Labor issues prove challenging for CPG industry

KANSAS CITY — Labor, always a challenging issue for food manufacturers to navigate, has become even more so since the onset of the coronavirus pandemic back in March 2020. In presentations at the recent virtual Barclays Global Consumer Staples Conference held Sept. 8-9 executives of many of the leading consumer packaged goods companies were asked to what degree they are addressing the labor issue. 

In most cases, executives said they have been able to find ways to navigate shortages. But the challenges, they said, are wide-ranging and extend all across the supply chain.

“I think what’s interesting about it is that the competition for labor and the variables that will influence our ability to continue to succeed in attracting and retaining labor has probably proven to be a little different than we might have thought going in,” said Mark A. Clouse, president and chief executive officer of Campbell Soup Co., Camden, NJ. “Of course, intuitively, you tend to go to wages right away as your primary lever to try to increase your competitiveness. But what’s been interesting is we’ve tended to have more success with — certainly, wages play an important role. I don’t want to diminish that. But there’s a lot of other elements that are going into our strategy for attracting labor, whether it’s work schedule, predictability, whether it is environmental things that we’re doing to improve benefits and other experiences. And especially as you think about younger talent that’s choosing from a variety of different entry points and hourly labor, those things are extremely important.

“We also — one of the areas of greatest pressure for us has been in our temporary labor pool, which gets a little harder to differentiate. And the good news, I think, for us is that the demand that we’re seeing and the predicted demand even beyond this period is enabling us to convert many of those temporary roles into permanent full-time roles, which gives us a dramatic advantage and attracting talent versus what it takes on the temp side.

“I think the reality is though none of these are silver bullets, right? You got to do it all well. If you’re going to succeed, and I do think in the balance of ‘22 is going to be a very important variable.”

At General Mills, Inc., Minneapolis, it has been “all hands on deck,” said Jonathon J. Nudi, group president of North America Retail.

He said the company’s internal plants have faced few issues. The challenges have surfaced with some of the company’s external supply chain partners as well as distribution centers and the transportation network.

“And as a result, our service levels in (North America Retail) haven’t been where we wanted them to be,” Mr. Nudi said. “So what we’ve done is really revert back to some of the processes that we had in place at the beginning of the pandemic. We have a daily control tower at the working team level really tackling the issues that are coming and getting after those in real time. We have a senior-level control tower meeting once a week, where we talk about some of the big issues and where senior leaders can help remove hurdles. Just yesterday, I was on the phone with the CEO of a major ingredient company, talking about an ingredient that’s really constraining one of our platforms and allowing us not to run.

“So, well, it’s really all hands on deck. We’re focused on this. We’re confident that our service levels will get better as we move through Q2 and the back half of the year. But certainly, the labor market has been a challenge over the past few months.”

Andrew P. Callahan, president and CEO of Hostess Brands, Inc., said the Kansas City-based company realizes employees — like consumers — have a lot of choices. As a result, Hostess has an employee value proposition.

“We look at our value proposition,” he said. “The example would be our safety record. Our safety, our recordable incidents are 20% — or less than one-third of what the industry average is. We look at our labor schedules. So we look at, obviously, pay but we also look at benefits and the work experience for our employees, keeping them safe, giving them their liability. So all of that, we look at it on an ongoing basis. And we have to deal with it.

“And that’s the same issue. It’s not just the Hostess teammates that we control. We also work with our suppliers, making sure they have the same policies we have relative to treating their employees, dealing with their employees so that it’s a sustainable value proposition for our employees. Now certainly, there’s a disruption in the marketplace that we’re dealing (with) … in the short term. But over the long term, if we have the right employee proposition, I believe, we’ll manage through it well.”

Kenneth C. Keller, president and CEO of B&G Foods, Inc., Parsippany, NJ, said that while the company is seeing and feeling the pressures of labor shortages it is not the biggest challenge in terms of supply constraints.

“We felt it in a couple of our plants, where it’s becoming more difficult to bring in labor, retain labor, and we’ve got competition from other places, but it hasn’t become our primary constraint,” he said. “Still, I would say, materials availability, particularly in packaging has been one of our constraints. The crop — waiting for the new crop to come in so that we can have good service on our vegetable business, particularly our shelf-stable Green Giant vegetable business. These have been probably our biggest challenges. But labor, some of our facilities and factories is definitely a factor. And we’ve been doing things to try and bring people in and retain people because we want to keep running full out.

“And we’ve also, I think another dynamic that I’m sure a lot of food companies have been feeling and I’ve heard people talk about it is we’ve been running very, very full out for the last 16 to 18 months. And so how long can you keep doing this with your labor force over time and everything else? So we’re also looking at how do we reschedule, reorient our shifts to be able to give people more breaks, bring people on, expand shifts and other things to solve that issue as well. So it’s been a factor, but I wouldn’t say it’s our biggest factor in supply constraints.”

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