New American Heroes: Supermarkets and Their Suppliers

April/May, 2020 – It is, of course, a terrible moment in time for our country and the world. Coronavirus is spreading, posing severe health risks, especially to the ill and the elderly. While most businesses move to required shut downs, supermarkets face record crowds. Which means, of course, that employees, especially front-line people, such as deli department staff who specifically are there to interact with customers, are all at great risk of getting the virus.

Of course, the exact risk is unclear. So far, it appears that young and healthy employees might get the virus and might infect others with the virus but, themselves, are quite safe. How one perceives all this is very personal. In Italy, a 34-year-old Italian nurse took her own life after testing positive, as she was terrified that she might have passed it on to her own patients.

In a time when unemployment numbers are about to reach records exceeding those of the Great Depression, the retail food industry booms. Executives tell us of sales 200 percent, 300 percent and more over last year as consumers, fearing they may be confined to their homes or that supplies will run out, try desperately to stock up.

There may be a retail disaster down the road… If the situation normalizes, consumers may find they don’t need to buy toilet paper or hand sanitizer for years. Due to its perishable nature, the deli department will escape most of this, though overall consumption might drop as consumers realize they have a 10-year supply of, say, canned soup and so decide to eat it to save money and avoid waste. As a result, they might reduce their normal purchases even of perishables.

Many vendors of perishable foods will suffer as most foodservice operators—from restaurants and hotels to theme parks and airlines—are buying a tiny fraction of what they once did. In fact, foodservice distributors who lost most of their customers virtually overnight are scrambling to salvage things. Many have launched direct-to-consumer sales programs; others are approaching independent retailers, and a few have collaborated with large wholesale grocers to utilize their spare capacity to help the wholesalers deal with unprecedented demand.

Deli departments have had some special challenges. Most stores have closed salad bars and hot food bars. In many cases, even though the sales drop was not sufficient to meet pre-established protocols, it was a combination of an “abundance of caution” and not wanting to be liable or in the public eye if someone caught the virus by cross contamination with the food.

When we get through this…and we will… there will be a time of reflection. Is “just in time” inventory the right thing to do—especially on health and-safety related products? Can we rely on international transportation networks, or do we need to store or produce more products in the U.S.? Many specialty deli products don’t generally ride into the U.S. on dedicated cargo planes; they often ride in the belly of passenger jets.

How will this all be viewed? As a once-a-century interruption in commercial life, like the Spanish Flu of 1918 to 1920? Or as a new reality that we have to prepare for where global interconnections are so vast that we can expect these types of situations to pop up from time to time?

The implications are mind-boggling. Basing compensation on profitability, for instance, often makes sense—but how do you measure profitability? If a CEO puts a chain on “just in time” delivery and boosts profitability but exposes the chain to being without needed goods in some future outbreak, does it really make sense to say that CEO #1, who cut the inventory, is a genius and should get paid big bonuses, but CEO #2, who had to pay premiums to get inventory and disappointed customers when he couldn’t, should get paid less just because of the bad luck of timing?

Our delis, more than most of the supermarket, depend on open trade, especially with many of the best cheeses, for example, produced abroad. Certainly, there will be some public reaction, as it is realized that about 4/5ths of active ingredients in antibiotics are produced abroad. Will there be a targeted response to ensure the U.S. produces the medicines we need, so the country is not as vulnerable to interruptions in supply? Or will this knowledge turn into a more jingoistic attitude that ultimately leads to interruptions in trade of all sorts?

For the moment, supermarkets and their suppliers are the new American heroes. Keeping people fed, making them feel safe with toilet paper and hand sanitizer… and with staff, although often not particularly well paid, willing to risk getting the virus themselves to do their jobs and help people stay fed…. it is a most beautiful thing to see so many work so hard and risk so much to help us all.