Friction between food retailers and their suppliers is adding costs across the food chain.
Big buyers including Walmart Inc. and Sysco Corp. are fining suppliers over infractions like late or incomplete orders. Retailers excused such penalties for months during the pandemic when surging demand led to widespread shortages.
Meanwhile, many food makers and distributors say labor shortages, supply constraints and high freight costs are making it difficult to deliver complete, timely orders for goods from cake mix to ramen noodles. Similar tensions are mounting throughout the U.S. economy, as industries contend with shortages of supplies and complications of reopening businesses in the wake of the coronavirus pandemic. Prices for many foods, consumer products and other goods are rising as a result.
“The supply-chain challenges are still there,” said Henk Hartong, chief executive officer of Brynwood Partners, which owns Hometown Food Co., the maker of Pillsbury cake mixes and Buitoni pasta. He said wheat costs have soared and shipments for ingredients including vitamin C for Sunny D are running behind: “It’s not just one thing, it’s everything.”
Walmart told suppliers last fall that it would require orders to be 98% full and on time. Suppliers that didn’t comply would be charged 3% of the cost of missing items, according to a September letter from the retail giant viewed by The Wall Street Journal.
