Commercial food suppliers struggle with product and labour shortages
Last year as the pandemic hit the U.S., Kevin Hourican witnessed the US$659 billion U.S. dining industry crater and take Sysco Corp., the food supplier he had just joined to lead, down with it.
Now Hourican, who became Sysco’s chief executive officer in February 2020 after stints at CVS Health and Macy’s, is watching a comeback that he says has exceeded expectations.
Revenue at Sysco, America’s largest food supplier, has been declining for over a year, but sales in the quarter that ran through June are expected to jump nearly 60 per cent, according to analysts’ estimates. That may help the company’s stock, which has fallen this year as broad measures like the S&P 500 have gained.
Bloomberg recently spoke with Hourican about the restaurant industry’s ability to bounce back, inflation and the great chicken wing shortage of 2021.
Restaurant chains are talking about surging demand. Denny’s CEO John Miller recently said that Americans are creating an eating-out renaissance of sorts. What’s most surprising about this rebound?
The surprise is how robust and how fast the recovery has been. It’s definitely exceeding the industry’s expectations. Restaurants are busy. They’re booming. They’re bouncing back in a strong way. They’re not up just over 2020, they’re up versus 2019 as well.
Not all markets are recovering at the same pace. Urban centers are still lagging behind the national average. Labor Day is kind of a line being drawn in the sand with more employees coming back into those cities.
Inflation is on a lot of people’s minds. How long will it last, and what are the biggest pressure points for Sysco?
We work really hard to blunt inflation. We find alternative suppliers. We find and source alternative products. We do all this work so we can manage the cost that our customers experience.
We’re experiencing much higher than normal inflation right now. It’s economics 101. We have surging demand in food-away-from-home and supply constraints.
When does that come back into equilibrium is really the most interesting question, and I don’t know the answer. I’m hopeful it’s within the next 90 days. Hopefully, it’s not in the year-plus range.
You have a great view into how price increases work their way through the food economy. How is it playing out?
We’re mostly seeing our restaurant customers being successful in passing through the inflation to the end user. Restaurants can do that. Consumers have money in their pocket. They’ve fared mostly well during the pandemic. Saving levels are at an all-time high. And food-at-home fatigue is real.
As a warehouse operator and restaurant consultant, Sysco has visibility up and down the supply chain. How legit is this dearth of chicken wings?
There’s a nationwide shortage of chicken wings. We can’t get what we want. We can’t get enough. Chicken wings are just in extraordinarily short supply. Boneless wings are available, that can be put on the menu. The chicken wars that are happening between the fast-food chains—it’s just remarkable. We’re working hard to find additional sources of poultry.
What could be the next big story in shortages?
Canola and soybean oil are in shorter supply. The company has something that essentially sucks the bad stuff out of the cooking oil to extend its life. The oil that the fries are being cooked in becomes dirty and the quality of the fries becomes worse.
I don’t think consumers would accept there not being fries.