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The Stockout: Fast food is helping keep meatpackers afloat

The Pandemic has been a boon for fast-food and in turn helped meat producers. I have written about many troubles that meat packing companies have gone through this year, ranging from a general slowdown in the economy to workforce struggles with on-site outbreaks. As restrictions on dining and indoor gatherings have spread across the country, this has provided an unforeseen boost to certain sectors. 

Same-store sales in the quick service restaurant (QSR) industry took a big hit as did the rest of the economy in the first quarter of this year. Sales rebounded extraordinarily off the lows and have been in positive territory since the start of the second half of the year. Recently, same store sales have lost some momentum, which could be attributed to lower overall spending due to increased uncertainty surrounding COVID relief and strained finances. 

It is clear that although consumers aren’t dining in as frequently as before the pandemic, there is still a heavy desire to buy ready-to-eat food and not have to prepare it at home. Concurrently, there isn’t a surge in spending at grocery stores due to much less panic surrounding the pandemic. One thing that is intelligible is that with the coronavirus spreading at rapid rates across the country, fast food chains are likely to fare significantly better than their dine-in competitors for the foreseeable future.

The significant rebound in QSR sales has executives at multiple meatpacking companies optimistic into the new year. 

“Our food-services business is pretty close to being back to where it was,” said Jon Nash, head of North America protein for Cargill. “The only places where we continue to see things being impacted is more fine dining, but the QSR space has been very strong.” Cargill is the third-largest beef producer in the United States and has over 30 protein processing plants in the United States and Canada

“We are encouraged by reports of a chicken sandwich war in 2021,” said Joe Sanderson, chief executive officer of Sanderson Farms. According to the U.S Department of Agriculture, chicken breast prices are currently at the highest level in over five years, $3.41 per pound.

So what does all this mean for the CPG supply chain? Meatpackers should focus their supply chain on items that are in high demand from their QSR customers and carriers should expect to have opportunities to ship these goods across the country due to restrictions likely staying in place for at least the next quarter. If a “chicken sandwich war” does breakout, the Southeast will likely heat up as three of the top five broiler chicken producing states are Georgia, Alabama, and Mississippi

Reefer tenders are strengthening in some of the nation’s biggest markets. Reefer tenders have soared out of some of the nation’s biggest markets over the past month while the Northeast is outperforming the rest of the country on a relative basis. 

Map: FreightWaves SONAR; height: reefer volumes, color: reefer outbound tender volume index monthly change.

In the nation’s second-biggest reefer market, Allentown, Pennsylvania, outbound reefer tenders have skyrocketed by 21.79% month-over-month (m/m). Interestingly, relative reefer capacity has only tightened by 3.37% m/m which suggests that this jump in tenders is due to an increase in physical volumes and not just retendered freight. 

Other markets in the Northeast where outbound tenders have risen significantly over the past month are Philadelphia, Pennsylvania (+30.32%), Buffalo, New York (12.5%), Pittsburgh, Pennsylvania (+11.24%), and Cleveland, Ohio (+10.63%). The majority of the upside in tenders is due to strengthening volumes, except for Cleveland where higher rejection rates contributed to more tendered loads. 

Strength in large markets wasn’t just limited to the Northeast. Reefer tenders were higher by 19.55% out of the Green Bay market whereas volumes rocketed higher by 11.03% out of Little Rock, Arkansas. Reefer volumes have been particularly weak West of the Mississippi. 

Reefer operators, it will be best to position your assets East of the Mississippi. Capacity is tight on a national basis (OTRI.USA: 45.28%) which will lead to opportunities in the spot market. Transportation managers, it will be advantageous to use longer lead times if your plants are located in the hot areas listed above.