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  1. Analysis
May 12, 2022

Can’t get the staff – the food industry’s labour pains

Worker numbers were expected to normalise after Covid's worst excesses and that hasn’t happened.

By Andy Coyne

With labour shortages endemic throughout the food industry, companies are having to invest to retain and attract staff while at the same time planning a future with fewer people and greater levels of automation.

Until recently, many complaints within the food industry about labour shortages were linked to specific events – Brexit in the UK and, globally, Covid-19, being the most obvious examples.

While those issues still contribute to difficulties in staffing levels, something more fundamental seems to be happening. Worker numbers were expected to normalise after things had calmed down after the worst effects of the pandemic and that just hasn’t happened.

That leaves the food industry with a difficult question to answer. Are our facilities an unattractive place in which to work?

Firstly, it should be conceded not all factories are the same. Location – rural or urban – can also be a factor, as can the size of the facility and what is being produced there.

However, many of the world’s largest large food manufacturers are facing staffing problems to some degree, with the topic of labour a common theme in their recent public comments.

Speaking to analysts after Nestlé reported its first-quarter sales, CEO Mark Schneider said the world’s largest food maker could have sold more products in North America if it wasn’t for labour shortages. “Sometimes we couldn’t run lines that we wanted to run,” he said.

Similarly, Fabio Sandri, CEO of US meat major Pilgrim’s Pride, told analysts: “We are seeing a strong demand for labour in the US. We are seeing very difficult conditions to staff our plants to 100% of their levels. We were never able to produce the optimal mix that we want to maximise our profits.”

Providing more detail, he said: “We are not deboning all the dark meat that we expected because of a lack of labour.”

The issue has become so widespread governments have been pressed to do more to help.

In April, the UK government was chastised for its response to food sector labour shortages.

An influential Parliamentary committee said the UK government had failed to get to grips with the pressure on labour in the country’s food and farming industries.

The House of Commons cross-party Environment, Food and Rural Affairs Committee warned the sectors face “permanent damage” if the Government does not address the issue.

In its report, it said the paucity of labour in 2021 – “due mainly to Covid-19 and Brexit” – took a toll on food security, the welfare of animals and the mental health of those who work in the industry.

The pig sector was particularly badly affected, the committee’s report said, with 35,000 pigs being culled due to a lack of butchers to process them.

Brexit has played a significant part in the UK food industry’s labour shortage, especially for those businesses that relied on immigrant labour.

It has made recruitment from abroad difficult because freedom of movement between EU member states and the UK was no longer possible, while some foreign workers in the UK – understandably feeling less than welcome under the new regime – headed home.

Covid-19 added to the problems, with more foreign workers returning to their home countries on a one way ticket.

Clive Black, head of research at UK-based Shore Capital Markets and a a veteran observer of the grocery market, also points to what he calls “the great retirement”.

He says: “This has seen more than one million people leaving the [UK] labour market. Lockdown one, in particular, encouraged a lot of people to reassess their lives.”

But he doesn’t mince his words in blaming the Government for the impact of its policies on necessary immigration.

“If we’ve got people in the UK who aren’t prepared to pick fresh produce or work on a butchery counter but you can’t bring in alternative labour that’s shooting yourself in the foot,” he says.

In the US, meanwhile, while there was no Brexit to contend with, Covid tore through large food plants while immigration rules tightened in the Trump era.

Businesses are struggling to fill vacancies. Last week, the Bureau of Labor Statistics’ revealed 11,893 consumer packaged goods jobs were filled in April, a number described by trade body the Consumer Brands Association as “a modest dent in the industry’s 120,000 job openings”.

The association’s president and CEO, Geoff Freeman, said: “Companies are making investments in their employees and upending long-honed production models to recruit the workforce they need, but higher pay and benefits are not closing the gap sufficiently.”

Tough for meat

The meatpacking industry on both sides of the Atlantic has been especially impacted by the labour shortage issue.

Nick Allen, CEO of the British Meat Processors Association (BMPA), says: “Covid caused the most problems in terms of absences and then a steady trickle of people leaving.

“There was an assumption that a lot of people being furloughed [laid off temporarily] would come back into the jobs market. The reality is that never materialised and a lot of people just disappeared out of the country.

“Most of the plants would say they are running with a 10%-15% shortage of labour.”

Allen admits attracting people to work in a meat processing plant is not an easy sell.

“A lot of work has been done to make working conditions better but you can’t get away from the fact you are working in a cold place wearing warm gear on a production line,” he says.

“It’s the law of supply and demand. The thing most of our members dread is an Amazon warehouse opening on their doorstep.”

Allen believes Brexit and its impact on immigrants working in the UK is a major factor when it comes to labour shortages at meatpacking plants.

“The government is in a Brexit time-warp. Everyone needs to move on for the country to thrive and to make sure we’ve got enough labour. The attitude seems to be ‘thou shall not pass’”, he says.

In the US, meat plants have also struggled to get to full employment.

Professor Derrell Peel, from the agricultural economies department at Oklahoma State University, says: “The packing industry has struggled with labour issues for a long time. Meatpacking is hard, physical work, under relatively unpleasant conditions and just not glamourous under the best of circumstances.

“The long history is that meatpacking often relied on immigrant labour under rather gruelling conditions. More recently – the last 15 to 20 years – packing plants have faced high turnover rates but managed to maintain a marginally adequate labour force. Relatively low wages and immigration issues have increased that challenge in recent years. Covid, of course, caused enormous problems and highlighted the challenging conditions even more.

“It is my view that, post-Covid, the general labour situation has changed in the US. There is a lot of labour movement as many people in a wide range of low-end jobs are changing careers and are simply not willing to accept previous conditions and wages.”

Unsurprisingly, it is not just larger economies like the UK and US that food producers are having to tackle labour shortage issues.

Nicholas Courant, communications director at Belgian food industry body Fevia, said: “For us, it’s actually one of the main challenges for all our companies. Not just sufficient people but people with the right skills.

“It is a growing industry in Belgium because of its success in exports but, on any given day, there are 1,500 job openings remaining vacant.”

Courant suggests food companies in Belgium are now looking for a more sophisticated type of employee.

“We are now looking for a different type of workforce, more highly skilled,” he says.

“In the past, it was more of a lower-skilled labour force. Many repetitive jobs have already been automated. We need people who can work with digitalised equipment.

“The food industry is not known as much as it should be for its high-skill profile.”

What can be done?

The food industry is engaged in a two-pronged process of investing in measures to retain and attract staff, while also introducing more automation into the production process.

US meat heavyweight Tyson Foods has arguably gone further than most similar-sized peers in its attempts to make itself attractive to would-be employees and to help it retain existing staff.

In April, it launched a free education programme for all US employees, allowing them to attain master’s, undergraduate and associate degrees and other professional qualifications career certificates. A four-year, $60m investment will cover 100% of all tuition, books, and fees for “team members”.

It is the latest in a series of job-attractiveness measures taken by the Jimmy Dean and Hillshire Farm brands owner.

Tyson says it invested more than $500m in wage increases and bonuses for its hourly workforce last year. In addition, it is piloting subsidised and onsite childcare, as well as seven free, near-site health centres.

The company has also committed more than $1m to support immigrant employees – its US-based workforce is comprised of people from more than 160 countries. The Tyson Immigration Partnership (TIP) helps provide them with legal services needed to acquire US citizenship.

Also, an increasing number of Tyson production facilities are offering more flexible work schedules, considered to be an attractive option for female workers who may be juggling working with childcare.

Tyson CEO Donnie King, speaking to analysts in a post-results call this week, suggests its efforts are starting to bear fruit.

He said: “We are seeing our investments in team members making an impact … Overall, we’re confident that our actions will increase Tyson staffing levels and position us for future growth.”

Mark Clouse, CEO of US soups and sauces major Campbell Soup Co., has said the company is also starting to see the company’s initiatives, including “aggressive hiring and training”, kick in.

“We have seen consistent improvements in labour attraction and retention driven through the recent recruiting actions and wage increases,” he told analysts in March.

Wage increases are widespread throughout the US food industry. Earlier this month, the Consumer Brands Association revealed salaries for manufacturing facility roles rose 6.4% over the past year, outpacing the national average of 5.5%.

Incentives are one thing but food companies are at the same time preparing for the factories of the future and this means investing in a greater level of automation.

Sandri at Pilgrim’s Pride told analysts recently: “We are also investing in automation. There are new machines in the dark meat deboning [area] that require less people and we’re heavily investing in those machines.”

Allen at the BMPA in the UK points out that such work is already happening to a notable degree.

“A lot of people would be surprised if they went around most meat plants about how much automation is already used, cutting machines etc,” he says. “One of our members has spent GBP100m (US$122.1m) over the last few years on automation.”

But anyone starting out on this process now may find they are at the end of a long queue.

In Europe, the specialist manufacturers of this equipment – mainly based in northern Italy and Germany – are in high demand.

Shore Capital’s Black says: “The waiting list for this is quite extensive. And then you would need someone in the UK to install it.”

But he understands why it is such an attractive option, both from a labour resource and financial point of view.

“Labour has been re-priced and it is more expensive which encourages innovators to look at automated processes in a different way.”

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