Labor Woes Threaten Product Availability, CPG Group Warns

Labor challenges throughout the food and packaged-goods supply chain amid robust consumer demand may threaten product availability in the closing months of 2021, the Consumer Brands Association warned Monday.

In its second-quarter CPG Economic Pulse Report, the Arlington, Va.-based CPG trade group noted that demand for consumer packaged goods was up 8.7% in the quarter, with demand for personal-care products up 20.6% year over year. That surging demand has exacerbated the need for more workers both to make the products and get them to their intermediate destination.

However, against a backdrop of 362,000 job openings in nondurable-goods (e.g., packaged foods) manufacturing this summer, the CPG industry added only 12,000 new hires in the quarter, according to Consumer Brands. Meanwhile, the transportation, warehousing and utilities sector had 460,000 jobs open in June (the latest month for which data from the Bureau of Labor Statistics is available), up nearly 48% from 311,000 in June 2020.

"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," Consumer Brands President and CEO Geoff Freeman said in a statement. 

CPG manufacturers, like grocers, have responded with higher wages, sign-on bonuses and other enticements meant to attract workers, but hiring still lags demand, the report noted. Wages in food manufacturing were up 4.6% in July year over year and up 6% for production and nonsupervisory workers in the sector. Consumer prices, meanwhile, were up 5.4% year over year in July.

The increase in demand for CPG products in the second quarter of 2021 was especially remarkable given that its year-over-year comparison was a quarter still early in the pandemic when stock-up shopping was common, according to Consumer Brands. The big question mark hanging over the heads of producers, retailers and consumers alike remains the path of the COVID-19 pandemic, the report's authors stated. The impacts of the surge in coronavirus cases and hospitalizations resulting from the delta variant won't be seen until third-quarter data are in, although a Consumer Brands/Ipsos poll of 1,000 U.S. adults conducted Aug. 6-8 found 35% of respondents saying they are spending more time at home because of the latest surge. 

"At-home consumption has been the biggest driver of CPG demand and will continue to put pressure on the industry at a time where the supply chain is at its breaking point," the association stated, calling the delta variant and the pace of vaccinations against COVID-19 "the big variable for the available workforce."

In a WGB interview last month, Freeman called on the Biden Administration and Congress to do more to address accelerating inflation and revisit regulations affecting ports, trucking companies and other key players in the movement of goods into and across the U.S. 

"The message from industry to Washington is, 'This is an emergency situation; it’s time to treat it as such,' " Freeman told WGB, adding, "We have not seen that urgency."

The post-Labor-Day end to enhanced pandemic unemployment benefits may help some employers fill workforce gaps in the near term, Freeman and Consumer Brands have indicated. To address persistent talent needs, Consumer Brands' report stated, the association is calling on leaders in Washington "to launch new workforce initiatives to advance education, apprenticeships and support of skilled trades and supply chain professions greatly in need of new talent."