The delta variant has thrown a wrench into economic expectations, making even the immediate future seem impossible to predict. At the same time, consumer demand continues to set records, raw materials prices continue to climb, and workers continue to be hard to come by, according to the CPG Economic Pulse: Q2 Report from Consumer Brands Association.
Here’s a brief look at the key results.
Demand for CPG products up 8.7% YoY
With the vaccination campaign in full force and people venturing out, it seemed likely that the record-breaking demand for CPG products seen early in the pandemic would fade. The opposite was true — CPG products saw demand growth of 8.7% compared to Q2 of last year.
Consumer Brands notes that demand could remain elevated in Q3 as people continue to stay home because of the delta variant. The results of a survey conducted earlier this month show that:
- 35% of Americans are spending more time at home
- 63% are spending the same amount of time at home
- Only 3% are spending less time at home
Producer Price Index sets a new record
“Every link in the supply chain is costing more right now,” according to Consumer Brands. The Producer Price Index hit record highs, rising 6.1% in April, 6.5% in May, and 7.1% in June. Many of the most common raw materials used in the CPG industry have seen staggering price increases in the past year — corn is up 121%, while aluminum is up 100%.
Delays and added costs in shipping are also driving up costs. For example, shipping ports are congested, the trucking industry is short on drivers, and fuel prices are high. Consumer Brands notes that the infrastructure bill currently making its way through Congress contains “many key provisions that will reduce long-term friction in the supply chain.”
Labor shortage is now a “labor crisis”
The job gains in the economy at large “are not reflected in the CPG industry,” which added only 12,000 jobs compared to the 850,000 added across the board. Of the 826,000 open manufacturing jobs, 362,000 are in non-durable goods, the category that includes CPG.
This struggle continues despite wage increases — food manufacturing wages were up 4.6% YoY in July, with wages for production and non-supervisory roles increasing 6%.
Consumer Brands notes that it has called on the government to prioritize new workforce education programs as well as legislation that supports education tax credits, public-private job initiatives, and targeted visa reforms.
The delta variant is also impacting people’s ability to go back to work. Most CPG companies currently don’t require employees to be vaccinated (though some, like Tyson, are leaders in this area). However, the recent full FDA approval of the vaccines will likely cause more companies to take this step.