AmerCareRoyal offers disposable products used in the food service, janitorial, sanitation, industrial, hospitality and medical industries.
Quarterly Market Update
Quarter 2 | Spring 2023
Product-to-Market Factors
SUMMARY: Lower and stable material and logistics costs after unprecedented peaks in ’21 and ‘22.
Paper costs have increased in 2023 driven by sanctions on Russian paper (Ukraine) and constrained supply contributed to by 4 paper mill closures since start of Q4 2022. Major pulp sector meetings in China at the end of March may spur a downward trend as mills confront strong customer demand for lower prices. (Fastmarkets RISI)
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Natural rubber and poly costs for glove making increased mildly in February, stabilizing in March.
Plastic material costs were mixed through Q1 of ‘23. PET climbed 20% after two-year lows that peaked in December while index prices for HDPE, LDPE and LLDPE all increased January - March after Q4 ’22 declines.
Fastmarkets RISI Ocean freight expense has receded completely from pandemic supply chain crisis highs, with the Drewy Composite Index for 40’ containers on all routes at $1,917 as Q1 ends. (Drewry)
First quarter North American truck shipping rates fell nearly 30% versus prior year. (DAT, Supply Chain Dive)
Q2 2023 Market Update
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Restaurant Industry Update
SUMMARY: Labor shortages recede. Business Travel returns and with it, Business Dining. Healthy Q1 Growth.
Restaurants labor shortages are easing. Hiring software company Harver says progress has been made in the battle for restaurant help, citing a 22.1% increase in quick-service restaurant candidate volume in Q4 2022 versus Q4 2021, this versus a 11.3% decrease in candidates in Q4 2021 versus Q4 2020. Separately, Technomic and the Bureau of Labor Statistics report US Foodservice Industry employment levels reached 2019 (pre-pandemic) levels in February, and numerous national chains have reported significant improvements in 2023 staffing efforts versus the preceding two years, in-turn yielding improvements in guest metrics dealing with staff performance and quality of patron experience. Canadian foodservice industry employment rose 10% year-over-year in February. (Nations Restaurant News, Statistics Canada)
Staffing improvements have come with a cost, however. Restaurant Labor costs are up in excess of 18% since 2019, according to the National Restaurant Association.
Business Travel steadily rebounded in 2022 helping achieve a near-full recovery of the Business Dining industry segment from sustained pandemic-lows the preceding two years, reports Technomic . By Q4 2022, business dining expenditures were 91% of the same quarter’s level in 2019, the final quarter prior to the pandemic’s start. Technomic’s Tindex foodservice industry gauge shows sales growth of 9% over prior year in the United States for February 2023, the last reported period. Enabling the strong early-quarter performance were a weak comparison month of prior-January (2022) when the omicron variant was peaking, and release of pent-up December 2022 demand due to winter storms, coinciding with well-timed mild weather in January of this year. Last available report of commercial foodservice sales in Canada shows 12.5% annual growth at the end of 2022. (Statistics Canada)
Q2 2023 Market Update
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Regulatory / Legislative Environment
SUMMARY: PFAS legislation and governance continues across the United States and expands into Canada.
Vermont is the latest state banning the addition of intentionally-added PFAS in the manufacture of Foodservice packaging, effective July 1, 2023 (LegislatureVermont.gov) The US Environmental Protection Agency proposed in March the first-ever national drinking water standard for 6 PFA substances. (EPA.gov)
(Graphic by Shipman)
Public concern about PFAS in foodservice packaging increased throughout Canada following the publication in late March by the journal Environmental Science and Technology Letters of a study done by researchers from Canada, the U.S. and Switzerland. The study alerted to the prevalence of PFAS in compostable paper bowls, sandwich and burger wrappers, popcorn serving bags and other types of food packaging formed from pulp, paper and fiber, collected from Toronto-area restaurants.
Canada doesn’t currently ban PFAS in foodservice packaging, but the Canadian federal government is currently researching the issue. (CBC, Toronto Star)
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Takeaways
SUMMARY: Industry resilience continues, prices remain high but stable, sustainability regulation advances
Manufacturing production and supply chain logistics have righted since the pandemic’s dark days of scarce materials, $12,000 container fees and floating parking lots just off-shore. However, because load after load of supply inventory was purchased into North American warehouses at the height of the supply chain crisis, when cost-of-goods was at its peak, only to be followed by reduced consumption as Americans and Canadians felt the pinch of record- setting inflation, supply costs remain high for operators and distributors alike as high-cost inventories are slowly, but steadily bought down. Expect pricing inflation to continue and be a fragmented picture for the months ahead. Practice strategic supplier management and rationalization, taking the long and historical view of where your business can best rely for continued access to product and insights that optimize your returns. Stay on- top of legislation affecting foodservice packaging. A simple trick, set up “Google Alerts” for PFAS and Plastic Ban inf ormation to be served pertinent news on the topic to your inbox each day.
AmerCareRoyal is the Foodservice industries agile, collaborative and responsive choice for packaging and consumable supplies. Pick ACR to help your organization win, every day!
Q2 2023 Market Update
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