South African consumers may struggle finding their favourite chips on retailers' shelves after harsh weather conditions wreaked havoc on potato harvests, causing a potato shortage. The supply shock has left the makers of leading chips brands Lays and Simba chips, PepsiCo, with low stock levels, John Stevenson, senior vice president for South Africa foods & beverages at PepsiCo Sub-Saharan Africa told Business Insider South Africa.

"We experienced disruptions in our potato supply due to frost conditions affecting crop yields. Whilst those issues are largely behind us, we were left with very low inventory levels entering peak season festive demand with constrained supply as a result," Stevenson said. Generally, good quality potatoes have been hard to find, and prices have remained at an elevated level for a while. Earlier in the year, during the winter months, the agricultural sector had to contend with icy weather that caused damaged to some crops. As a result, farmers were lifting fewer potatoes. At one point this year, prices for potatoes reached a record high of R97,09 for a 10kg bag, which surpassed last year's mid-October high by about 16%.

The company's low stock levels, just as the country enters the peak festive season demand period, has also affected its ability to supply all flavours and quantities. "We have activated an extensive Business Continuity Planning process to ensure we maximise availability. This includes increasing raw material stock levels and securing alternative sources of supply," said Stevenson. Some retailers have begun to feel the pinch, such as the Prospur Spar in Cape Town, which warned consumers of the shortage. In a notice to customers, the store said: "Our potato chips suppliers are currently experiencing supply issues due to the national potato shortage. Please accept our apologies".

In addition to the potato supply challenges, PepsiCo's primary supplier of flexible film, had its factory destroyed during the unrest period in July. The company is simultaneously dealing with global supply chain disruption affecting global supply. South Africa is not the only country facing a potato shortage. In Japan, McDonald's outlets are even resorting to rationing fries and are set to suspend the sale of large and medium-sized French fries.

The excessive rains experienced in South Africa also bode badly for potatoes, Strike Sebake, managing director for Tshwane Green, a market agent at the Tshwane Market said. Some potato cultivars are scarce, and the prices are high. Sebake said he expected potato prices to come down after supply returned following the frost damage of July, but excessive rains have kept prices elevated. For the Kota making spaza shops and corner cafs, who mostly use the Mondial and Sifra varieties, which are mostly used for slap chips and are preferred because they consume less oil, the prices are too steep and supply hardly meets demand, he said.

A number of popular food items, including marmite and cream cheese, have faced scarcities because of supply chain disruptions wrought by the pandemic and extreme weather. Potatoes are the latest to join the list, becoming unevenly available in some countries and fast-food chains because of a confluence of factors. In Japan, McDonald's locations stopped offering large and medium-size french fry orders last month, after pandemic-related supply chain issues and floods in the Port of Vancouver delayed potato shipments.

Days later, South Africa's leading makers of potato chips warned that potatoes were in short supply after a hard frost and excessive rains led to low local yields, on top of global sourcing shortages. In Kenya this month, Kentucky Fried Chicken locations struck french fries, known locally as chips, from the menus as virus-related shipping delays held up containers full of potatoes.

Extracted from: Ntando Thukwana, Business Insider (2021)

Question 4

With reference to issues highlighted in the case study, provide recommendations on the strategies that need to be put in place to avert future supply chain disruptions. Your recommendations should be relevant to the issues highlighted in the case study