Facing empty store shelves, consumers are asking when supermarkets will return to pre-pandemic stock levels. Steve Spinner, CEO of United Natural Foods (UNFI), one of America's largest food distributors, offered a sobering prediction during a recent earnings call: full recovery of grocery supply chains might not come until autumn.
Pandemic's Impact on Food Supply: Surging Demand Meets Constrained Supply
The COVID-19 outbreak triggered unprecedented demand for groceries as households stockpiled food and restaurants shuttered. Simultaneously, supply chain disruptions and labor shortages emerged, making it increasingly difficult for suppliers to meet market needs. Inventory levels have remained depressed as a result.
UNFI, as a major distributor, has felt this pressure acutely. Spinner revealed that suppliers' order fulfillment rates have plummeted more than 1,000 basis points below historical levels—a decline he described as unprecedented in his career. The fill rate, which measures the percentage of customer orders actually delivered, serves as a critical indicator of supply chain efficiency. These low fulfillment rates have not only limited UNFI's sales growth but also caused significant losses for retailers.
Despite these challenges, UNFI reported a 12% year-over-year increase in net sales for the quarter ending May 2, reflecting continued strong consumer demand for groceries. Paradoxically, order fulfillment rates have become both the primary driver and the main constraint on sales growth. Spinner characterized current fulfillment rates as "painful" and "a huge loss for us and our retailers," though he declined to provide specific figures.
Demand Factors: Restaurant Rebound and Consumer Habits
While restaurant reopenings might suggest reduced grocery demand, UNFI anticipates a slow return to dining out. "Beyond whether restaurants are open and whether I can go out to eat," Spinner explained, "there's the question of whether I feel comfortable doing so." Persistent high demand, compounded by March's panic buying, will keep many suppliers playing catch-up for months.
Supply Response: SKU Rationalization and Production Adjustments
Major consumer packaged goods companies—including Coca-Cola, Clorox, Campbell Soup, Procter & Gamble, and Mondelez—have responded to disruptions by temporarily discontinuing less popular products to focus on high-demand items. While this SKU reduction strategy improves production efficiency, it creates challenges for distributors. "The largest manufacturers have temporarily stopped producing thousands of items to concentrate on consumer favorites," Spinner noted. "As growth stabilizes, manufacturers can begin returning to normal operations."
Root Causes: Complexity and Fragility of Supply Networks
The pandemic exposed fundamental vulnerabilities in food supply chains—complex systems spanning farms, processors, packagers, transporters, warehouses, and retailers. Key pressure points include:
Labor shortages: Worker infections, quarantines, and health concerns reduced staffing at processing plants and transport companies.
Logistics breakdowns: International and domestic shipping constraints, port congestion, and container shortages disrupted food distribution.
Raw material instability: Pandemic effects on planting and harvesting led to inconsistent supplies and price spikes for key ingredients.
Packaging deficits: Soaring demand for packaging materials outpaced constrained production capacity.
Changed consumer preferences: Increased home cooking and heightened focus on health, safety, and sustainability altered purchasing patterns.
Strategic Responses: Diversification and Technology
Food companies are implementing multifaceted strategies to strengthen supply chains:
Diversified sourcing: Developing multiple supplier relationships to mitigate dependency risks.
Enhanced collaboration: Improving information sharing and coordination among supply chain partners.
Advanced inventory systems: Employing predictive analytics and automated replenishment to optimize stock levels.
Technology investments: Leveraging blockchain, IoT, and AI to increase visibility and efficiency.
Risk management frameworks: Implementing systems to identify vulnerabilities and develop contingency plans.
Long-Term Outlook: Building Resilient Supply Chains
The pandemic has accelerated transformation across food supply networks, with companies prioritizing:
Regionalization: Shorter supply chains reduce transport dependencies and improve responsiveness.
Digitization: Smart technologies optimize operations and decision-making.
Sustainability: Environmentally conscious practices gain importance throughout the supply chain.
Collaborative ecosystems: Open partnerships create shared value across the network.
While UNFI's forecast suggests grocery shortages could persist through fall, this doesn't imply permanent empty shelves. As restaurants rebound, supply chains adapt, and technologies advance, availability should gradually normalize. Meanwhile, industry players must continue strengthening supply networks to better serve consumers.