The Pandemic’s Pepperoni Problem

Pepperoni has always created problems.

Visually it’s a worry because no one could guarantee that it would be distributed evenly on a pie. Domino’s even tells us that when their pizzas don’t look like the ads, customers complain. Responding, Domino’s created the Pizza Checker. The Checker is a digital device that uses AI to guarantee visual and temperature consistency. During 2019, it was tested in Australia and New Zealand.

Now, the pandemic has created a new pepperoni problem.

Pepperoni Shortages

We’ve seen that hog output is down because of Covid-19 outbreaks in meat processing factories:

Those fewer hogs mean there will be less pepperoni, especially because other pork products are more profitable. However, not all restaurants will suffer. Since the larger chains have long-term contractual arrangements that guarantees what they pay, pricier pepperoni is unlikely.

Instead, the smaller pizza places will suffer from price increases that could be as high as 50 percent. Charlie’s Pizza House in Yankton, South Dakota paid $2.87 a pound during January 2019. Now, it’s $4.12.

With supply shrinking and pandemic demand soaring, classic economic analysis says price should rise. But like the larger chains, the smaller ones say they will not charge more.

Our Bottom Line: Supply and Demand

As economists, we can explain pepperoni problems through classic supply and demand. The processing cutbacks diminished supply while the lockdowns and quarantines increased demand.

With the supply curve shifting to the left and demand to the right, there is no way to avoid pricier pepperoni:

But don’t worry. As one pizza restaurant owner said, “It’s an American right to have pepperoni on pizza,”

My sources and more: Thanks to The Hustle (an email with quirky stories) for alerting me to the pepperoni shortage. From there, in a quest to know more about pepperoni, I discovered the Pizza Checker. Finally, I suggest Eater and Bloomberg for the pepperoni shortage story.