What We Can Learn From a Ketchup Packet

The Wall Street Street Journal recently told us that it will be tough to catch up with ketchup. But last September, we could have predicted the ketchup crisis. Especially through the three red bars that compare unit sales for different time periods, the ketchup section of the following graph shouts a demand surge:

So yes, we can look at chicken, instant coffee, or toilet paper. But ketchup packets best explain our Covid shortages.

Covid Shortages

With our gargantuan jump in takeout, we’ve ratcheted up our need for ketchup packets.

And that is the problem.

Because Heinz has not made enough of them, they are boosting packet production by 25 percent to more than 12 billion packets. As a result, packet prices have increased by 13 percent since January 2020. But also, the pandemic seems to have intensified our taste for ketchup. During 2020, retail ketchup sales were 15 percent higher than 2019.

At the same time restaurants and bars had to change their ketchup preferences. That bottle we all shared on each table became a pandemic problem. Instead, Heinz is developing a no-touch version. Then, adding to restaurants’ woes, Heinz has been shipping much less ketchup to them. Gargantuan amounts–close to 300,000 tons of ketchup had been used for commercial food service. Now though the amounts they currently need are more than Heinz could ship. As a result, chains like Long John Silver’s are searching for generic substitutes until Heinz catches up. For the time being they are filling cups with generics. Bars are even apologizing to patrons because they have no Heinz for their burgers and fries.

Our Bottom Line: Demand and Supply

Like ketchup, for chicken and toilet paper and countless other products, Covid shifted demand and supply. With more retail and less commercial activity, manufacturers had to switch what they made and where they sent it. They needed more ketchup packets for households, smaller retail-size packages of chicken for supermarkets, less of the commercially coarse toilet paper they made for businesses. The result has been intermittent shortages until the adjustments could happen.

As economists our ketchup packet graph could have a more vertical supply curve that reflects a short term inability to respond (less elasticity) and a demand curve that moves upward and to the right:

But for most os us, the shift in demand and inelastic supply look like this:

My sources and more: My interest in ketchup started with the recent WSJ article. But then, looking back, we could see it coming. Finally, if you want to learn more about ketchup packets, you might enjoy finding out more about Dip&Squeeze.