Food & Beverage

Pepperoni supply problems cause shortage, price increase

While pepperoni supply problems increased costs, lower cheese prices may mean now is the time for all those cheesy LTOs.

Photo: iStock

August 17, 2020 by S.A. Whitehead — Food Editor, Net World Media Group

For pizza operators, the biggest commodity story of the moment is likely the nationwide pepperoni shortage. Some restaurants are paying more than 40% more for the spicy meat, according to USA Today.

Prices ranged around $6 per pound for smaller quantities purchased by many mom-and-pop chains, which Bloomberg reported were being hit the hardest by the shortage. Larger chains like Domino's and Pizza Hut are less vulnerable to these kinds of price shifts since they purchase staples like pepperoni in larger quantities on long-term contracts.

On that topic of larger pizza brands, Domino's Pizza pulled off a nice hike in its value during trading last week, increasing $9.87 on the week to close Friday at $398.99.
The parent company Pizza Hut, Yum Brands, also reported an increase in its share value last Friday at the close of trading when it reported a $1.83 increase in value over the week, to close Aug. 14, at $92.65.

Friday, Aug. 14, was also the deadline for the much-smaller two-brand pizza company, Rave Restaurant Group, to submit a plan to the Securities and Exchange Commission on how it was going to get its share value back up to avoid delisting on the Nasdaq. Fortunately, the Pizza Inn and Pie Five parent closed up 8 cents Friday at 68 cents Friday, lending an optimistic note to its case.

Pizza Marketplace has requested additional details from Rave Restaurant Group about the plan it submitted regarding its delisting but had not received a response at the time of this story's publication.

The only brand monitored here weekly that noted a price dip from the week's trading was Louisville, Kentucky-based Papa John's International Inc. Though that company has been on an upward trajectory in recent weeks regarding its share price, last week its value fell $1.96 to close Friday at $96.15.

Cheese

Pepperoni may be sparse and pricey, but the good news is that cheese remains relatively plentiful. In fact, the price for the pizza staple has been falling in recent weeks, according to the U.S. Department of Agriculture.
The weekly average for barrels last week fell 3 cents to $1.48, while 40-pound blocks came in about 2 cents lower at $1.48. On Friday, barrels closed at $1.50, while and blocks finished at $1.82.

Cheese producers, like many dairy manufacturers, were facing more uncertainties in recent weeks. As schools plan reopening or virtual learning protocols, cheesemakers were reporting lower-than-average foodservice orders for this time of the year.

Cheese buyers, like pizza brand operators, are in a favorable position, though, according to the U.S.D.A., which reports that cheese market prices have plunged from their peak of $3 (for Chicago Mercantile Exchange blocks) a month ago, to their current point, hovering around $1.70 last week. Cheese inventories have also reportedly grown with plentiful milk supplies.

Wheat

Wheat prices last week were largely mixed, with price increases. In Chicago, soft red winter wheat ranged from $4.90 to $5.05 a bushel, up 3 cents from the previous week.

In Kansas City, hard red winter wheat, terminal bid, was unchanged from $4.40 to $4.50 a bushel. In Portland, hard red winter wheat was also unchanged to 5 cents lower, at $5.60 to $5.70. Lastly, the Chicago Mercantile Group reported that wheat futures for September were up about 3 cents to $5.

Auto fuel

The gas pump has become a new version of "Old Reliable" recently, with prices remaining fairly steady nationally at an average of $2.17 per gallon for regular unleaded. That price is about 1 cent lower than last week's average and just 2 cents under what we paid last month, according to the American Automobile Association.

The U.S. Energy Information Administration reported that gas demand increased slightly from 8.6 million barrels a day (b/d) to 8.8 million b/d. However, last week's estimated rate is 1 million b/d lower than last year's rate in early August.

That lower demand has helped to keep pump prices stable, as total domestic gasoline stocks are also holding steady at 247.1 million barrels. If demand remains low amid consistent stock levels, AAA said motorists — including all those pizza company delivery drivers — will likely see stable pump prices in the weeks ahead.

Last week, the largest weekly decreases in gas prices nationally were in Indiana and Florida, which both reported prices down about 4 cents on average state-wide. Illinois and Michigan reported a 3-cent decline in prices last week, while Ohio, Colorado, West Virginia, Georgia and Maryland were all down 2 cents.

This morning, the national average for a gallon of regular unleaded was $2.18, steady with last week. Mid-grade ($2.52) and premium ($2.79) were also steady with the previous week. The average price for a gallon of diesel was $2.42, down a cent from the previous week, while E85 came in at $1.98, 1cent higher than the previous week, but still 3 cents lower than the price one month ago.

Natural gas

Natural gas spot price movements were mixed for the seven-day period that ended Aug. 12, with the Henry Hub spot price falling from $2.18 per million British thermal units (MMBtu) to $2.06/MMBtu over that same period.

At the New York Mercantile Exchange, the price of the September 2020 contract decreased 4 cents, from $2.19/MMBtu to $2.15/MMBtu, according to the U.S. Energy Information Administration. The price of the 12-month strip averaging September 2020 through August 2021 futures contracts remained the same at $2.72/MMBtu.

The net injections to working gas totaled 58 billion cubic feet (Bcf) for the week ending Aug. 7. Working natural gas stocks totaled 3,332 Bcf, which is 22% more than the year-ago level and 15% more than the five-year (2015–19) average for the period.

The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 14 cents/MMBtu, averaging $5.05/MMBtu for the week ending Aug. 12. The price of isobutane fell by 9%. The prices of natural gasoline, ethane, butane, and propane rose by 9%, 5%, 5%, and 2%, respectively.

About S.A. Whitehead

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Pizza Marketplace and QSRweb editor Shelly Whitehead is a former newspaper and TV reporter with an affinity for telling stories about the people and innovative thinking behind great brands.