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How Omicron is Impacting Food and Bev Manufacturers

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The rapid rise of the Omicron variant is disrupting nearly every facet of life in the United States, from waves of flight cancellations to school closures. As the country hits record levels of COVID-19 infections, food and beverage manufacturers face an increasingly complex and challenging operating environment at the start of the year.

Labor Challenges Accelerate as Omicron Spreads

Bloomberg reported last Thursday that Omicron has infected “so many workers that more shortages at grocery stores are all but certain,” noting that Campbell Soup Co. and Conagra Brands have recently observed an increase in worker absenteeism due to COVID. The business news organization said the variant appears to have had minimal impacts on beef and pork processing operations so far.

“It’s entirely reasonable for us all to project that the next month or so could remain strained within the supply chain as Omicron runs its course,” Conagra president and chief executive officer Sean Connolly said in a January 6 call with investors.

New employment data released Friday by the US Bureau of Labor Statistics (BLS) revealed that the consumer packaged goods (CPG) industry – which includes food and beverage products – added only 1,590 positions in December 2021. 118,000 roles are currently open within the US CPG industry, according to trade group Consumer Brands Association.

“We head into 2022 with tremendous uncertainty about the future of our workforce, not yet knowing the effect that the omicron variant will have on worker participation or consumer demand,” Consumer Brands president and chief executive officer Geoff Freeman said in a statement responding to the BLS report.

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“Now, more than ever, we need policymakers to take concrete actions, such as prioritizing testing supplies for essential workers, that will support keeping the workforce intact and protect product availability for consumers,” said Freeman.

Evolving Guidance and Rules

The US Department of Labor’s Occupational Safety and Health Administration (OSHA) will begin enforcement of its new COVID-19 Vaccination and Testing Emergency Temporary Standard (ETS) on Monday. Under the rules, businesses with more than 100 employees must make unvaccinated workers wear masks and create a policy to ensure that unvaccinated workers are regularly tested for infection with the virus.

The rule goes into effect after the US Court of Appeals for the Sixth Circuit recently lifted a stay of the rules put in place by the Fifth Circuit court. However, an appeal to the US Supreme Court could scuttle implementation of OSHA’s ETS.

Some industry observers contend that the agency’s rule will ultimately hurt America’s food manufacturers and retailers.

“Lifting the stay will exacerbate ongoing labor and supply chain pressures and negatively impact our members’ ability to focus their efforts on meeting their customers’ needs during the holiday season,” the Food Industry Association (FMI) wrote in a December 18 announcement.

As the battle over the OSHA ETS plays out in court, the US Centers for Disease Control and Prevention (CDC) recently reduced the recommended number of days that persons with COVID-19 should isolate and remain quarantined to reflect the realities of the Americans’ response to ongoing public health efforts and the rise of Omicron. While this development allows essential workers to get back to work faster following infection, food and beverage makers will likely scramble to reassess their in-house COVID-19 policies.

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The Road Ahead

Omicron is intensifying some existing challenges that food and beverage manufacturers have encountered over the course of the pandemic. The good news is that many companies have already made moves to implement robust measures to prevent the spread of the virus in their operations and found some innovative ways to overcome supply chain turbulence.

“As we saw earlier in COVID, there are steps we can take to maximize line efficiencies and throughput, things like SKU simplification, etc.,” Conagra’s CEO said in the company’s most recent earnings call.

Food and beverage makers must stay on their toes to keep up with regulatory shifts in 2022, as well as the on-going labor retention struggles.

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