KFC may have grabbed headlines by switching from lettuce to cabbage, but the food shortage cuts across all fresh produce lines, according to meal subscription company Marley Spoon.
Marley Spoon head of procurement Evan Murphy says inclement weather conditions and mass flooding in Queensland have made the fresh produce crisis “significantly worse” than what the company saw during the pandemic and that it’s likely to stay for the entirety of winter.
“We were pretty lucky in 2020 and 2021 with fresh produce,” Murphy told SmartCompany.
“Our main problem during those periods were the items in the middle aisles. That’s all your pastas and canned goods, oyster sauce from Hong Kong, or rice from India or Vietnam. This was related to shipping, but the focus and the issue now is that it’s much more local and produce-related,” he said.
The company, which also operates Dinnerly, delivers thousands of meal kits per week, and has more than 40 recipes for customers to choose from weekly. Murphy also works with numerous vendors delivering stock per day, but all this has been impacted by what he calls the “perfect storm” of issues including weather, labor shortages and inflation.
“We saw significant rain in February and March, especially in Queensland. At the time, it wasn’t too much of a problem. The main growing region for Australia during that period of time is South Australia and Victoria and we were able to cope quite well,” he said.
But the problem “is a bit like the pig in the python situation”, Murphy says, as while those rains didn’t have an immediate impact on the company, they had damaged or wiped out a lot of crops that would have been used in future.
“You can see that the python ate the pig, but it takes a while for it to come down the line,” he explained.
A brief reprieve later, just as winter crops were ready to be planted, another wave of inclement weather hit. With the winter crop responsible for approximately 70% of all fresh produce in Australia, it created the perfect storm where autumn crops were damaged or wiped out and winter crop destroyed before it had the chance.
“All of a sudden, we don’t have farms able to pick the crops they had planted previously. We’re also unable to get into the paddock to plant the seeds for the next quarter of crops. So it’s a double whammy,” he said.
To compound issues, the uncertain weather conditions have farmers spooked.
“They have zero confidence in what’s coming next in the environment and in the economic and inflationary area. They’re not willing to go out and spend another quarter million dollars on planting more seeds in the ground only to have them potentially washed away,” Murphy said.
It doesn’t end there though, as Murphy says labour shortages are having a knock-on effect, while inflation was casting an economic shadow over the industry.
This means stress across multiple lines for companies like Marley Spoon, which use consumer preference data to predict sales and place orders. These orders for vegetables, fruit, poultry and meat are placed several months in advance to allow the company to fill future sales.
But with the fresh produce crisis, that has been impossible, with everything from supplies to prices remaining uncertain.
“There is some availability of stocks in the market, but we really don’t know until a few days before we need it in our fulfillment center,” Murphy said.
“There’s a real lack of visibility of what’s in the supply chain, and it simply comes down to ‘can I get my tractor into the paddock tomorrow, is there going to be a cold snap, or has someone else paid top dollar at the market the day prior?’ All of a sudden, my ongoing bids for carrots or zucchinis or lettuce just don’t cut it anymore.”
With Marley Spoon’s business model built on low food waste (less than 1%) and stable prices, this has made it difficult to compete with other companies that can buy produce at a higher price and pass on the cost to customers.
To deliver the quality meal kits customers expect, the company has been forced to adapt, and customers may have noticed this already, with substitutions and alternate instructions included in their meal kits.
“Now what we’re doing is changing recipes [based on availability of produce],” Murphy said.
“I’m pulling recipes out and putting recipes in. I’m removing brocollini, carrots, baby spinach, zucchini, cucumbers and herbs all the way up until the day of production because a farmer is unable to commit to his volume. Our timelines have compressed by 1000%, from 12 weeks all the way down to less than a week.”
For staff at Marley Spoon, this has meant throwing in extra hours to ensure customers orders are met — even if that means putting in more than 1200 hours more a week across the board. There are many moving pieces, Murphy notes, from purchasing officers procuring produce, to the culinary team tweaking recipes, to nutritionists who ensure the recipes meet the health requirements of the customers, to staff in the three fulfillment centers, and delivery drivers, to make no mention of farmers and suppliers.
And the perfect storm, according to Murphy, will likely continue into the spring months if the inclement weather continues.
He predicts leafy greens and herbs are likely to be in short supply for the entire winter, but drawing on his pig in the python analogy, he says there’s a possibility it will continue into spring with crops that take longer to grow. The moisture in the ground is likely to play a role, as will insects.
“If we can have four, six, eight weeks of good, sunny weather with the odd drizzle, I think we will be in for an okay spring. But if we have more periods of significant rain, this issue will continue to persist into spring and onto summer as well,” Murphy said.
The weather may be impossible to predict, but there are other compounding issues which companies like In2food — a national fresh produce providore and Marley Spoon supplier — have seen. In2food executive director Rohan Benn tells SmartCompany it’s likely these issues will stay for the next few years.
The rise in prices due to weather events are only one side of the rubric, he says.
The other sides are dominated by the rise in the cost of fertiliser, energy, labour shortages, unreliable transport and even the supply of pallets.
“I don’t think this will be solved in the next two years,” Benn said.
“Fresh produce relies on energy, labour is difficult to get and fertiliser comes from eastern Europe. There’s a lot out of our control and farmers have been thinking carefully about what and how much they have to grow.”
Benn believes that even if local conditions like the weather stabilize going into the coming months, “we will be paying more because of supply chain disruptions”.
“In my 25 years in the industry, I have never seen anything quite this bad,” he said.
Gazala Anver is a technology and startups reporter at SmartCompany.
