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Bracing for the pandemic, Skyline built a 'strategic chili reserve'

'As a sole source of supply, we felt responsible'
Posted at 5:52 PM, Feb 23, 2022
and last updated 2022-02-23 18:38:16-05

FAIRFIELD, Ohio — Paper cups, carry-out containers, tomato paste, ranch dressing: Those are just some of the products that Skyline Chili Inc. had trouble sourcing in the last two years, as the COVID-19 pandemic wreaked havoc on global supply chains.

But the company never once ran out of chili, thanks to a forward-looking decision to freeze its most important liquid asset in April 2020.

“We built a supply of frozen chili for our restaurants so that if we ran into problems, we could draw on the frozen safety stock,” CEO Kevin McDonnell said. “We have a secret-recipe product that is made here and is shipped to all of our restaurants. So, as a sole source of supply, we felt responsible for making sure that product had a back-up, a frozen reserve.”

Kevin McDonnell, CEO of Skyline Chili Inc.

The strategy is unique, but the problem is not. A survey by the National Restaurant Association estimates 75% of restaurants have made menu changes because of supply-chain shortages and 95% have experienced shortages of key food items in recent months.

“Most restaurants are changing the way they operate because they just don’t have any choice,” said John Barker, president of the Ohio Restaurant Association. “Some are limiting menus. Some are limiting hours. They’re trying to get down to a core business they can operate and still make some money.”

Barker said Skyline's approach is smart because “chili is easier to do” than other frozen food items. He wasn’t aware of any other restaurant chain taking this approach.

“There are 18 categories of things that go into Skyline chili, when we make it here in Fairfield,” McDonnell said. “We’ve had supply-chain problems with every single one of those items.”

Skyline franchisee Mike Sauer is grateful for the company’s approach.

“If we wouldn’t have chili, we wouldn’t be open. So, it was a live saver,” said Sauer, who bought into the company 17 years ago and operates three locations. “We’ve never had a problem. And our frozen chili is exactly the same as our regular, just takes a little longer to cook.”

Skyline normally delivers chili from its commissary in 30-pound plastic bags, encased in cardboard boxes. Sauer said the frozen boxes are rock solid when delivered, but thaw in the refrigerator until they can be brought to a boil without burning.

“Instead of 20 minutes to get our chili to a boil, it might take twice that long,” Sauer said. “Our crew has handled it just fine.”

The crew also taste-tested the frozen product before serving it to customers.

“We actually took some chili off our table that was from a regular refrigerated block chili, cooked the frozen one and put them in bowls,” Sauer said. “We couldn’t tell the difference.”

Skyline has frozen its product in the past to deal with minor fluctuations in order volume and manufacturing capacity. But it’s never leased this much freezer space for an ongoing chili reserve.

At its peak, Skyline’s chili iceberg grew large enough to supply the company’s 137 restaurants for eight weeks. Now it’s down to a six-week supply, with new chili replacing the oldest boxes periodically to guard against freezer burns and spoilage.

“Once things equalize, we’ll work it down because it’s expensive to have all of those expensive materials, meat, and everything that goes into the chili just sitting there,” McDonnell said. “We hope at some point, some knowledgeable authority is going to sort of say, ‘All clear.’ And we can go back to business as normal. But until then, we’re going to keep that back up.”

McDonnell was reserved about any more details on the frozen chili, unwilling to give up its exact location.

"We keep it in an off-site frozen facility that's nearby," McDonnell said.

When asked if we could see the reserve, McDonnell told us "no," while laughing.

"I'm getting concerned, you want to know way too much!"