Article

How to manage rising food costs

Look into markets that sell seconds or items that are discounted because of overruns.

January 7, 2015

By Brian Heider, President of Culinary Consultants

From burgers and bacon to chicken fingers and fruit, food prices continue to creep upward. The US.Department of Agriculture predicts that food prices will rise 2.5 to 3.5 percent this year (compared to 1.4 percent in 2013).

For consumers, this may mean changing dinner plans or digging for extra cash in the checkout lane. For businesses, it means that owners must understand the forces behind rising food costs, how to plan for them, and how to reduce expenditures.

Why the steady climb?

The cost of food — particularly protein — has increased significantly due to a variety of factors:

• The porcine epidemic diarrhea virus, which killed 7 million piglets in the past year, appeared in the US for the first time in 2013. It affected thousands of farms and drove US pork prices up as much as 45 percent in some areas last year.
• Drought has driven up the price of grain and hay throughout the country, making it more expensive to feed cattle. As a result, there has been a national decrease in herd size and an increase in the price of beef.
• Record-high beef and pork prices have driven up chicken and turkey prices, too, as consumers have gone to the birds. Even as demand increases, the supply of chicken has remained limited.
• Produce is about to hit the winter market, which means costs will rise due to the increase in imports.

How to stay one step ahead

The best way to fight the challenges of rising food prices is to prepare for them. As the market changes, there may be opportunities for reduction in areas you haven’t considered.

• Don’t keep suppliers on standby. There are always changing opportunities for wholesale network connections, and it may hurt you to stay in business with a standby connection when food items increase significantly in price. Shop around for food networks or buying groups, which offer better collective buying power.
• Don’t be afraid to shop secondhand. Look into markets that sell seconds or items that are discounted because of overruns.
• Look for alternative brands. There may be a brand or a slightly different option that could significantly reduce expenditures.
• Think outside the box with purchase volume deals. Evaluate your needs and storage capabilities to determine the impact buying in bulk will have on your bottom line.
• Change menus to remove pricey items. Think seasonally, and take advantage of pricing that may vary depending on the time of year.
• Make sure you know how much you’re using. Evaluate what really needs to be going out in your product, and thoroughly cost out each item or dish. Accurately estimating how much you’re using will help you determine whether you’re recouping the costs of that ingredient.
• Keep a handle on waste. Take a look at the amount of food waste you produce, and identify ways to cut down on what never makes it to a plate or shelf.
• Do your homework. Just as the weather forecast helps you dress appropriately for future storms, watching the pricing trend forecast helps you prepare for rising costs. Reviewing the Consumer Product Index, industry publications, and category-specific publications will help you know when it’s time to push forward or pull back on certain items.

By staying on top of forecasts and trends and making changes to find cheaper options, you can keep your business one step ahead of climbing food costs. Although it takes work to constantly reevaluate options for reducing expenditures, the effort will help you position your business for future success and lend it strength in the market.

Brian Heider is the president of Culinary Consultants, a purchasing solutions organization that’s devoted to fraternity, sorority and foodservice management companies throughout the country that operate within the college and university market. 

Photo provided by Wikipedia.