Americold, the largest player, managed to recover increased costs, but food production has yet to return to normal.

The COVID-19 pandemic prompted a reshuffling of the national workforce, and continuing waves of the virus have left many employers in the United States dealing with chronic absenteeism problems. The temperature-controlled logistics industry faces a double whammy when it comes to labor management: with their own workforces and with those of their customers in the food industry.

Those same issues relate to yet another industry dilemma. Labor problems play into the inflationary pressures many companies are dealing with and, particularly in the food industries, contributes to severe operational inefficiencies.

Americold, the largest TCL player in North America, was staffed with around 70% permanent employees versus 30% temporary employees prior to mid-2021. By the end of last year, that ratio stood at around 60:40. In the first quarter of 2022, Americold managed to bump the proportion of permanent employees up to 65%, but that was still well below the company’s preferred ratio of 80%.

“While relying on temporary labor during 2021, we were less productive and less efficient, and we know it negatively impacted customer service,” said Americold’s CEO George Chappelle. “I do not think this is an Americold specific issue. I believe this impacted all companies in the services industry that are dependent on skilled labor.”

Americold’s customers in the food industry are also experiencing labor problems, which means that they “are producing less,” said Chappelle, despite strong consumer demand for their products. Fill rates at the retail level have plummeted to as low as 70% in an industry where 98.5% is the usual benchmark.

“End-consumer demand for temperature-controlled food remains strong,” said Chappelle, “but COVID-related supply chain and labor disruptions continue to impact the global food supply chain.”

During the first months of 2022, Americold’s customers faced production problems as COVID’s Omicron variant infected many workers. But even after Omicron receded, the labor market remained challenged, straining the ability of the food-service industry to produce at pre-COVID levels.

“All the customers I’ve talked to have said they’re operating inefficiently,” said Chappelle. “When you don’t have the right amount of staffing in your facility, you can’t operate normally.” Pre-pandemic, the food industry tended to stock the pipeline with four to six weeks of inventory, according to Chappelle, which is “not a ton. It wasn’t like inventories were bloated to begin with.”

Next to labor costs, power represents Americold’s second largest expense. During the first quarter of 2022, the company’s power costs increased by 18% year-over-year, with increases seen in Europe more so than in North America thanks to energy-cost increases brought about by the war in Ukraine. To address that, the company has implemented utility surcharges on customers at impacted facilities.

Warehouse Revenue Rises

The company has also moved to increase rents and storage fees. Around 30% of Americold’s warehouse revenue comes from smaller customers, where pricing can be adjusted with…

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