ED: In today’s chat, we look at this whole situation we’re facing in retail and foodservice. Let’s focus on retail to start. What the heck is going on? Why isn’t there enough meat on the shelves in a lot of the country right now?
MOLLY: Well, I think it’s a little bit of a perfect storm, right? As you know, Ed, I used to work in a meatpacking plant. So, I understand how they work and some of the challenges they have, not just with meatpacking but also with food manufacturing and manufacturing facilities. I think a lot of what we’re experiencing is that food manufacturing, in general is an industry that works off of tremendous size and efficiency. When you look around large manufacturing facilities, there’s not much robotics in meatpacking plants; however, there’s more robotic innovation in other industries. As a result, in meatpacking, you have many people on the floor who are in relatively close quarters. Since the processing facilities have been designed for efficient throughput, it’s quite difficult to retrofit for a circumstance like we’ve had with a novel virus like we’ve had this year.
ED: So, not only is the manufacturing process inherently built on the maximization of human power, space, efficiency, and time, there are food safety protocols that are in place. That’s something that’s interesting about all this. With all that’s out there about washing your hands and covering your mouth when you cough, it’s like we’re relearning food safety 101. Aside from the process, what has happened with brands’ ability to predict what customers are going to buy? I mean, most shelves are stocked based on historical data. There’s no historical data to model what’s going on right now, right?
MOLLY: That is true. When I go to the grocery store, I always hit a couple of aisles to see how manufacturers are doing. It has been interesting to see the pivot around two key categories—cleaning supplies and any disposable paper goods. So, I don’t care if it’s bathroom tissue or paper towels and cleaning wipes—I’ve noticed concentration around the brands that people buy the most. I think that’s been an innovative pivot. Both retailers and manufacturers are saying, “Listen, these are the brands that move the most. Normally we like to stretch out, and we like to have some variety. We need to triple down on this type of product so that people have access.” It has been a fascinating study in the supply chain.
If you go back to the meat example, you think about that supply chain built around people working in cold, damp environments. You’re talking about a perfect storm, right? And frankly, some of them are in very, very rural communities. It’s a tight-knit rural community. So, if one worker gets sick, pretty soon, several workers are ill. Any manufacturing facility is going to have to deal with worker safety in that regard. But since packing plants are cold and wet, it’s even more challenging when you have a virus going around.
ED: I was visiting with one of our BTY teammates whose husband is in hard goods manufacturing. He said for several weeks, they were struggling with getting enough parts to be able to build what they build. But then when they have been exposed to COVID, you must isolate the people that person is near. Frankly, they just don’t have all the people to do this. So that’s the reality. What I find scary and intriguing is the mentality that customers had across the country when sheltering in place started becoming a reality. Back March, April, what were some of the more surprising or intriguing things you noticed about consumer buying behavior?
MOLLY: Well, I think it is literally like a joke. When you think about buying behavior, I never understood for respiratory disease why people scrambled for toilet paper. I couldn’t figure that one out.
ED: And they’re still scrambling for toilet paper unless you’re an H-E-B customer. Our daughter lives in Atlanta, and we’re shipping toilet paper to her because she cannot find toilet paper in Atlanta.
MOLLY: It is a real thing. I grew up in a hurricane community. We have hurricane preparedness even as far inland as San Antonio, because we’re not that far from the coast here if there’s a direct hit with a hurricane. In the short term, I noticed very similar buying patterns of what you see consumers do with hurricane preparedness.
ED: And only for two or three days, right?
MOLLY: Right! This happened all over the country. And honestly, you could argue that some of the global brands were being affected across the globe. When you’re hit with an unknown, people automatically hunker down, whether it’s based on fear or caution. We saw a lot of that starting February and March.
ED: So, in the protein category, depending on the retailer, some have been able to adjust or modify. Was there anything in protein that was or wan not purchased that was intriguing to you?
MOLLY: Basically, what happened was very similar to other categories across the store. You can always draw a similarity if you’re familiar with store categories because you can look at when somebody starts to shop if they’re shopping lower on Maslow’s Hierarchy of needs. So, when you’re more concerned with food, shelter, and clothing, you’re less concerned with the products that will bring you self-actualization.
What happened was people started buying the heck out of ground beef. And there’s a lot of factors that have to do with that. But if you know how to cook it, you know how to store it, and you know your family’s gonna like it. You can do a ton of different things with it. So, you saw a huge increase and need for ground beef. But you saw other products like deli or frozen food items that were a bit more exotic that consumers decided they either weren’t willing to spend the money on it in uncertain financial times, or it wasn’t pleasing enough to purchase.
ED: Interesting. So really having to have things that are more utilitarian or functional. We’ve talked before about animal utilization. But the challenge is, you can only get so much meat out of one animal, right? So when the cuts and the logic of the animal’s utilization shift so rapidly, it’s very difficult to turn on a dime and get more of one cut or one grind out versus the other, right?
MOLLY: It isn’t easy. Ground beef is a ubiquitous product, right? There is a lot of ground beef in retail and a ton of ground beef in foodservice. Retail tends to take a certain type of cut and run towards more of a value-oriented mix. Foodservice is where you get all of the really high-end steaks. I’m exaggerating when I say all, but most high-end steaks are going to go towards food service. So, suddenly, when restaurants closed overnight, there was a huge push trying to divert that product, because it’s perishable. It diverted quickly. Ultimately, what you want is to eliminate food waste. It’s incumbent that processors do their best to minimize food waste, especially when they’re thinking about animal protein. You’re making those conscious decisions. In particular, I was proud of the USDA with how quickly they were able to pivot on some labeling regulations, which was fascinating. But they saw it and they did it. It was a case study, Ed. Just a case study in how to pivot,
ED: Fascinating. Thanks, Molly.
MOLLY: My pleasure, Ed.