In 2020, there was a severe shortage of essentials like toilet paper. We seem to be heading towards another shortage of staples and daily use goods yet again. Will there be a toilet paper shortage in the U.S. in 2021?
The current situation isn't as dire as the early days of the COVID-19 pandemic when shelves in retail stores simply ran out of staples like toilet paper and paper towels.
Why are people buying so much toilet paper?
Usually, the demand for consumer staples like toilet paper is steady. In general, the staples industry is defensive, unlike the consumer non-discretionary sector. People have been buying a lot of staples like toilet paper lately due to fears about rising coronavirus cases in the U.S.
Also, the memories of last year’s toilet paper shortage are weighing on consumer behavior. You don’t want out to miss out on essentials, so it's better to stock up before supplies run out.
Which companies produce toilet paper?
P&G is the largest toilet paper producer in the U.S. Georgia-Pacific and Kimberly Clark are the other leading producers. There are several smaller producers and many retail brands have their private label brands. Most of the toilet paper used in the U.S. is manufactured in the country and only about 10 percent is imported.
Is there a toilet paper shortage in the U.S.?
There appears to be somewhat of a toilet paper shortage in the U.S. and it's being led by both supply and demand-side issues. Almost every retail company that released earnings over the last month talked about supply chain issues. The labor shortage and bottlenecks with logistics have only amplified the problem.
On the demand side, hoarding from some consumers has meant that demand has spiked at a time when retail companies are finding it hard to get complete orders fulfilled from their suppliers. Overall, a mix of raw material shortages, supply-side issues, and demand bumps are leading to a toilet paper shortage.
Purchase limits at Costco
During the earnings release for the fourth quarter of 2021, Costco said that it's bringing back purchase limits on some staples like toilet paper. The company didn't specify the limit on each product. Meanwhile, Costco said that unlike 2020 when there was a shortage of products as a lot of factories were closed, the situation is a bit different this time.
Costco said that while there's “plenty of merchandise,” there are logistics issues that are leading to higher lead times for deliveries.
Will there be a toilet paper shortage like in 2020?
As things stand now, it looks unlikely that there will be a toilet paper shortage as severe as 2020. The COVID-19 pandemic situation now is different from the early days when governments saw lockdowns as the first option. Now, lockdowns are seen as the last option and governments only use them in extreme cases.
Also, a large part of the population is already vaccinated against the coronavirus. The Biden administration is working to get more people vaccinated. Whether or not there's another severe shortage of toilet paper will depend on the collective behavior. If more people start hoarding toilet paper, the situation might get tricky.
Meanwhile, retail stores have also taken cognizance. Costco has bitten the bullet by placing purchase limits and other retailers might follow suit. For some consumers, purchase limits might be a sign that there's a shortage and they need to stock up. Overall, situations like these test the very basis of free markets and could be a topic for academic study on consumer behavior.