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The real reason supermarket shelves were empty

May 4, 2020 • 15m 16s

When the pandemic hit Australia stores across the country were stripped of food and other essential items. The situation revealed deep vulnerabilities in our food supply system. Today, Margaret Simons on why our supermarkets weren’t prepared for this crisis.

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The real reason supermarket shelves were empty

215 • May 4, 2020

The real reason supermarket shelves were empty

RUBY:

From Schwartz Media, I’m Ruby Jones, this is 7am.

The Covid-19 pandemic has exposed many Australians to shortages of food and essential items for the first time.

The empty shelves revealed deep vulnerabilities in our food supply system.

Today - academic and journalist for The Saturday Paper Margaret Simons on why our supermarkets weren’t prepared for this crisis.

**

RUBY:

Margaret, a few weeks ago supermarkets were running out of basic items - things like flour and toilet paper. Can you tell me what was going on?

MARGARET:

Well, people probably remember the Prime Minister saying that panic buying was ridiculous.

Archival tape -- Scott Morrison:

It’s ridiculous. It’s un-Australian and it must stop.

MARGARET:

A scolding sort of message.

Archival tape -- Scott Morrison:

I can’t be more blunt about it, stop it…

MARGARET:

But at the same time, people would go into the supermarket and the goods weren’t there.

Archival tape -- Scott Morrison:

With shelves stripped bare as Australians prepare for a pandemic…

MARGARET:

Important staples and toilet paper obviously became the emblem of it.

Archival tape -- reporter:

And now to what is being called ‘toilet paper apocalypse’. There wasn’t a toilet roll in sight.

MARGARET:

But it was also true of mince and pasta sauce, pasta. Rice I think in a lot of places.

Archival tape -- reporter:

Tissues, pasta rice and cold and flu medicine also scarce with supermarkets scrambling to keep up with demands…

MARGARET:

The goods weren't there. And that persisted not just for a few days, but even up until now. There are still some products which are either limited or in short supply.

So there's this dissonance. On the one hand, the grocery industry, the supermarket managers, the prime minister were all telling us there wasn't a problem.

Archival tape -- Scott Morrison:

There is no reason for people to be hoarding supplies in fear of a lockdown or something like it…

MARGARET:

And yet the lived experience was that there was a problem.

RUBY:

So, the Prime Minister and supermarket chains were telling us there was enough food... But the shelves were still emptying out.

Was the issue that people were buying too much, and stockpiling?

MARGARET:

Well, the evidence in Australia is a bit limited. But in the UK, where they had similar problems with empty shelves for similar products, the consumer group, which did some research and found that the number of people who were really ridiculously stockpiling were actually a very small minority. Most people were just picking up an extra can or to an extra bottle or two, an extra pack or two by way of sensible preparation.

But that was enough. And it is a bit counterintuitive because we're constantly told, not least by governments and the grocery industry, that we're self-sufficient in food - and we are. Australia grows more food than we eat. We are a net exporter of food. And what's more, most of the food we eat is actually produced in Australia.

So why is it that not just for days, but for weeks the shelves were empty or products were in scarce supply? I think a lot of people began to think that maybe they weren't being told the whole story. And while I don't think anybody was lying, it is true that they weren't being told the whole story.

RUBY:

Hmm. So help me understand what's going on. We've got a lot of food in Australia, in fact so much that we export a lot of it. And it sounds like, individual consumers weren't necessarily stockpiling food, or not everyone was. So what happened?

MARGARET:

So let's take a jar of pasta sauce. Let's say we're talking about an Australian made pasta sauce. The tomatoes are grown here...

Archival tape:

Your soil is the most important thing to look after with tomatoes…

MARGARET:

But the jar that is in is almost certainly imported. There are very few glass jar manufacturers in Australia. The cap on the jar may come from that same company or it may come from another company altogether. Same is the case with tin cans.

Archival tape:

A new electronic tinning line to make Australia self-sufficient for all its tinplate requirements…

MARGARET:

We don't make the steel tin plate in Australia anymore. We import it.

Archival tape:

All this to make the simple tin most of us take for granted...

MARGARET:

And so while we export legumes, we can't actually put a can of them on our supermarket shelves without importing the metal that contains it. So same story with plastic wrap and most plastic packaging. It's manufactured in Australia probably, but from imported resins and ingredients.

And then if you go in to say, a jar of curry sauce, for example, or cook at home. Curry, all the spices in that are probably imported. Supermarket bread. The wheat is grown in Australia, but the yeast is almost entirely imported.

So the supply chains for each item of groceries are very long, very international and very complicated.

RUBY:

Right. So even if we grow our own food, what you’re saying is we can’t package it up and sell it without relying on international supplies…. So how exposed is our supply chain as a result of this reliance?

MARGARET:

So before Covid-19, the entire grocery food supply chain on industry figures had only about 30 days of stock of nonperishable items, your rice and your pasta and so on. And that's the whole supply chain, both the supermarket, what's on the shelf there, anything that's out the back at the supermarket, which won't be much. And what's back in the warehouse. Only 30 days. And for fresh produce, fruit, vegetables, meat, milk, that sort of thing. It's only about five days in the entire supply chain. So there's no stockpiling capacity, no capability of responding to surges in demand.

RUBY:

That seems like a pretty big problem when a pandemic shuts down global borders.

MARGARET:

Exactly.

RUBY:

We’ll be back in a moment.

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RUBY:

Margaret, how close did we get to genuinely running out of certain types of food in Australia, when Covid-19 hit?

MARGARET:

I don't think there was any risk of Australians going hungry, but as any shopper will tell you, you couldn't get your accustomed brands. And there were some things that were just really hard to get and that was because there's nothing out the back. All the stock had been sucked into people's pantries. So we had to substitute. We had to find other food stuff. There were a few panics that were a bit more serious or potentially more serious.

For a little while one of our major supermarkets didn't know whether they'd got a stock of glass jars on water from northern Italy because things were so disrupted in northern Italy. But apparently that is on the water and on its way to us. If that had gone missing or not got onto the water, then we probably would have had a bit of a shortage of that brand of pasta sauce for a while, not because the sauce was in short supply, but because of the jars.

And then the other part of the supply chain is that most of our agricultural chemicals come from China. Something like 90 per cent. And there was a worry that there wasn't gonna be enough urea for the planting season. But apparently that too has been resolved.

So there were certainly some anxieties and some panics, but push comes to shove. The supply chain did hold up. It was strained, but it did hold up. And nobody in Australia went hungry because of these disasters. And of course, you can't say that in all of the world. So we're in a fortunate position in that sense.

RUBY:

It sounds like we got lucky when it comes to actually running out of essential goods… but it was a close call. Why aren’t supermarkets stocking up on these items so that we aren’t at risk of running out?

MARGARET:

Well, in the short term, it's because of this thing of there being nothing out the back. You know once upon a time when I was young, if there wasn't something on the supermarket shelf, you'd say, have you got any out the back. Well, that's almost nonsense now.

And there's this thing which is orthodoxy in inventory management for all sorts of industries called just-in-time inventory. And the idea is that you minimize the amount of working capital or money that you've got tied up in things sitting around on shelves, in warehouses. It's generally said to have developed with Toyota and car manufacture.

Archival tape -- Toyota advertisement

MARGARET:

When a car was ordered from a retailer, that information would flow through to the factory.

Archival tape -- Toyota advertisement

MARGARET:

And the parts and all the other very complicated components that go into making up a car would be ordered on a needs basis.

Archival tape -- Toyota advertisement

MARGARET:

It was popularized in the UK initially by Tesco's as a supermarket, and they cut costs enormously by doing it. And so of course, everybody else copy that.

And it's a good system. You save money by not having to manage all that stock. You don't have to pay as much rent either out the back at the supermarket or in the warehouse. So you save a lot of money and it's made possible by information technology every time you scan something at the checkout. That information flows pretty seamlessly right through to the warehouse and then to the manufacturers and to the producers. And so when it's all working and most of the time, it's a bit of a modern wonder, really. All of the supplies arrive in the right place at exactly the same right time. And it's pretty reliable.

But it's not a resilient system. It doesn't deal well with the unpredicted. When Australians suddenly all began to pick up, you know, just an extra jar or two of this or that, then that brings the system to its knees quite quickly.

RUBY:

So is it the case that, you know, the situation that we saw with empty supermarket shelves was a result of this system in action? And I guess a reflection of the fact that it's there to cut costs.

MARGARET:

Yes. So in Australia, we've got one of the most concentrated grocery industries in the world. It has three big players: Coles, Woolworths and Metcash, which supplies IGAs and FoodWorks, and they are the wholesalers and dominate most of the market.

Increasingly over the years, they have rationalised their distribution centers, these huge warehouses. So, for example, in South Australia, Woolworths has just one. And even in Sydney and Melbourne, there are fewer and fewer of these warehouses. That in itself is a vulnerability. What if you had two natural disasters in two states at the same time, for example, floods and bushfires or a cyclone and bushfires, which as we've seen sadly last summer, is by no means out of the question.

Then you might have real difficulties because of the fact that the goods are all concentrated in one area. Or the other kind of vulnerability, given that the whole system is so dependent on information technology is what about cyber attack? What about hackers?

So the system has a lot of vulnerabilities because it's concentrated and because it's very, very lean and efficient. So there's not much well, there's no fat in it really to account for unexpected events.

RUBY:

Ok, so our food supply chain doesn’t have the capacity to handle unexpected events… like natural disasters, or in this case, a pandemic. What can we do to avoid being in this situation in the future?

MARGARET:

Well, interestingly, back in 2012, there was a report done for the Department of Agriculture by the Sapir Research Institute. They considered pandemic, at that stage, people were expecting flu pandemic rather than coronavirus. And they also talked about bushfires and floods and other sorts of natural disasters. And they identified the issues I've been talking about as key vulnerabilities in the chain. And they said they were getting worse.

The problem here, I think, was not so much that people stockpile, but that they all did it at once and in the teeth of a crisis rather than as sensible good housekeeping. And moving further forward, I would suggest while we need international supply chains because we are exporters, we benefit from those international supply chains ourselves... We probably need to look at some of the key vulnerabilities around packaging and ingredients. And even if we don't want to make them ourselves, perhaps have the capacity to rapidly switch to making them.

RUBY:

Margaret, thank you so much for your time today.

MARGARET:

It's a pleasure.

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RUBY:

Also in the news...

The federal education minister Dan Tehan has accused Victoria’s state Premier Daniel Andrews of taking a “sledgehammer” to the school system.

The remarks reflect growing tension between federal and state government’s over the contentious issue of school closures.

Tehan urged parents to ignore the Premier and send children back to schools.

But hours after launching the attack on Daniel Andrews, Tehan said he had overstepped the mark and withdrew his comments.

**

Meanwhile a Victorian primary school has been closed after a teacher tested positive to Covid-19.
According to the state government, a teacher at Epping's Meadowglen Primary School had tested positive… and the school will shut down from Monday to Wednesday to enable cleaning and contact tracing.

**

And the NSW Government has announced a new testing regime for staff at the Newmarch House aged care home after it confirmed the death of a 14th resident from Covid-19 over the weekend.

The state government said all staff would now be tested daily to control the spread of infection

Margaret Simons covers business for The Saturday Paper. Her position is supported by the Judith Neilson Institute for Journalism and Ideas.

The coronavirus pandemic has exposed many Australians to shortages of food and essential items for the first time. Empty shelves across the country have revealed deep vulnerabilities in our food supply system. Today, Margaret Simons on why our supermarkets weren’t prepared for this crisis.

Guest: Academic and journalist for The Saturday Paper Margaret Simons.

Background reading:

The real reason our shelves were empty in The Saturday Paper
The Saturday Paper
The Monthly

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7am is a daily show from The Monthly and The Saturday Paper. It’s produced by Ruby Schwartz, Atticus Bastow, and Michelle Macklem. Elle Marsh is our features and field producer, in a position supported by the Judith Neilson Institute for Journalism and Ideas. Brian Campeau mixes the show. Our editor is Osman Faruqi. Erik Jensen is our editor-in-chief. Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio. New episodes of 7am are released every weekday morning. Make sure you don’t miss out by subscribing on your favourite podcast app.

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215: The real reason supermarket shelves were empty