Via Financial Times

Supermarket groups are reporting a run on certain products, a rise in online ordering and are preparing to ration supplies and restrict operations if the coronavirus outbreak worsens.

“There is definitely stockpiling going on — things like kitchen towels, toilet rolls and hand sanitiser in particular,” said the chief executive of one UK supermarket chain. 

He added that more people were doing their shopping online, echoing comments from elsewhere in the industry. Earlier in the week, online grocer Ocado said there was higher than normal demand for delivery slots and that customers “appear to be placing larger orders”. 

However, retailers said they are coping with the increased demand because most of the products being stockpiled are not perishable. “We are seeing increased buying of staple long-life goods like rice and pasta,” said one large supermarket chain. “But we have got stock of everything.”

Another UK retail executive said that for non-perishable goods, there is typically about three to four weeks of inventory in the supply chain. “All that is happening is that stock is moving from stores and warehouses to cupboards.”

“There will be gaps on shelves for a day or two while the system catches up.” 

A customer holds a shopping cart filled with toilet and kitchen paper at a supermarket in Sydney, Australia, on Wednesday, March 4, 2020. Australia's four biggest lenders have heeded the prime minister’s plea to "do their bit" to help the country weather the expected economic hit from the coronavirus, by passing on the central bank’s latest interest-rate cut in full. Photographer: Brendon Thorne/Bloomberg
Supermarkets in Sydney, Australia, found customers filled their shopping carts with all kind of paper products © Bloomberg

Retailers in France gave similar reassurances. “We have not seen abnormal situations in terms of sales or shortages,” said a spokesman for one of the big five supermarkets. “There is a enough inventory for supermarket staples since there are no issues with the supply chain or with transport.”

In the US, grocery chain Wegmans said it was working with suppliers to manage inventories and was increasing orders based on demand. “Generally speaking, we’re seeing increased sales on items customers tend to stock up on during flu season, like hand sanitiser, anti-bacterial soap, and cleaning supplies,” said Deana Percassi, head of public relations at the chain, which has 101 stores in the north-east and mid-Atlantic regions.

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Kroger, another supermarket chain, said shoppers were spending more on personal care items, ready meals and soup, while Target chief executive Brian Cornell told analysts that US consumers were “starting to stock up on household essentials, disinfectants, food and beverage items”.

Richard Galanti, chief financial officer of Costco, said that “whatever limited amounts we get or allocated are gone pretty quickly”. 

He added: “We’re getting deliveries daily but still not enough given the increased levels of demand on certain key items.”

FILE PHOTO: File picture of a customer picking up rolls of toilet paper at a Hong Kong market following the coronavirus outbreak February 8, 2020. REUTERS/Tyrone Siu/File Photo
Toilet roll stockpiling: since the outbreak of the crisis consumers in Australa, Japan and Hong Kong (pictured) have been hoarding lavatory tissue © Reuters

UK retailers said they were reluctant to introduce rationing of products, fearing that it would encourage a sense of crisis. But some have placed limits on the number of items a customer can purchase for certain products such as hand sanitiser. 

This week, the UK competition regulator warned retailers and the public about prices for the most popular products. “We urge retailers to behave responsibly throughout the coronavirus outbreak and not to make misleading claims or charge vastly inflated prices,” said Andrea Coscelli, chief executive of the Competition and Markets Authority.

If the outbreak worsens in the UK, as the government expects, staff shortages could become a problem. 

“Even if only a small percentage of the population gets the disease, the impact on the workforce is a lot larger,” said Bruno Monteyne, food retail analyst at Bernstein and a former supply chain executive at Tesco. “If children or family members go sick, or when schools are closed, many mums and dads will have to stay home,” he said in a note to clients. 

“No supply chain is able to deal easily with an additional 5 per cent of absences at very short notice.” 

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One big four supermarket in the UK said “a doomsday scenario would of course mean changes in stores”.

“We’d look at what parts of the store we’d run and which we’d close if we had a lot of people off sick, or caring for people who are sick,” a spokesperson said.

Cafés and other departments with additional staff such as meat, fish and bakery counters may have to close temporarily to focus manpower on the main parts of stores, while ranges might be restricted to the most popular items.

“We have contingency plans to prepare for all eventualities . . . we have a group of people looking at this on a daily basis,” he added.

The French supermarket said it was “following the situation closely” and “preparing alternatives for deliveries, if more aggressive quarantine measures are put in place by the government”.

Meanwhile a call by UK health secretary Matt Hancock to avoid stockpiling and panic buying was supported by industry bosses. 

“What causes a problem is everyone saying there is going to be a problem,” said the senior UK executive. “It becomes a self-fulfilling prophecy.”