Rising food costs contribute to industry pain points

Female chef looking at customer orders hanging from ceiling
Photo credit Image(s) generated by OpenAI’s DALL•E

By Danielle Schalk

The Challenge

The costs of goods has been a moving target in recent years and this is contributing to industry pain points — especially as food cost across the country are generally following an upward trend.

Colin Burslem, culinary director of Surrey, B.C.-based Joseph Richard Group, points to the wide range of factors that have been disrupting supply chains and, ultimately, influencing costs, including extreme weather, natural disasters and wars. And, on top of that, factors such as inflation and carbon taxes are further increasing the cost of these goods.

“From a producer standpoint,” says Burslem, “the costs for them to do business has increased, so for them to maintain and sustain their livelihood, they have no choice but to raise the cost of goods on that raw product.”

And this trickle-down effect continues through the path to consumer. “Food costs are driving menu prices up,” Burslem adds. “I’ve been working 23 years in the food-and-beverage industry and I’ve never seen the cost of goods at where they are today.”

Of course, he’s not alone in this experience. Lightspeed Restaurant data for April through June 2023, released by Lightspeed Commerce Inc., shows a 4.73 per cent year-over-year increase in median item price and a 6.96 per cent year-over-year increase in median burger price across its North American restaurant clients.

The Touch Bistro State of Restaurants 2023 report further highlights this trend, with 53 per cent of North American operators reporting that they raised their menu prices within the past six months in order to offset rising costs. The report also reveals that most operators raised their prices by an average of 15 per cent and goes on to suggest this “appears to be the maximum increase most consumers are willing to absorb.”

Jeff Dover, principal, fsSTRATEGY Inc., warns against operators holding on to hopes that food costs to decrease anytime soon. “There’s a perception out there that prices are going to come down on menus, but it’s built into the system — we need deflation in order for food costs to go down.”

Burslem agrees that this challenge won’t be quickly resolved. “My prediction would be that we’ll continue to see the cost of goods rise,” he notes. “We’re at an interesting crossroads in the food and beverage industry because there’s a lot of unknowns with what’s ahead.”

The Opportunity

Looking at what is probably a long road ahead, Dover notes there’s opportunity to be tapped in adapting how menus are managed. “Look at what’s available and what’s discounted on a seasonal basis…Feature those items and, using menu engineering, drive people to order what you want them to order,” he suggests. “If you make something with fresh strawberries in July, your food cost is a lot less than if you’re making something with fresh strawberries [in January]. It’s really about taking a look, each month, at what your theoretical cost of sales are for each menu item and discontinuing some, or adjusting them seasonally.”

As Dover stresses, the process of menu management needs to be more active and flexible than it’s been in the past. “The important thing is, every month you should be looking at your theoretical cost of sales for each menu item. You have to be costing each menu item and, when [ingredient costs] are going up, you have to make changes — it might be portion sizes, might be changing ingredients and mixing it up a bit. But, if you set the price once and you don’t look at it again for a year, you could be in a lot of trouble,” he explains.

And, as Nourish Food Marketing’s 2024 Nourish Trend Report notes, embracing technology such as artificial intelligence (AI) may be a valuable tool in reducing spending/costs. “Look for ways it can streamline your food inventory management to save time and minimize waste, and provide an instant boost to the bottom line,” suggests Nourish president and founder, Jo-Ann McArthur.

David Hopkins, president, The Fifteen Group, highlights that it doesn’t have to be a wholly utilitarian approach to this kind of menu management. He suggests there’s also opportunity to encourage creativity. “If the cost of an item doubles, you don’t have to increase the [menu] price. You can challenge your chef or kitchen manager and say ’hey, we need a different item to replace this, with different ingredients that are more economical.’”

Dover acknowledges that some changes may be hard to make, but highlights the necessity of a practical mindset. “Nobody ever likes taking something off [the menu], because there’s so and so that comes in every month and orders this item…But, that’s where the opportunities are, it’s in sound management of your menu.”

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