Last Crumb, Crumbl Battle the Over-Baked Supply Chain
Sugar, spice and everything nice…that is what cookies are made of. But what happens when key ingredients are nowhere to be found and recipes are disrupted? DTC cookie brands, like virtually all other CPG brands, are still feeling the heat of the over-baked supply chain and inflation propelled by the lingering pandemic.
Backups at ports, labor shortages in production facilities and freight trucking and the prolonged war in Ukraine have forced food and beverage makers to adapt how they source, price and forecast their products. According to the TraceGains 2022 State of Supply Chain Disruption survey, new product development and recipe modification have been instrumental in compensating for higher ingredient prices and ingredient shortages like sunflower oil, wheat and stevia.
So what’s the impact for delivery cookies, which rely on tight supply chains and fast order fulfillment? It’s led to some pivots.
Crumbl co-founder and CEO Jason McGowan told NOSH the supply chain crisis has “completely changed” the way the Utah-based cookie company does business. Crumbl now plans its flavors out as far in advance as possible – at least six months ahead. Additionally, the brand has begun producing some of its own ingredients as suppliers were unable to meet demand, McGowan said.
The changes come as the FDA has already issued temporary guidance providing flexibility for manufacturers to make minor formulation changes in certain circumstances without making conforming label changes to help meet consumer demand.
One cookie-specific formulation change covered under this temporary flexibility is the substitution of unbleached flour for “bleached flour,” as there is a current shortage of the bleaching agent used in flour. Additionally, food brands are able to exchange spices without a label change where the label declares the generic term “spice.”
It’s not all flour, butter, sugar, though.
For luxury cookie company Last Crumb, which markets a 12-pack batch of ultra-premium hand-made cookies for $140, the biggest hurdles created by the supply chain crisis and inflation have not been ingredient shortages, but changes in the market for corrugated boxes and shipping.
“We’re such a young company and we’ve barely scratched the surface of what we’re going to become that I think it’s hard to say we’ve felt a huge effect from everything that’s going on economically [in terms of ingredients],” said Last Crumb CEO Matt Jung.
He added, “I think the biggest challenge that we face, as we continue to grow, is going to be [changes in shipping] and how we navigate them to provide a great customer experience.”
According to global procurement intelligence and analytics provider BerOE Inc., demand for corrugated boxes is projected to spike by around 3-5% during 2022 to 2025. Cardboard suppliers in the U.S. have announced around a $60 to $70/ton price hike for corrugated boxes for containerboard grades in Q1 2022 citing input costs and supply chain pressures along with steady corrugated box demand.
According to TraceGains, the most important strategic shift planned for CPG brand leaders over the next 24 months is increasing supplier diversity, with 69% percent of survey respondents planning to expand their supplier networks.US DTC sales are projected to reach $175 billion by 2023, Insider Intelligence reported.
“Forward thinking brands have used this unfortunate time as a wake-up call to modernize antiquated operations and those who already have are much better positioned to mitigate disruptions with as little impact as possible,” Bradley said in a press release.
“The key for us is to stay super focused and disciplined through the next couple of years and get creative,” said Jung. “That’s what I’m thinking about a lot is how can we be creative [and] do something that is a little bit different, maybe not expected, but really works well for us and can work well in this economic climate because who knows where things are going to go.”