Apr 21, 2020 - Economy

America’s food supply chain moves backward

Illustration of a waiter holding a silver serving tray featuring a bag of groceries

Illustration: Sarah Grillo/Axios

The whole country is eating every meal at home — and that’s triggering widespread shifts in the food supply chain.

What's happening: Restaurants are turning into grocery stores and wholesalers, and supermarket chains are functioning as grocery-pickers, as they adapt to America's new lifestyle.

Driving the news: To help consumers who can't find what they need at picked-over local markets — and to supplement sales — restaurants are selling groceries alongside prepared food.

  • Subway, Panera Bread and Moe's Southwest Grill are among the restaurant chains that have started selling bags full of their own ingredients — like fresh produce and bread.
  • Bakeries are getting into the act, selling ingredients needed for home baking — like yeast, butter and sourdough starter — as the frenzy for breadmaking continues.
    • With many supermarkets sold out of flour, some bakeries are taking 50-pound bags of the stuff and repackaging it into 5-pound bags to sell to retail customers.
    • "Everyone wants to make some godforsaken bread," is how two Bay Area writers put it in an article for ABC's KGO station.

Grocery stores are turning into warehouses. The Whole Foods store in Manhattan's Bryant Park temporarily closed to the public this week to focus solely on fulfilling the barrage of grocery delivery orders for Amazon Prime members.

  • "Pandemic shopping" has made delivery windows hard to get through online-only grocers like FreshDirect and Peapod, so brick-and-mortar supermarkets are trying to seize the day.
  • A sign-of-the-times headline in USA Today: "'Refund my money!' Customers accuse Instacart shoppers of stealing their groceries."

There are more — and bigger — warehouses. The country's shift from buying in-store to buying online means that all food retailers are leasing more warehouse space, WSJ reports.

The big picture: Eating and shopping for food are deeply ingrained habits, says John Stanton, a professor of food marketing at Saint Joseph's University in Philadelphia. We tend to buy the same things every week — just as we keep going back to our favorite restaurants to order "the usual."

But a shock to the system like the coronavirus pandemic is quickly breaking us of our old habits and forcing us to make new ones.

  • Grocery shopping is up 26% as home cooking becomes the norm, AP reports.
  • Instacart — which delivers groceries via online order for 25,000 North American stores — says its order volume has jumped 150%, per Time. Before the pandemic, online grocery was just 3% of the U.S. food market.

What to watch: Delivery companies like Amazon and Instacart are staffing up by the tens of thousands as demand keeps surging.

  • Business Insider Intelligence projects that half of American consumers will have tried online grocery delivery by the end of 2020.
  • Says Stanton: "The question is, how many of these habits will last after this is over?"
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