A continued demand for CPG products amid the pandemic has exacerbated supply chain and labor challenges, according to the Consumer Brands Association’s Q2: CPG Economic Pulse Report.
“The second quarter of 2021 builds on a remarkable story of an industry that has continued to deliver essential goods to the American people every day through one of the most challenging periods in the industry and country’s history,” said Geoff Freeman, president and CEO of Consumer Brands, in a statement. “But with supply chain backlogs more severe and the labor shortage more desperate, consumers’ access to essentials is threatened.”
The report outlines three key takeaways from the association’s research.
First, at-home consumption is fueling demand. Demand jumped 8.7 percent in the second quarter of 2021, proving there was no decline in the need for CPG products despite the rollout of vaccines and widespread reopening of the country. The CPG numbers reflect the optimism of reopening, with demand for personal care products up 20.6 percent over the prior year, but this optimism does not yet reflect potential changes in consumer habits brought on by the delta variant.
Second, the increased demand is driving already constrained supply chains to the breaking point. The cost of making essentials continues to rise and there are also significant delays and added costs for shipping product ingredients, packaging materials and – ultimately – finished goods to consumers, caused by factors such as port congestion, truck driver shortages, and rising diesel fuel costs.
Third, the CPG category is facing a labor crisis, despite wage increases. The CPG industry is the largest manufacturing employer in the U.S., but added only 12,000 jobs during the quarter, despite more than 800,000 openings in manufacturing. Food manufacturing wage increases were up 4.6 percent in July over last year — 6 percent for production and non-supervisory workers — but have not influenced job growth.
“Supply chain bottlenecks and workforce gaps lead to delays and potential shortages, which are bothersome when a consumer must wait months for furniture delivery, but disastrous if those delays mean consumers don’t have access to essentials they depend on like baby formula, soap or toilet paper,” continued Freeman. “The CPG industry needs the federal government to engage on supply chain issues to alleviate the pressure it’s feeling so consumers do not suffer the consequences.”
Related: Chipotle Uses Tik Tok to Recruit Workers; Makers See Supply Chain Pressures Lasting for Months.