Few global events have disrupted the U.S. food industry—from farm to table—as significantly as COVID-19. The ripple effects of that disruption have created volatility in the cheese industry as well.
Whipsawing wholesale cheese prices underscore this year’s hold-on-to-your-hats reality. When restaurants and schools nationwide closed in March and April, demand plummeted, sending the price of cheese to a historic low of $1 per pound. Months later, as suppliers worked through imbalances between retail and other markets, prices reached record highs (exceeding $2.80 per pound at one point in mid-July). By late summer, cheese prices had returned to the historically normal range of $1.60 to $2 per pound.
“The cheese industry has been on a wild tear,” confirms Mark Stephenson, an agricultural economist and the director of the Center for Dairy Profitability at the University of Wisconsin–Madison. “I’m not really sure we know exactly where we are right now. It’s approximately normal passing through ‘oh my gosh.’”
Foodservice operators are all too familiar with that search for a new normal. Steady supplies of staple ingredients can be hard to find. Customer demand is unpredictable. And the specter of more far-reaching COVID-related shutdowns hangs in the air.
Del Rodrigues, owner of Brazilian Bread in Berkeley, California, is one of countless operators who have felt the pinch. Back in April, supplies of certain cheeses she relies on for making one of her signature items—puffy balls of cheese bread called pão de queijo—became unstable.
“We couldn’t find cotija cheese, which is a base ingredient of our cheese bread,” Rodrigues recalls. “In May, the supply started to come back,” but even now, in September, availability can be hit or miss. “We have been able to get our ingredients,” she adds, “but we often have to use different brands of cotija.”
Rodrigues has also seen a shortage of many imported Brazilian products; to fill gaps and avoid menu changes, she’s turned to alternate suppliers. So far so good, she says, but she’s had to adjust the prices of some offerings to reflect vendor increases and is often out of certain items.
All in all, foodservice operators and cheese producers alike agree that flexibility, adaptability and resilience have been key to weathering the COVID-19 storm.
Retooling for a New Reality
Overall, Stephenson says the cheese industry has done a “tremendous job” of adapting to shifts in demand while keeping supplies relatively steady.
There have been very few COVID outbreaks at cheese plants, in contrast to what the meat industry has experienced in its processing plants. “Dairy plants are almost nothing like meat plants—they’re not densely populated with people,” he explains. “They’ve very hygienic.”
The big shift on the production side has to do with a massive shift in sales to retail. Grocery sales have shot up as Americans stay home and cook—or just pop cheese-laden frozen pizzas in the oven.
According to a July report from CoBank’s Knowledge Exchange Division, foodservice accounted for 48% of U.S. domestic cheese demand pre-pandemic; the rest was divided between retail (42%) and institutional (10%) needs. The crisis has pushed retail cheese sales up 35%, while foodservice demand has dropped 25% and institutional demand has fallen 60%.
Cheese producers focused on mass-market shredded and sliced products have adapted relatively easily, retooling production lines to better align with retail demand. “People have shifted gears,” says Marianne Smukowski, outreach program manager at the University of Wisconsin–Madison’s Center for Dairy Research and 2019–2020 president of the American Cheese Society. “Producers have been making smaller bags of shredded cheese—one-pound packages, not the five-pound packages usually made for restaurants.”
But that’s not to say all cheese producers are doing fine. High-end specialty cheesemakers are in a difficult spot, Smukowski continues. Their primary customers—upscale restaurants—are hurting, and grocery sales of expensive cheeses are falling as well. Consumers are tightening belts and stores are shrinking the number of products on display.
“The folks that we work with who make high-end cheeses took a big hit,” she says, noting that some of them converted “to making cheese curds once a week” to get some quick money in the door. But for the most part, producers can’t easily switch up production this way.
Should foodservice operators be worried about a specialty cheese they rely on disappearing altogether? Some artisan cheese producers are at risk of failing, Smukowski says—but they’re also creatively adapting via direct-to-consumer sales online or at farmers markets.
The bottom line, Stephenson says: “If you have a diversified customer base and business model, you’re more resilient.”
Adapt to Survive—and Even Thrive?
The same applies to operators during the pandemic, of course. Rodrigues’ approach is likely familiar to anyone trying to find a stable path forward. She’s worked to meet customers where they are—and increase the size of an average sale—by starting delivery service and offering individually packaged meals and pantry/grocery items. Her business also offers catering.
Improved customer communications have become paramount. She suggests “ramping up social media and other channels of communication to highlight your offerings and keep customers informed on what is going on with the business.”
Her approach is working. In late May, Rodrigues opened a second location across the San Francisco Bay, in San Rafael. Its menu is mindful of supply chain challenges. “We created meals with more readily available ingredients,” she explains. “In a way, it was a blessing in disguise, as the menu seems to be amenable to our clientele in San Rafael.”
Most operators aren’t expanding right now, of course. But they can still learn from Rodrigues’ approach to supply chain challenges during the pandemic:
- Seek out alternate suppliers of key ingredients, like cheese.
- Order larger quantities when possible, if you have the storage space.
- Adapt menu items to feature more readily available ingredients.
And try to keep the faith that your customers will return. Smukowski knows many of her favorite local restaurants are hurting—but she also knows that “people want to support the local economy and support restaurants.”
These are undoubtedly difficult times for operators as businesses adapt to an unprecedented crisis. Learn what foodservice employees are expecting now and in a post-COVID-19 workplace.