Production of Twinkies, Nutter Butters and other packaged goods has been stalled by a lack of ingredients, creating intermittent stockouts at grocery stores.
Consumer packaged goods giants including General Mills, Conagra Brands and Mondelēz International are grappling with production hiccups as factories have to wait for the arrival of key ingredients.
“Unfortunately, you can't make a Twinkie with only 95% of ingredients,” Hostess Brands CFO Travis Leonard said in early August, noting that ingredients shortages have created production scheduling challenges and transportation inefficiencies.
The war in Ukraine has pressured supplies of essential ingredients in food products, particularly wheat and cooking oils. Ukraine was responsible for 31% of global sunflower oil exports in 2020-2021, while Russia and Ukraine combined accounted for 28% of wheat production, according to the U.S. Department of Agriculture.
Russia’s invasion of Ukraine had brought port activity in the country to a halt for months. Additionally, Russia has pursued its own restrictions on exports of grain and sunflower oil, further straining supply.
Ships carrying wheat, corn and other commodities are just now trickling out of three Ukraine ports following a United Nations-facilitated agreement on July 22, though experts expect supply to remain constrained for some time.
Conagra, owner of Marie Callender's and other frozen food brands, saw volumes drop 6.4% over the previous quarter as ingredient constraints impacted the production of refrigerated goods. The business has also seen higher-than-expected inflation for edible oils.
“If we're missing an ingredient, we can't produce,” said CFO Dave Marberger in a July call.
Snack maker Mondelēz recently raised prices again to offset inflation from materials including edible oils and wheat, CEO Dirk Van de Put said in a Q2 earnings call late last month. Supply chain constraints have limited production of biscuits, including for brands such as Nilla, Nutter Butter and belVita.
At a June investors conference, CFO Luca Zaramella noted Mondelēz has seen “some availability issues” with oils and grains in particular, and the company is working to reformulate products to “replace some ingredients and components that are in shortage.”
General Mills has also moved to substitute ingredients after shortages disrupted the company’s ability to run production lines.
Each ingredient change requires an entire product to be reformulated and relabeled, “which is obviously a lot of work,” Jon Nudi, group president of North America Retail at General Mills, said in a call. As of March, some products had been reformulated over 20 times.
But, finding substitute ingredients at all can be difficult, particularly for sunflower oil.
Extreme weather over the past few years has tightened supplies of a wide range of sunflower oil alternatives in major exporting countries. Drought, for example, pressured the supply of soybean in Brazil and rapeseed oil in Canada, while a December typhoon in Malaysia impacted palm oil production.
Finding substitutes has been a challenge for Mondelēz, with Zaramella noting it’s an area “we need to work on.”
“With the supply chain strains that we have seen around the world, it has been a challenge and it will continue to be a challenge most likely in the foreseeable future,” he said.
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August 12, 2022 at 03:21AM
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From Twinkies to Nutter Butters, lack of ingredients hamper snack food production - Supply Chain Dive
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