MARKET INTELLIGENCE
Food Shippers Adjust Purchasing Patterns to Address Supply Chain Disruptions There have been dramatic challenges facing food shippers in 2022. Transportation delays, constraints in the labor pool, and global uncertainties all have led to supplier slowdowns. As a consequence of these factors in supply chain disruption, food manufacturers in particular have been completely rethinking their purchasing patterns. Some expanded their sourcing pool, while others inked long-term agreements with vendors to jointly add capacity. One business even sent its own workers to a supplier factory to speed up deliveries. So what can food companies do to address these significant challenges? Here are a few recent examples of how food manufacturers are reacting to these challenges to lessen the impact of higher costs, longer lead times and a lack of raw materials in their food chains.
Quickly Building Out Manufacturing Capacity at Oatly Oatly, a Swedish food company that produces alternatives to dairy products from oats, will expand its
sourcing options after poor harvest conditions strained the supply of oats. The plant-based milk producer has been increasing prices to offset higher costs for raw materials worldwide, the company has enough oat and other raw material contracts and supply in place to meet its growth expectations for 2022, according to Christian Hanke, the company’s Chief Financial Officer. Drought conditions last year pushed North American oat harvests to near-record low levels, threatening the supply of a popular ingredient used in plant-based milk, says Hanke. U.S. oat production declined 39 percent last year from 2020, with harvested acreage at a record low 650 thousand acres, according to the National Agricultural Statistics Service. Canada is a major oat supplier to the United States, yet the country saw its smallest oat crop since 2010, according to Agriculture Canada. In addition, rail shipping issues also have added to supply woes. Unseasonal flooding in western Canada at the end of 2021 washed out major rail lines, and railroads
AS PART OF THE SOLUTION, OATLY HAS BEEN RAPIDLY BUILDING OUT ITS MANUFACTURING CAPACITY TO MEET DEMAND FOR OAT MILK AND MITIGATE THE EFFECTS OF THESE INGREDIENTS SHORTAGES.
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| FOOD CHAIN DIGEST • EDITION 2 • 2022
were unable to meaningfully make progress on the resulting backlog due to a cold snap at the beginning of 2022. Continued rail constraints come as Oatly already expects lower production volumes in the first quarter due labor and raw material challenges. To add complexity to the supply challenges, these conditions have been factors in elevating oat prices. According to the USDA’s Economic Research Service, the average price of oats in the 2021-22 season is expected to reach $4.20 per bushel, which would surpass the 2012-13 record of $3.89. Oatly is paying anywhere between 8 percent to 50 percent more for oats, depending on the region. As part of the solution, Oatly has been rapidly building out its manufacturing capacity to meet demand for oat milk and mitigate the effects of these ingredients shortages.
Reformulating Products at General Mills General Mills, a multinational manufacturer and marketing of
