Unprecedented ingredient costs coupled with shortages, inflation, and related supply chain issues have affected nearly every specialty food category this year, with continuing repercussions. Companies specializing in grain and oats, in particular, have been impacted by an onslaught of events that has compelled emerging brands to become nimble, and execute innovative solutions.
According to Food Dive, a North American drought last year devasted oat harvests, which have been further exacerbated by rail shipping issues, and a host of other factors that led to a 39 percent decrease in U.S. oat production last year compared to 2020. These supply challenges have also ramped up prices for the product that has successfully made it to circulation, hitting $4.20 per bushel in the 2021/2022 growing season, up $0.20 from last year.
Faced with an oat shortage, Yishi Foods, an Asian-inspired oatmeal brand, sought additional suppliers to keep its business afloat.
“All the biggest oat suppliers across the globe are running out of oats. One of our suppliers just yesterday told us that their oats were completely reserved for the next year,” Lin Jiang, founder of the company explained during an SFA Spill & Dish podcast, recorded this summer. “Our entire team including sales and marketing started reaching out to oat suppliers and we got a palate of oats here and there from Canada and Wyoming…the entire team found a few oat suppliers to get through the entire pandemic.”
“We are trying to stock up in general because we are growing quickly,” she said. For Yishi Foods, this swift action led to establishing a relationship with of one of the largest oat suppliers. In the end, the company secured stock from many supply streams, rather than relying on one, and it has been enough to get it through the next year.
Though its products do not contain oats, Kiley Fields, founder of For Good Granola, is likewise feeling the strain of ingredient shortages.
"Access has become a more concerning issue than cost, believe it or not,” Fields told SFA News Daily. “We have sought out additional sources for many of our ingredients. The first time you have to delay granola production because you are missing an ingredient...you learn quickly you need a backup source for the backup source.”
Recent data from the market research firm IRI indicates that consumers are gradually shifting to shopping store brands for all their items; however, the oatmeal and snack bars, granola bars, and clusters categories are particularly affected. Store brands’ lower price points are taking business from specialty makers who already face their own rising costs.
Fields is buying higher quantities to help minimize costs.
“By purchasing at a higher volume, we have been able to limit the frequency of shipping and freight costs and also benefit from some economies of scale,” she said.
Victoria Ho of Sherpa CPG, a specialty food consulting company, provided some context regarding access issues, indicating that smaller brands were more affected by current events than brand giants.
“Many emerging brands who weren't at the stage to make contract purchases of the certified crop were forced to spot-buy pallet lots at an inflated price, [and] widen supply chain searches to overseas (with Canadian and Ukrainian oats also being affected by heat and drought),” Ho explained. “Brands who were relying on turnkey copackers to supply raw materials faced a uniquely frustrating battle as well when unexpected spikes in the demand for their product…was met with an inability to fulfill those orders due to shortage.”
The pains of these events were deeply felt by many in this category, and Ho warned “the pain with oats is ongoing, as oats are a commodity crop with a huge crossover market in specialty markets like gluten-free.” This is a persistent battle that requires brands to stay vigilant and remain attuned to current events.
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