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Rising commodity, energy costs top concerns
August 26, 2008
CHICAGO — ArrowStream, provider of supply chain management and logistics solutions for the foodservice industry, has announced that commodity and fuel costs top the list of margin-pressure concerns of chain restaurant operators for the second half of 2008.
ArrowStream's Market Outlook Survey responses were collected from 12 senior-level representatives of leading quick-service and casual-dining chain restaurant operators. ArrowStream works with many national and regional chain restaurants that collectively represent more than 17,000 retail stores in the U.S.
Thee top three margin pressures chains will be facing in the last half of 2008 are:
- rising commodity prices (corn, beef, chicken, cheese)
- rising energy costs (oil and gas)
- the ability to maintain revenue and traffic growth
Reflecting the impact of rising costs, 45 percent of survey respondents also expect profitability to decrease somewhat over the next 12 months, and 27 percent reported expectations of moderate increases in profitability.
Some of the survey results echo other industry studies, including the Datassential report presented at the International Food Marketers Association'sFebruary 2008 COEXmeeting. The Datassential study also found that rising commodity and energy prices are putting tremendous pressure on U.S. foodservice chain operators.
The top strategy cited by chain operators for easing pressure on margins to improve profitability was improving procurement processes and inventory control.
Other key strategies for strengthening the year's financial outlook include switching to lower-cost food and beverage products (64 percent), increasing menu prices (45 percent), simplifying the menu (18 percent) and revamping labor compensation practices (9 percent).
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