DELCO FOODS
JULY 2021
VOL. 26, NO. 7
CREATING SUCCESS: CHOOSING A DISTRIBUTOR A frequent question by pizza restaurant operators is whether they should use two or more distributors to “spread the risk” and have a back-up. Distributors ask similar questions. In past the answer may have been “yes”, but now that can work against you. Why?
RECOVERY UNLIKE ANY OTHER ? By Peter Thor, President, Bellissimo Foods Company
Bloomberg headlines…“Price inflation across the protein market complex has far exceeded even our most bullish forecasts”, and another, “ PizzaWheat Price Jumps as Drought Threatens Higher Food Costs”. These headlines and others deserve not just a causal explanation, but some future forecast to help distributors and operators in our industry plan for the balance of 2021 and 2022. Here is our view of root causes of the shortages, volatility, and future cost of goods. The current shortages, cost volatility, and inflation can be traced to (1) pandemic illness and worker shortages, (2) supply chain disruption, unplanned government re-start, and (3) government subsidies and pump-priming that have both restricted labor supply and spiked demand. Allocating blame is easy. Harder still is forecasting what to expect next. How long will shortages be with us? Is the cost inflation in food and basic materials going to return to previous levels or stay high? These are important questions for managers throughout or economy. The Wall Street Journal last week called this time a “Recovery Unlike Any Other”, and we think they’re right. Irrespective of how we got there, it is clear that the current labor “shortage” is causing many of the disruptions in supply as well as inflationary cost increases. Manufacturer price increases are being announced daily, and implemented immediately due to raw product spikes and inability to keep up with demand. Producers, manufacturers, distributors, and logistics companies are unable to hire workers sufficient to keep up with rapidly increasing demand because the state economies are all opening; while at the same time many workforce participants are being paid by the government to stay home. These forces exceed supply chain capacity while an extremely tight labor market, including a truck driver shortage, drives up transportation expenses. Across the industry, restaurants are raising prices amid inflationary pressures. The climb isn’t isolated to (continued on page 2)
A PROUD DISTRIBUTOR OF BELLISSIMO
Cost is but (1) factor to consider when choosing a distributor. Other key aspects should be (2) product breadth and quality fit with your business, (3) service levels including emergency situations, and (4) consultative value of sales representatives. Operator surveys consistently find that DSR’s are invaluable in finding product options, food cost saving opportunities, marketing and menu (continued on page 3)
MARKET UPDATE Dairy Cheese Blocks
PRICE
$1.505
LAST MONTH
DIFFERENCE
$1.480
$0.020
Active cheese production this year has influenced prices lower, but $1.505 is a big support level for cheese blocks. Food Service butter deman has improved, and recent exports have been strong.
Beef 50% Trimmings
PRICE
$0.978
LAST MONTH
DIFFERENCE
$0.980 ($0.002)
Slaughter levels in the last few weeks are the largest since June 2011, with most of the catch up on production being done on expanded Saturday schedules. Remain optimistic that price relief is on the way because of the expanded slaughter schedules.
Poultry
PRICE
Wings(Jumbo) $2.970
LAST MONTH
$3.061
DIFFERENCE
($0.091)
Chicken processors looked to have been in make-up mode, slaughtering a whopping 170 million head, up from 116.8 millkion head, nearly 6% larger than year ago levels. Larger production schedules look to be taking the highs out of the chicken market. As of 6/21/21
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