Loaded and Rolling: Trucking and CPG sales, White House freight data exchange

Truck drivers as a driver of CPG sales

I was recently  tasked with filling in as a temporary expert for The Stockout newsletter. It turns out that drivers are conveniently placed at truck stops that offer a litany of consumer packaged goods. Can you name one sector that has outperformed the S&P 500 by about 3,100 basis points (bps) year to date? It turns out the convenience store (C-store) industry is that sector. This sector for CPG is noted as a less price-sensitive channel due to consumer resilience. 

One operator told Wolfe Research “consumers will buy their coffee and donut before they pay their mortgage.” Another interesting note from the report is “80% of products are consumed within one hour of purchase, which typically means that they are impulse driven, leading consumers to be less price sensitive.” This is a boon for operators, but inflation and higher prices will eat into driver purchasing power. 

C-store operators often have products priced upward of 20% or more compared to regular grocery stores. Surprisingly, compared to mass/dollar channels like Dollar Tree, they can cost upward of 30-40%. An added benefit are the fuel pumps, something that grocery stores and large retailers like Walmart frequently use to attract customers via fuel promotions. 

For many over-the-road drivers, a major source of their meals can come from C-store locations built into truck stops like Love’s, Flying J and Pilot. This is due in part to the difficulties drivers face when attempting to fit into grocery store parking lots or even navigating a Walmart — which you need permission from — if you want to take a rest break. The health challenges from a diet predominantly based on CPG items has led to trucking companies getting creative by offering an official driver cookbook. 

White House freight data exchange grows in size

A freight data exchange launched by the White House in March has grown with the addition of new members. The exchange, coordinated by the U.S. Department of Transportation, is called the Freight Logistics Optimization Works (FLOW) and it originally included 18 members, ranging from shippers, trucking, warehousing, logistics companies and ports. The new members put the total contributors at 36 and included the first addition of a rail carrier with BNSF. 

The program seeks to share basic information, including early return dates for containers, measure chassis availability and attempt to aggregate dwell times throughout the supply chain. A challenge will be how much data to share. 

“How do we break down some of the silos in which we operate, and how do we get people confident that the data won’t be weaponized, whether it be in the private sector, public sector or in the labor workforce?” Port of Los Angeles Executive Director Gene Seroka noted in March. “That’s a key hurdle to get over for all of us. … We don’t want to use anything that’s proprietary.”

Proprietary data will remain a touchy subject, as most parts of the supply chain remain siloed and view the sharing of information as losing a competitive advantage. When I was a broker and worked at a large asset based carrier, the internal information about driver habits, carrier buying power and even asset utilization were viewed like state secrets. 

Market update: Trucking capacity continues to loosen 

Outbound tender rejection levels, a measure of carriers’ acceptance of contracted load volumes, continues to decline, reaching 5.64%. The last time OTRI was around this level was late June 2020. Traditionally, when outbound tender rejection rates fall, this indicates carriers are refusing few contracted loads and losing pricing power in the market. The concern is what will the freight outlook be moving into the second half of the year if rates and rejection levels continue to decline.

Craig Fuller, CEO and founder of FreightWaves notes, “The freight market is a pendulum — and when it swings, it may be the buyers or sellers of capacity that now have the power in rate negotiations. Ever since the summer of 2020, trucking companies have largely held all of the power in rate negotiations, based on their ability to squeeze their shipper customers for rate premiums.”

Shippers, accustomed to paying record rates for contract and spot market loads, are taking notice. There are fears of a cascading effect, where both carriers and brokers attempt to undercut incumbents for declining freight supply. For shippers, this can bring much-needed transportation cost savings. But for carriers and brokers, there’s the risk of a race to the bottom, with profitability becoming collateral damage. 

FreightWaves SONAR spotlight: Rejection rates decline on the most difficult lengths of haul to cover

Summary: The days of carriers flexing optionality in the freight they accept are largely over. Carriers now are reacting to the changing market conditions and ensuring their trucks continue to run loaded with any freight that is tendered. 

Throughout August, the rejection rates across the mileage band have largely declined, with the exception of the Short-haul Outbound Tender Reject Index (SOTRI), which increased by 21 bps during the month. 

When carriers have optionality, rejection rates will increase, especially on loads between 450 and 800 miles (Tweener outbound tender rejection index or TOTRI), which are traditionally the most difficult to cover. The decline in TOTRI signals that carriers are willing to take even the most difficult loads to avoid the spot market.

Traditionally, rejection rates rise at month’s end, especially when backed by a holiday weekend. But in this instance rejection rates continued their decline as carriers avoided the spot market.

The Routing Guide: Links from around the web

Driver training programs overwhelmed by Interest (Transport Topics)

BLS data indicates truck transportation employment growth may be slowing (FreightWaves)

Is the largest truck prebuy ever on the horizon? (Trucking Info)

As trucking sees costlier crash payouts, insurers seek to limit risk (Transport Dive)

Bosch investing $200M to make hydrogen fuel cells for Class 8 trucks (FreightWaves)

Recent shift in market conditions changing the driver pay conversation (Commercial Carrier Journal)

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Source: freightwaves - Loaded and Rolling: Trucking and CPG sales, White House freight data exchange
Editor: Thomas Wasson