Q&A: Krasdale Foods’ Steve Silver says COVID-19 supply hurdles remain

Steve Silver has served as president and chief operating officer of Krasdale Foods, since January 2019. Based in White Plains, N.Y., the grocery distributor supplies more than 300 independent supermarkets in the Northeast and Florida, primarily in metropolitan New York. Store banners it supplies include C-Town, Bravo, Aim and Market Fresh supermarkets; mini-groceries Shop Smart Food Markets and Stop 1 Food Mart; and a host of delis, drugstores, convenience stores and other independent retailers selling food and groceries, reaching around 2,500 retailers overall.

When the coronavirus outbreak was declared a national emergency in mid-March, the New York area was hit hard, with the number of COVID-19 cases and deaths in New York rising to the highest in the nation in the ensuing months before public and community lockdowns helped bring incidence of the virus under control. Now the metro area has one of the nation’s lowest COVID-19 infections rates, despite a recent uptick seen across most parts of the country.

Supply shortages driven by consumer panic buying and lockdowns at the outset of the pandemic have improved but still remain, according to Silver. He noted that the problem has been particularly acute for a small-to-midsize wholesaler like Krasdale, which carries less clout with manufacturers than bigger distribution competitors and large, self-distributing retailers. In an interview with Supermarket News Senior Editor Russell Redman, Silver talks about lingering supply issues, the impact on Krasdale, and how the company is adapting to the pandemic and preparing for another potential wave of COVID-19 this winter. Here are edited excerpts of the discussion.

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SUPERMARKET NEWS: Since the coronavirus outbreak more than seven months ago, the grocery industry has seen both an explosion in demand and supply disruptions. When did Krasdale Foods and its retail customers begin to feel the effects of the pandemic?

STEVE SILVER: In New York, you know what it was like back in March and April in terms of the anxiety, panic and everything else that was going on — justifiably. When we first got wind of what was probably going to happen, we — as probably most companies back then — were not a company that traditionally worked from home. Although we certainly were technically capable of working from home, we weren’t in a position where we could have the whole company working from home. The infrastructure wasn’t in place. But we put that into place very quickly in February and March, changing the infrastructure with licenses and hardware, whatever we needed to do to make sure that we could work from home, at least from the office perspective. Obviously, you can’t pick delivery orders from home.

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In terms of the office, there was a massive buildup as quickly as we could to operate remotely as best as we could. It took a lot of resources. And from a technical perspective, it was a big change for a lot of people as they got the communication system back in sync to make sure people were actually doing what they should be doing and being managed properly. But we survived.

As far as our customers, the retail supermarkets, they had it even worse. We were only dealing with our own employees. Supermarkets were dealing with consumers, employees, suppliers — everybody in the world coming into their stores. It was scary back then. But we never closed. We never had a huge outbreak that would have crippled us, particularly in our distribution center. We got all of the PPE, the gloves, the masks. In our distribution center, most of the men are on equipment, so they’re fairly spaced apart to begin with. But we had to change hours in our distribution center because the city closed subways and mass transit earlier to do all of their sterilizing. And that wasn’t easy for us to do. We have union shops, and you have to get a lot of people together to change shifts. But we did whatever we had to do to stay in business. In the beginning, there was panic buying [by consumers], and you just couldn’t keep up with the orders, which were way over the top, crippling our system and the whole supply channel.

SN: When did Krasdale really start to see the crushing demand?

SILVER: Because we kind of saw what was going to happen, in February we were able to buy in a little bit on merchandise that we thought we might see a run on, things like pasta and paper goods. But that got wiped out fast. About the middle of March is when the panic buying started, and everybody just got wiped out. What’s very unusual about this episode is the supply chain is still disrupted. We’re a company that has historically fulfilled on 98% to 99% of what we would get. These days, on a good day, we’ll hit 80%. But it’s not because of us; it’s because we can’t get supplied. And that's very frustrating. 

Krasdale's 325,000-square-foot distribution center in the Hunts Point section of the Bronx is well-positioned to serve the metro New York market.

The manufacturers, for whatever reason, haven’t tooled up appropriately, or maybe they didn’t think it would last this long. For a small or midsize regional distributor like us, we go to the bottom of the list in terms of priority. We’re certainly not Walmart, Costco or Amazon. So it’s a constant battle to keep the supply chain going. And as you know, we don’t have a locked in audience. Our customers buy from us because it’s good to buy from us. We give them great service and a good, competitive price. But if we can’t supply them, they’ll go somewhere else. They are entrepreneurs, and I can’t blame them. If we can’t supply their product, they’re going to go somewhere else, and that’s what’s been happening. It’s very difficult, no matter how much we scream and cry to our vendors. And I’m talking about large suppliers, not just small ones. They’re all having the same issues. There’s a solid demand issue that suppliers have just not taken care of.

SN: What products have been in highest demand amid the pandemic? Which categories have seen supply shortages/disruptions?

SILVER: In the beginning, it was the paper products and the cleaning products, but it quickly gyrated right over to the food products. And it still is. You get one vendor under the control, and then another one goes sour on you. Again, if we’re able to fulfill on 80%, we’re doing a good job these days. And again, it’s not because we can’t ship it out; it’s because we can’t get it in. As a consequence of that, it adds a lot of cost to the system. In this business, since you’re working on such small margins, you’ve got to send out trucks full. And when you expect them to be full and they go out with 30% air, it causes a lot of problems. And that just walks its way down the supply chain. Stores can’t fill their shelves, and consumers get angry. It’s gotten better, but you would think that after six or seven months of this, we’d be closer to being back to normal. And we’re not. I don’t see anything on the horizon that says we’re going to get there anytime soon.

SN: Have you seen an upsurge in demand for Krasdale private-label products?

SILVER: Yes. If we couldn’t get branded product, they [customers] would take our product as well. But we had a hard time getting our product in as well. With private-label product, most of it is packed at the same time as the growing season. So if there’s a big spike in demand, and we run out of private-label product, it’s going to be a while before we get it back in. The supply issues have been across the board.

SN: At a lot of the grocery stores I visited during the pandemic, I’ve seen brands I normally don’t see at those stores.

SILVER: Right. Because they’ll fill their shelves. They’ll get product from whatever sources they can get, just to have product in their stores. Nobody likes to look at empty shelves. And in this business, which is highly promotionally driven, it’s been very difficult. You can’t run promotional programs and sales and marketing programs that you had in place. It’s been a big scramble.

SN: Because you couldn’t guarantee supply.

SILVER: That’s right. You don’t want to put something on promotion, and then the consumer looks through the circular and says, ‘I’m going to go to the store and buy that,’ and then you can’t get it, right? You have to be very selective about what you’re going to promote now, and you try to get guarantees from your supply lines that it’s coming in. But even with all of that, it doesn’t happen. That’s what we’re all dealing with. 

SN: How have Krasdale’s CSS and KoolTemp subsidiaries played a role in the supply challenge brought by the pandemic? [Consolidated Supermarket Supply and KoolTemp Foods provide Krasdale customers with product via arrangements with preferred suppliers.]

SILVER: The guys that we source from are all having the same issues, maybe less severe than us or maybe worse than us. Our frozen, dairy and meat suppliers — we’re all under stress. As you know, we have many longtime, loyal customers. What we do better than anybody else is provide personal service and a lot of expertise to our stores. We have a big field force out there that helps our retailers operate. And that went dormant. Obviously, you couldn’t put all your people on the street at once, and that’s a big advantage we have over everybody, our personal contact with our customers. There’s only so much you could do via Zoom.

Grocery store banners supplied by Krasdale include C-Town, Bravo, Aim and Market Fresh supermarkets, among a host of other food retailers.

SN: What kind of support have Krasdale’s retail customers been looking for? What have you been hearing from them as all of this has unfolded?

SILVER: They just want the product from us. They were all struggling themselves. Fortunately, most of our operators stayed open. We had a few that had to close because they had problems with the illness. They were dealing with a lot more anxiety and panic than we were. As I said, the retailers have an open shop, with consumers walking in. Back in March, April and May, it was spooky going into supermarkets [in metro New York], wasn’t it? Supermarkets were trying to convert by putting up all these plastic barriers and shutting down all their service areas. We helped as much as we could. We could help with financial assistance. We did a few seminars on PPP [Paycheck Protection Program] and ways that they can obtain funds. But most of our guys are pretty sophisticated, with good professionals to help them, and those that needed funding found a way to get it. But again, the primary problem was getting product to the shelf.

SN: Have you begun stockpiling to prepare for the winter and the holiday season?

SILVER: As much as we can, if we have it, we can get supply to you. We have outside storage. If we can find product, we buy more than we need, if it has no shelf-life issues. So do our customers. Our customers look for good deals. Most of the time, their basements are full of product. But this [pandemic] wiped them out. So you prepare for the worst and hope for the best. That’s all you can do.

SN: For which categories have you begun stockpiling product? I guess the traditional winter and holiday season stuff?

SILVER: Anything you can get your hands on, staples products — canned vegetables, pastas, rices. As long as it has a shelf life, and you can get it, we can stockpile it. We’ll put it in outside storage, we’ll keep it here and we’ll spend the money to move it around. 

SN: What's been the challenge with fresh foods, especially produce?

SILVER: That seems to have gone away. Most of our produce suppliers, I think, are pretty much back normal. You’re going to be out here and there with certain items. But we have three or four different produce suppliers that supply our stores. Most of our guys will go right to the produce market, and it’s the same thing on the meat side. Right now, most of the supply issues are on the dry grocery side, because the demand has been pent up so much and, in my opinion, the manufacturers will take care of the Walmarts and the Krogers and the Costcos first before the small, middle-size regional distributors.

SN: New York recently has managed to keep its COVID-19 infection rate under control versus most of the other States, despite a massive spread early on in the pandemic. What’s your outlook going forward in terms of the pandemic’s impact on Krasdale and its market area?

SILVER: Personally, I think you’re going to see an uptick. It’s a vicious disease, and as much as you try and stay away from each other, it’s going to get around. So I suspect we’re going to be dealing with it. Not like it was back in March and April, but there’ll be an uptick and you’re going to have to just survive. I don’t think we’re going to have the kind of lockdown we had back then. It might be targeted, specific ZIP codes, certain schools closing. Hopefully, the therapies have gotten a lot better. So they say, we’re all waiting for a vaccine, which I don’t think is going to happen for awhile. We’re going to be in this mode for a year, in my opinion.

SN: So for Krasdale, the name of the game will be just trying to keep a jump on supply?

SILVER: That’s it. It’s all about supply. It’s not about us pushing product out. We can push it out as good as anybody. We have a whole infrastructure in place. We don’t have a problem picking it. I just have to get product in the building.

The other thing I’ll tell you is that everybody in this industry — whether at the retail level or at the wholesale distribution level — they’re all warriors. To get people to come into work during that time span, when it was really pure panic in this part of the country, was amazing. Our employees were great, and our customers’ employees were great — one notch below health care workers, the grocery industry.