expect a 5-7% increase on hand sanitizer Q1 2022. Chemical cost increases, as well as labor and freight inflation, are the drivers (our contract held off potential price increases in 2021).

SHORT TERM: No change in pricing through December.

LONG TERM: Expect a 5-7% increase in chemicals Q1 2022. Chemical cost increases as well as labor and freight inflation are the drivers (our contract held off potential price increases in 2021).

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16

Market Conditions in the US COMMODITY

OUR EXPECTATION IS...

Clubs – Changes relative to current prices

GOLF TURF CHEMICALS

GOLF MOWERS, PARTS

3-20%

SHORT TERM: We expect that the Early Order Program (EOP) for Q4 2021 will see price increases from 38% from the major manufacturers. For Ryegrass seed, we expect a 15-20% increase due to some mergers and acquisitions of seed companies that may move as much as 40 million pounds out of the commercial market and into the residential market.

5-8%

LONG TERM: Overall, we expect a 5-8% increase in prices due to supply chain and availability issues.

3-7%

SHORT TERM: Toro normally raises their prices by November 1. Expect a 4% increase. John Deere plans on raising their prices by November 1. Expect a 3-7% increase.

Unchanged LONG TERM: Once the increase in November 2021 goes into effect, we do not expect additional price increases until November 2022.

4%

SHORT TERM: E-Z-GO normally raises their prices by November 1. Expect a 4% increase.

GOLF CARS, PARTS Unchanged LONG TERM: Once the increase in November 2021 goes into effect, we do not expect additional price increases until November 2022.

Other – Changes relative to current prices 2-3%

SHORT TERM: Based on continuing economic growth, North American natural gas prices are forecast to increase by 3% and electricity prices to increase by 2% for the remainder of 2021.

1-2%

LONG TERM: Energy production is expected to increase due to higher prices, so North American natural gas prices are forecast to increase by 1% and electricity prices to increase by 2%.

ENERGY

6-8% CAPITAL EQUIPMENT & SMALLWARES 3-5%

SHORT TERM: Supply chain challenges will persist into late 2021. We can expect to see ongoing product and accessory price increases of 6-8% across the foodservice equipment and supplies manufacturing community. Effected areas include transportation, labor, market demand and pricing. Manufacturers continue to communicate dramatic increases in the cost of stainless steel, copper, aluminum and other raw materials. In addition, the ongoing trade tariffs, freight costs, and global supply chain anomalies are having an inflationary impact.

LONG TERM: The potential for an industry price increase is likely to continue in the first quarter of 2022 with manufacturers seeking price increases due to continued inflationary pressures as noted above.

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Market Conditions in the US COMMODITY

OUR EXPECTATION IS...

MRO – Changes relative to current prices

CARBON STEEL STAINLESS STEEL ALUMINUM

8-10%

SHORT TERM: Price expected to remain at historically high levels through 2021, due to reduced global production brought on by global pandemic.

2-5%

LONG TERM: Price is expected to fall as supply and demand begin balancing in 2022; construction and manufacturing need for steel will begin to grow.

8-10%

SHORT TERM: Input cost for production has driven pricing up and will continue pushing prices until 2022.

6-8%

LONG TERM: Supply of steel is expected to help prices to ease toward the start of 2022.

2-4%

SHORT TERM: Steady price increase as economy recovers and demand remains high.

2-4%

LONG TERM: Continued steady increase in pricing as global supply and scrap supply remain high, holding down price spikes.

3-5%

SHORT TERM: Based on continuing economic growth, North American copper prices are forecast to increase by 3% for the remainder of 2021.

COPPER 10-12%

LONG TERM: Copper could hit highest price in history in 2022. Majority of demand for this base metal is for electrification of energy and the re-stimulation of global economy. Expect supply to eventually increase to meet the new demand.

2-4%

SHORT TERM: Pricing per brl of WTI and Brent are hovering around $75, which is the highest in two years.

Expect pricing to maintain or slightly drop by EOY.

6-8%

LONG TERM: Increased production from OPEC and accelerated U.S. growth will outpace consumption and lower pricing for WTI and Brent to $58-$60/brl. Growth of EV usage continues to have minimal impact to global consumption.

CRUDE OIL

POLYMERS

CATEGORY DEPENDENT

SHORT TERM: PVC: Pricing is expected to gradually fall throughout 2021. Polypropylene: After hitting a high in April 2021 due to poor supply after severe weather in TX and Gulf region affected production, pricing has begun to soften. Expect pricing to gradually fall throughout 2021.

LONG TERM: PVC: After hitting a high in 2018 at USD 920.9 mt, there has been a slow decrease in price, and it’s expected to continue through 2022 until settling at around USD 750 mt. Polypropylene: As supply picks back up with the demand, and feedstock availability increases, expect pricing to gradually fall back to near pre-COVID prices.

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PORK UPDATE: US

CURRENT STATE AS OF JULY 2021 •

•

•

Starting January 1, 2022, both Massachusetts and California will implement regulations (Bill H.3930 and Proposition 12, respectively) that mandate all uncooked processed pork cuts and raw bacon sold in those states must come from sows who (a) are not placed in breeding stalls, (b) have a maximum of five days in gestation crates and (c) have at least 24 square feet of usable floor space.

Industry analysts say that less than 4% of U.S. pork production is currently utilizing regulation-compliant housing systems and there will be increases in costs of all products as a result of the cost to convert to Bill H.3930 and Prop 12 compliant housing.

Prop 12 has been challenged in the courts on multiple fronts by groups like the North American Meat Institute (NAMI) and the National Pork Producers Council (NPPC).

The case could ultimately be heard by the Supreme Court.

Most of the industry is waiting to see what happens with the courts and/or potential changes to the implementation date.

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EXPECTATIONS FOR 2022 •

Cleveland Research has advised that the greater the percentage of the U.S. market that shifts toward regulations similar to Bill H.3930 and Prop 12, the higher the price of pork will be to the U.S. consumer in the long run.

•

Research by both Avendra and Cleveland Research concludes that California and Massachusetts pork consumption will drop significantly — from a combination of higher prices and scarcity of compliant product — once these regulations take effect on January 1, 2022.

THE BOTTOM LINE •

Some estimates show that compliance with Prop 12 alone may result in total costs across the industry exceeding $2 billion, with suppliers passing any incremental costs on to their customers. California currently accounts for 14% of total U.S. pork consumption, and the industry is not on track to have sufficient compliant product by the January 1, 2022 deadline.

•

Avendra will continue to work with its pork suppliers to secure compliant pork products for our California and Massachusetts markets and will provide ongoing updates throughout 2021.

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LARGE FORMAT AMENITIES

When hotels operate under eco-friendly and resource-efficient policies, they minimize their carbon footprint while attracting guests who seek out businesses committed to sustainability. Bath accessories are a high-touch area where hoteliers can reduce their overall environmental impact by opting for large format over single-use bottles. But, in light of heightened COVID-19 cleaning protocols, operators will need to consider the cost efficiencies of supplying guests with bath dispensers that must be properly cleaned and sanitized with every room turnover. The following Q&A offers some important insight.

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Q: WHAT ARE THE TOP TRENDS/CHALLENGES FOR AMENITIES AT THE MOMENT? WHAT IS DRIVING THE CHANGE? A: A global environmental movement to reduce single-use products, particularly plastics, has been gaining steam for a number of years. Legislation banning straws and other consumables is already in effect, with more pending. The convergence of ethical consumerism, potential further legislative action, and the rising cost of plastic is motivating hoteliers to outfit guest bathrooms with full-size refillable bath amenity dispensers.

Q: WHAT SOLUTIONS ARE AVAILABLE OR EMERGING? A: There are already several types of large format amenities on the market: • •

• •

Refillable bottles with a threaded pump neck that can be unscrewed, and the bottle refilled Non-refillable bottles with a pump neck that is ratcheted or snapped on and cannot be removed without damaging the bottle Gravity-based squeeze bottles featuring non-refillable cartridges that dispense from the bottom when squeezed Push button dispensers that dispense liquid from the bottom when a push button or paddle is pressed

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LARGE FORMAT AMENITIES

When choosing large format dispensers, operators must also consider how they will be displayed and presented and what retrofitting may be required to secure the product.

Consideration should also be given to which types of products are offered in large format. For example, dispensed liquid soap versus bar soap.

Q: HOW IS AVENDRA HANDLING THESE CHALLENGES AND MAKING SOLUTIONS AVAILABLE? A: Avendra is dedicated to helping our customers navigate this complicated category. In addition to working with brands and suppliers on developing and deploying large format programs, we are also working with suppliers to develop solutions for sustainable accessories in other areas. We believe there will be a continued movement toward sustainable products in hotel rooms. We plan to use our customers’ volume to curate an economically viable, sustainable solution for several products.

and implementing appropriate training. So while operators may realize an initial financial impact by transitioning to a sustainable large format amenity system, they can expect the sanitation station and dispenser installation to be a one-time cost. Operators should also consider factors that can impact actual product cost, including the bracket system (plastic or stainless-steel bracket) and dispenser amenity size (10 oz or 16 oz bottle), which ultimately will influence the amount of savings.

For operators who are unable or choose not to switch to refillable containers, the most sustainable option to reduce single-use products is to make them available by request only at your property.

Q: HOW CAN OPERATORS ADAPT TO THESE CHALLENGES AND UTILIZE THE SOLUTIONS? A: Operators who transition to large format amenities must also consider a sanitizing and refill process for the bottle exteriors between every guest room turnover. This may involve installing a sanitation station in the hotel’s housekeeping area

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CANADA: ECONOMY • Statistics Canada reported the Canadian economy contracted for the first time since the initial outbreak of COVID-19 in April.

GDP dropped by 0.3% in April as a renewed COVID-19 outbreak forced a return of restrictions impacting business and consumer activity. Retail, foodservice, and manufacturing sectors faced pressure due to increased restrictions that drove the monthly decline in economic output.

• However, since then, economic activity in Canada has accelerated toward a 10-year high in June as businesses and consumers responded to improvements in the COVID-19 situation. The seasonally adjusted Ivey Purchasing Managers Index (PMI) increased to a reading of 71.9 In June from 64.7 in April. Indicators measuring employment and price levels rose for the month.

• Consumer confidence in Canada reached a record high as optimism surged around increased COVID-19 vaccinations, the economic recovery underway, and future economic prospects.

The Bloomberg Nanos Canadian Confidence Index rose to 66.4 for the week ended July 2, the highest reading since the survey began in 2008. Despite a surge in COVID-19 cases this spring, economic prospects have quickly improved with consumers holding excess savings ready to resume away-from-home activities and spending.

Français

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KEY CONSIDERATIONS FOR 2021-2022 BUDGETING Market Conditions in Canada COMMODITY

OUR EXPECTATION IS...

Food & Beverage – Changes relative to current prices 5-7%

SHORT TERM: Limited supply of beef cuts, due to export and low slaughter from countries supplying imported cuts. U.S. droughts are also impacting hay pastures and prices. Combination of feed cost and limited supply affecting all beef cut market prices.

4-5%

LONG TERM: Prices are expected to stabilize but will remain strong. This will be contingent upon demand, cost of feed and beef packing capacity that have been affected by plant closures.

3-5%

SHORT TERM: Poultry market pricing affected by restricted import poultry quotas and tightening supply, causing some product shortage. Increased demand for bone-in products, along with increased cost of feed triggered by increasing soy and corn prices.

2-4%

LONG TERM: Poultry prices expected to stabilize but will remain above average market cost. Canadian chicken farmers expected to increase supply in early fall to ease the current supply issues.

3-5%

SHORT TERM: Significant surge in raw pork belly material costs, causing instability and a volatile pork market. Limited supply due to increased export pressures to China and the third wave of ASF (African Swine Flu). Declining food production caused by plant closures and increased freight rates.

2-4%

LONG TERM: Relief is expected as export pressures cease. Prices are expected to remain strong, as freezer inventories remain low with minimal supply cushion. Growing demand is expected to put added pressure on supply and affecting pork market prices.

2-3%

SHORT TERM: COVID-related logistical challenges, along with inventory issues and labor shortages, will have an unfavorable impact on prices. Not all species will be affected, so be open to adapting your menu to the less impacted products.

4-5%

LONG TERM: Prices are expected to increase based on varying responses to the COVID-19 pandemic and efficacy of vaccinations, which could see the return of a strong foodservice demand, coupled with increased at-home use.

BEEF

POULTRY

PORK

SEAFOOD

Short term refers to the expectation for the rest of 2021.

Long term refers to the expectation for calendar year 2022.

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Market Conditions in Canada COMMODITY EGGS

2-3%

SHORT TERM: Expect increase of 2-3% due to feed costs and expected strong baking demand for the end of the year. Consider using liquid eggs to help mitigate increases.

1-2%

LONG TERM: Egg production is anticipated to rise, which should keep supply high. Hence, we expect a minor increase.

Unchanged

DAIRY

OUR EXPECTATION IS...

3-4%

SHORT TERM: Prices are expected to remain stable until early next year when the CDC will likely announce an industry increase.

LONG TERM: Dairy price increase will be impacted by several drivers - market access and export of skim milk powder (SMP) and milk protein concentrate (MPC), demand for dairy as hotels, restaurants and institutions reopen, ongoing high input costs and the economic recovery. Restaurants are important buyers for cream and cheese, and reopenings will boost demand.

15-20%

SHORT TERM: There have been recent gains on pricing of all vegetable oils (canola, soybean, olive, sunflower oil). As key markets begin to recover from the effects of COVID-19, supply and demand dynamics continue to be the primary drivers of the global vegetable oils index. After prices initially fell at the start of the pandemic, tight global supply due to poor weather and a gradual recovery in fuel, feed and edible demand for oilseeds caused a bullish trend in prices. Prices are expected to continue to rise steadily in coming months.

5-10%

LONG TERM: Long-term pricing on vegetable oils seems to be more so bullish with some stability expected in latter half of 2022.

• Olive Oil: Decline in stock levels is clearly visible, and stocks globally are low. Global consumption is set to increase by 8-11% in 2022. Stocks are short which could keep prices elevated. Weather remains a concern.

• Canola Oil: Rapeseed oil prices are pressured by the external vegetable oils’ complex volatility.

Backwardation in vegetable oil market leads to buying on the forward curve. There is a distinct lack of physical oil available in the market. 21/22 production looks to be static or very marginally up; tight stock situation unlikely to improve. Consumption set to increase around 10%. Flat stock levels could be met with increased demand. Weather improving in Canada and France, but crop has already sustained damage, with further downward revisions to come.

• Soybean Oil: Soybean oil has been propelled by the U.S. Green Fuel plan, which aims to use soybean oil as a key biofuel. Soybean oil supply on the nearby is severely limited, keeping prices elevated. Demand could remain subdued in India due to ongoing COVID-19 crisis. Many market participants feel prices on the nearby are too high; markets are very volatile, making it difficult for market players. Weather has improved and could cool prices.

COOKING OIL

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Market Conditions in Canada COMMODITY PRODUCE

OUR EXPECTATION IS...

SHORT TERM: Renegotiations on contracts in September to take effect November/December but not Unchanged anticipating any large changes. Short term pricing is reducing but fall changes in growing regions may bring regional pricing back up slightly. Items under contract pricing should hold steady.

10%

ORANGE JUICE

Unchanged SHORT TERM: While orange juice remains a volatile commodity, Avendra’s OJ prices are expected to remain stable through the end of the calendar year.

3-5%

LONG TERM: Avendra’s OJ prices are expected to increase 3-5% due to COVID-19’s impact on freight and plastic, as well as an erratic climate and poorly marked seasons, resulting in fewer oranges.

4-5%

SHORT TERM: Brazilian harvest is an off-year crop and production is expected to come in lower than usual.

The coffee market price increases are a result of speculation, increased freight costs and smaller crop sizes, which are driving up prices of green beans. Recommendation is to look to purchase products with lower throw weights (2.5oz instead of 3oz).

5-7%

LONG TERM: The market continues to have a longer-term bullish supply outlook. A shift towards drier weather over Brazil's major Arabica growing regions has provided support to the coffee market as that should have a negative impact on their upcoming 2022 on-year coffee crop. With much drier than normal conditions seen in Brazil since the middle of 2020, coffee trees may have a difficult flowering period later this year. In addition to dry conditions, Brazilian coffee growing areas have an increased chance of frost from now until mid-August, and that could cause additional supply anxiety following this season's sharp decline in Brazil's Arabica output.

3-5%

SHORT TERM: Fundamentals, such as supply and demand imbalance, unforeseen record import volumes from China, reduced 2020/21 production projected for the EU, U.S. and Ukraine following weather concerns are the primary drivers sending wheat benchmark prices to multi-year highs. Wheat prices have been trending significantly higher YOY, driven mainly by less-than-ideal conditions for the 2021/22 crops in some areas, with cold spells in the U.S. and the Black Sea regions threatening production outcomes. Prices are expected to ease in the short term, pressured by a projected rebound in the EU's 2021/22 wheat production and, in part, due to the recent resurgence in African Swine Fever (ASF) cases in China, which will reduce their import volumes. Weather developments affecting spring and winter wheat will be key factors determining prices in short term.

COFFEE

WHEAT/ BAKERY

LONG TERM: Contract pricing will enable stability on some items, and as business patterns return to historic levels, growers will get back to more normal and predictable conditions. Expect ~10% increases dependent on weather and regional availability.

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Market Conditions in Canada COMMODITY

WHEAT/ BAKERY

OUR EXPECTATION IS...

1-2%

LONG TERM: Prices are expected to stabilize with production picking up to meet the demand. Eighty percent of France’s soft wheat crop ratings were reported in good or very good condition at the end of May. Warm weather at the start of June, following extensive rain during May, is helping European wheat crops recover from the cold and dry spring. As of June 3, Euronext wheat price (September contract) was chartered at EUR 215.5/MT, down 6.4% on the previous four weeks. According to USDA, the EU wheat production is forecast to rebound by 6.4% YOY in 2021/22. Also, with the 2021/22 harvesting season due to commence in July, supply tightness from the low-ending stocks projected for the 2020/21 marketing year, at 9.2 million tons, is likely to be alleviated.

3-5%

SHORT TERM: Resins have increased due to labor shortages (decreased supply from reduced production output caused by the pandemic), continued high demand for food and beverage packaging, and ocean/domestic freight. These have put supply constraint pressures on resins and paper/pulp across the board. Commodity market average increases are in the following resin types: PLA is 8%, PET is +38.7%; PP +49%; PS: +13%; HDPE/LLDPE +10%. Paper increased 3%.

3-5%

LONG TERM: Cost pressures are projected to be transitory, so we anticipate some relief in 2022. Suppliers have indicated that prices should level down upon normalization in the market resulting from cost changes and shortages in the underlaying raw materials, freight and labor.

DISPOSABLES

Rooms Operations – Changes relative to current prices 8-15%

SHORT TERM: With cotton now over $1 per pound, expect the price to continue to remain elevated in the short-term.

5-10%

LONG TERM: We expect that supply and demand will stabilize and cotton prices will re-adjust based on market conditions and we will see lower than $1/lb pricing. The freight and labor cost inputs, however, are not likely to return to pre-Covid levels and we expect the increases on these cost inputs will be more permanent.

3-12%

SHORT TERM: Increased labor and freight costs, in addition to global shortages and allocation of key ingredients will keep the short-term cost drivers in place into early 2022.

TEXTILES

BATH AMENITIES

3-5%

LONG TERM: The longer-term expectation for mid to late-2022 is that with stabilization and a retreat of historically high freight costs, in addition to greater availability of finished goods ingredients that pricing will retreat but not to pre-COVID levels.

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Market Conditions in Canada COMMODITY

OUR EXPECTATION IS...

Personal Protective Equipment (PPE) – Changes relative to current prices

MASKS

SHORT TERM: As mask restrictions slowly ease across Canada, we should see the availability and pricing Unchanged of 3-ply masks hold steady as suppliers have ample inventory on hand. N95 masks continue to be in limited supply in the marketplace and only available with selected MedSurg distributors.

10-15%

LONG TERM: The long-term outlook for AUS/CLU 3-ply masks will see a drop in pricing upwards of 10-15% due to excess supply with vendors seeking to deplete excess inventory.

5-10%

SHORT TERM: Global glove markets are in mid-recovery stages for nitrile, vitrile, vinyl and latex glove types now that we are on the back end of the pandemic. Pricing for all glove types is expected to come down as we head towards December. Expect supply availability and variety to grow through remainder of year, most notably in nitrile gloves.

10-15%

LONG TERM: Pricing for all glove types should continue to normalize in 2022 as supply and demand stabilize. To save money, use the appropriate glove for the many varied uses, click to learn more about ways to save.

DISPOSABLE GLOVES

HAND SANITIZER

Unchanged SHORT TERM: No change in pricing through December.

5-7%

LONG TERM: Expect a 5-7% increase on hand sanitizer Q1 2022. Chemical cost increases, as well as labor and freight inflation, are the drivers (our contract held off potential price increases in 2021).

Unchanged SHORT TERM: No change in pricing through December.

CHEMICALS 5-7%

LONG TERM: Expect a 5-7% increase in chemicals Q1 2022. Chemical cost increases as well as labor and freight inflation are the drivers (our contract held off potential price increases in 2021).

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Market Conditions in Canada OUR EXPECTATION IS...

COMMODITY

Clubs – Changes relative to current prices

GOLF TURF CHEMICALS

GOLF MOWERS, PARTS

3-20%

SHORT TERM: We expect that the Early Order Program (EOP) for Q4 2021 will see price increases from 38% from the major manufacturers. For Ryegrass seed, we expect a 15-20% increase due to some mergers and acquisitions of seed companies that may move as much as 40 million pounds out of the commercial market and into the residential market.

5-8%

LONG TERM: Overall, we expect a 5-8% increase in prices due to supply chain and availability issues.

3-7%

SHORT TERM: Toro normally raises their prices by November 1. Expect a 4% increase. John Deere plans on raising their prices by November 1. Expect a 3-7% increase.

Unchanged LONG TERM: Once the increase in November 2021 goes into effect, we do not expect additional price increases until November 2022.

4%

SHORT TERM: E-Z-GO normally raises their prices by November 1. Expect a 4% increase.

GOLF CARS, PARTS Unchanged LONG TERM: Once the increase in November 2021 goes into effect, we do not expect additional price increases until November 2022.

Other – Changes relative to current prices 2-3%

SHORT TERM: Based on continuing economic growth, North American natural gas prices are forecast to increase by 3% and electricity prices to increase by 2% for the remainder of 2021.

1-2%

LONG TERM: Energy production is expected to increase due to higher prices, so North American natural gas prices are forecast to increase by 1% and electricity prices to increase by 2%.

ENERGY

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MEXICO: ECONOMY • Mexico’s industrial output declined on a monthly basis for the first time in nearly a year in April due to challenges in manufacturing, construction, and energy sectors.

• According to the National Institute of Statistics and Geography (INEGI), industrial output slipped by 0.2% in seasonally adjusted terms. On an annualized basis, output posted its largest gain in over 25 years, rebounding from severe impacts brought by pandemic-related lockdowns from the year prior.

• Currency exchange between the U.S. dollar and Mexican peso is expected to be between 20 MXN and 20.5 MXN for 1 USD this year. For 2022, it is projected between 21 MXN and 21.5 MXN for 1 USD. • The year-end inflation is estimated at 6.1% and projected at 4.25 to 4.5% in 2022.

Español

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KEY CONSIDERATIONS FOR 2021-2022 BUDGETING Market Conditions in Mexico COMMODITY

OUR EXPECTATION IS...

Food & Beverage – Changes relative to current prices

BEEF

4-5% (domestic) 10-15% (imported)

SHORT TERM: • Domestic products: Low inventory and higher feed cost are affecting all beef cut market prices.

• Imported products: Incremental pricing pressure due to higher freight cost, labor costs in the U.S. and exchange rate.

4-5% (domestic) 15-19% (imported)

LONG TERM: • Domestic products: Low inventory and higher feed cost are affecting all beef cut market prices.

• Imported products: Incremental pricing pressure due to higher freight cost, labor costs in the U.S. and exchange rate.

10-20%

SHORT TERM: Chicken nursery had to be reduced due to Avian Flu in April and May in Mexico, creating low inventory.

10-12%

LONG TERM: Recovery of the Avian Flu will impact inventory and pricing. Feed prices are also driving producers to limit head counts. Imported poultry products have a 75% import tax.

5-10%

SHORT TERM: Domestic product is exported to China and Japan, which are willing to pay a premium.

Products are now being imported from the U.S.

POULTRY

PORK 5-8%

LONG TERM: Recovery of the production and limited exportation will affect pricing.

10-15%

SHORT TERM: The prices for fresh catch will remain high as the cost of fuel keeps increasing in Mexico at a monthly 4-6% rate. The hurricane season will put some pressure on the prices and product availability until mid-November. Frozen and imported products will depend on the USD exchange rate.

10-15%

LONG TERM: Prices will keep at pace with the inflation rate and the USD exchange rate.

SEAFOOD

Short term refers to the expectation for the rest of 2021.

Long term refers to the expectation for calendar year 2022.

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Market Conditions in Mexico COMMODITY 5-10%

SHORT TERM: Chicken nursery had to be reduced due to Avian Flu in April and May in Mexico, creating low inventory.

5-10%

LONG TERM: Recovery of the Avian Flu will impact inventory and pricing. Feed prices are also driving producers to limit head counts.

EGGS

0-6%

SHORT TERM: Avendra prices through LALA for fluid dairy are locked until February 2022. The rest of the dairy products, such as cheese, will have increases due to freight and increased demand.

• Fluid dairy and yogurt – Expect no changes • All other dairy products – Expect 4-6% increase

6-8%

LONG TERM: Producers anticipate a peak for all dairy products for the second half of 2022.

8-10%

SHORT TERM: Tight global supply due to poor weather and a gradual recovery in fuel, feed and edible demand for oilseeds has caused a bullish trend in prices.

10-12%

LONG TERM: Prices are expected to continue to rise steadily.

10-12%

SHORT TERM: Dry weather and drug-related conflicts are limiting the production of high-volume produce such as avocados, limes, pineapples, onions, tomatoes and oranges.

5-10%

LONG TERM: Prices are expected to increase due to dry weather and drought. Increases could be higher if weather does not improve.

10-12%

SHORT TERM: Dry weather is driving prices up. To mitigate cost increases, explore the option of concentrated juices which can be diluted and offer a final cost per liter much cheaper than a fresh juice.

10-20%

LONG TERM: If dry weather continues, we may see continued increases. A more precise forecast will be available at the end of 2021.

DAIRY

COOKING OIL

OUR EXPECTATION IS...

PRODUCE

ORANGE JUICE

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Market Conditions in Mexico COMMODITY

COFFEE

WHEAT/ BAKERY

DISPOSABLES (Paper, Resin)

OUR EXPECTATION IS...

Flat (domestic) 3-7% (imported)

SHORT TERM: Domestic products: Café Britt prices are locked until February 2022. Imported products: High ocean freight costs and inefficient logistics are creating bottlenecks in coffee’s three biggest producing counties and increasing cash prices.

5-10%

LONG TERM: Domestic products: Pressure on inventory due to no harvest in Mexico in 2021 due to COVID impacting domestic production. Imported products: Dry weather in Brazil, political instability in Colombia, and COVID recovery efforts will continue to put pressure on the pricing.

3-10%

SHORT TERM: Prices will depend on their commodity stability.

5-8%

LONG TERM: Product availability might be an issue and will push prices up. Wheat supply outlook is projected to increase by 6MM bushels. Increased demand could more than offset expected supply and production. Price risk will remain elevated. High international freights will also affect the prices of imported raw materials.

3-8%

SHORT TERM: The raw materials prices are going up as well as the international freight. In Mexico, there is a 53% growth in the consumption of products made with biodegradable polymers.

3-8%

LONG TERM: In the long term, it is expected that raw materials prices will go down, but this could not be reflected in the final prices because the inflation rate in Mexico is going up.

Rooms Operations – Changes relative to current prices 8-15%

SHORT TERM: With cotton now over $1 per pound, expect the price to continue to remain elevated in the short-term. Consider buying products manufactured in Mexico to help reduce costs or mitigate increases.

5-10%

LONG TERM: Long-term, we expect that supply and demand will stabilize and cotton prices will re-adjust based on market conditions and we will see lower than $1/lb pricing. The freight and labor cost inputs, however, are not likely to return to pre-Covid levels and we expect the increases on these cost inputs will be more permanent.

TEXTILES

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Market Conditions in Mexico COMMODITY 3-12%

BATH AMENITIES

3-5%

OUR EXPECTATION IS...

SHORT TERM: Increased labor and freight costs, in addition to global shortages and allocation of key ingredients will keep the short-term cost drivers in place into early 2022.

LONG TERM: The longer-term expectation for mid to late-2022 is that with stabilization and a retreat of historically high freight costs, in addition to greater availability of finished goods ingredients that pricing will retreat but not to pre-COVID levels.

Personal Protective Equipment (PPE) – Changes relative to current prices

MASKS

SHORT TERM: As mask restrictions slowly ease across the U.S., we should see the availability and pricing of 3Unchanged ply masks hold steady as suppliers have ample inventory on hand. The higher inventory in the U.S. will help to avoid increases in Mexico. N95 masks continue to be in limited supply in the marketplace and only available with select suppliers in our network.

5-10%

DISPOSABLE GLOVES

LONG TERM: The long-term outlook for 3-ply masks will see a drop in pricing upwards of 5-10% due to excess supply with vendors seeking to deplete excess inventory. We anticipate N95 mask supply to catch up with current demand in the long term at which time pricing will begin to level, but not to the extent of 3-ply masks.

SHORT TERM: Global glove markets are in mid-recovery stages for nitrile, vitrile, vinyl and latex glove types Unchanged now that the U.S. is on the back end of the pandemic and increased usage from vaccination sites and healthcare facilities will begin to decline/normalize as the global populace becomes immune.

0-5%

LONG TERM: Pricing for all glove types should continue to normalize in 2022 as pandemic begins to fade, resulting in more product supply availability, variety and better pricing.

Unchanged SHORT TERM: Pricing will remain unchanged through December.

HAND SANITIZER

6-8%

LONG TERM: Expect a 6-8% increase in Q1 2022. Chemical cost increases as well as labor and freight inflation are the drivers (our contract held off potential price increases in 2021).

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Market Conditions in Mexico OUR EXPECTATION IS...

COMMODITY CHEMICALS

Unchanged SHORT TERM: No change in pricing through December.

6-8%

LONG TERM: Expect a 6-8% increase in Q1 2022. Chemical cost increases as well as labor and freight inflation are the drivers (our contract held off potential price increases in 2021).

Clubs – Changes relative to current prices

GOLF TURF CHEMICALS

GOLF MOWERS, PARTS

3-20%

SHORT TERM: We expect that the Early Order Program (EOP) for Q4 2021 will see price increases from 38% from the major manufacturers. For Ryegrass seed, we expect a 15-20% increase due to some mergers and acquisitions of seed companies that may move as much as 40 million pounds out of the commercial market and into the residential market.

5-8%

LONG TERM: Overall, we expect a 5-8% increase in prices due to supply chain and availability issues.

3-7%

SHORT TERM: Toro normally raises their prices by November 1. Expect a 4% increase. John Deere plans on raising their prices by November 1. Expect a 3-7% increase.

Unchanged LONG TERM: Once the increase in November 2021 goes into effect, we do not expect additional price increases until November 2022.

4%

SHORT TERM: E-Z-GO normally raises their prices by November 1. Expect a 4% increase.

GOLF CARS, PARTS Unchanged LONG TERM: Once the increase in November 2021 goes into effect, we do not expect additional price increases until November 2022.

Other – Changes relative to current prices 2-3%

SHORT TERM: Based on continuing economic growth, natural gas prices are forecast to increase by 3% and electricity prices to increase by 2% for the remainder of 2021.

2-4%

LONG TERM: Natural gas prices are forecast to increase by 2% and electricity prices to increase by 4%.

ENERGY

Proprietary & Confidential Information of Avendra, LLC © 2021

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STAYING INFORMED IS EASY WITH

Avendra’s Additional Resources & Communications COVID-19 Resource Guide – Provides details on where to buy critical items including PPE, hand sanitizer, disinfectants, remediation services, social distancing signage and more.

F&B Product Solutions – Provides F&B product solutions to meet new guest needs (e.g., prepared meals, grab & go, to-go packaging).

QA & Safety Guidance – Additional recommendations on general sanitation protocols and best practices for deliveries, hand sanitizer and mask use.

Download the latest of the above from the myAvendra COVID-19 page.

Our Customer Service team is available to answer your questions at customerservice@avendra.com and 866-AVENDRA or 001 (301) 825 0200 (international customers).

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Short Term Cost Containment – Suggestions on how to reduce costs in your operations from Avendra Consulting Services (ACS).

Visit myAvendra to access your purchasing data, program and supplier information, opportunities for savings and much more.

SOURCES Sources include, but are not limited to: •

RTRS News Wires via Refinitiv Eikon

•

https://www.banxico.org.mx/

•

https://www.bloomberg.com/news/articles/2021-07-05/consumer-confidencein-canada-hits-record-on-vaccine-reopenings

•

https://www.cnbc.com/2021/07/02/jobs-report-june-2021.html

•

https://ec.europa.eu/info/business-economy-euro/indicatorsstatistics/economic-databases/business-and-consumer-surveys/latest-businessand-consumer-surveys_en

•

https://www.elfinanciero.com.mx/

•

https://globalnews.ca/news/7992397/canada-gdp-april-2021/

•

https://www.inegi.org.mx/default.html

•

https://www.markiteconomics.com/Public/Home/PressRelease/05e9c1e3d97147 15b72025a99df8a177

•

https://www.reuters.com/world/us/us-retail-sales-fall-may-producer-pricesincrease-2021-06-15/

•

https://www.reuters.com/business/us-factory-activity-index-rises-record-highjune-markit-2021-06-23/

•

https://www.reuters.com/business/us-consumer-confidence-races-more-thanone-year-high-june-2021-06-29/

•

https://www.reuters.com/article/us-canada-economy-ivey-idCAKCN2ED1MA

•

https://www.reuters.com/world/americas/mexico-industry-output-sufferssetback-april-despite-record-rebound-2021-06-11/

•

https://www.usda.gov/sites/default/files/documents/cotton-outlook.pdf

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