The great toilet paper shortage of 2020
If the empty shelves of toilet paper across the country taught us something, it’s how a change in the source of demand for a product that should be the definition of stable can result in shortages.
Despite full production and many assurances from the manufacturers that there is no shortage, hardly anyone can “spare a square” (Seinfeld).
COVID-19 itself doesn’t cause an increase in unit demand either. This has given rise to many a snicker from the media about how the consumer is hoarding the toilet paper, and supply will soon return to the shelves. However, now that some 90% of Americans are under stay at home orders, they are using toilet paper at home.
Before the restrictions, Americans used toilet paper outside their home as well. Everyone knows it’s not the same toilet paper, but it’s also not the same supply chain and often not the same manufacturer. So one segment of supply has seen a significant increase in demand, and the other segment has seen demand drop worse than sales at restaurants.
Since the raw material, packaging, manufacturer, and distributor are all different; there are a lot of hurdles for supply to catch up to the change in the source of demand. Just because Sysco has chicken and grocery coolers is empty; it doesn’t mean Sysco can now replace its lost demand from restaurants with grocery chains.
Alcohol is essential
There is some variation between states at what is an essential business during the lockdown. Generally, companies that are deemed to be contributing to the greater good are considered essential.
In every state with a stay at home, directive alcohol has been considered essential. Brewing has been identified as an essential business by the federal government.
Many breweries and distilleries are making their hand sanitizer by distilling some of it is their product to alcohol and adding it to aloe vera and essential oil. Somehow I don’t think hand sanitizer production is the reason the businesses are essential. It does mean overall demand should be less impacted.
The stock prices of the brewers have sold off significantly, mostly due to the loss of on-premise sales, as people do drink more outside the home, so there is a loss of overall demand. On the other hand, home brewing has not trended up in Google Trends.