Rising food prices could give restaurants edge
19 January, 2011
Rising commodity prices are causing headaches for everyone in the food industry—but the trend could prove to be good news for restaurant operators in the short term at least, according to a US expert.
That’s the conclusion of new research from the NPD group in the US, which suggests that supermarkets and other retailers are bearing the immediate brunt of soaring food prices. But restaurants, which have tied suppliers to longer term deals on key foodstuffs, are better placed to hold back their prices for now.
Harry Balzer, chief industry analyst at NPD, said: “Right now, supermarket prices are rising faster than restaurant prices. The advantage is to the restaurant.” He said food prices at grocery stores were currently running around 2% ahead of last year, having jumped towards the end of 2010 amid uncertainty on the markets.
That makes restaurants appear cheaper by comparison, prompting more Americans to eat out. NPD says diner numbers are picking up in 2011, having fallen by about 4% to 59.1 billion in the year to last November in the US.
But NPD has also pointed out that the upward trend in food prices is storing up problems for restaurants in the longer term. When operators next come to negotiate on supplies, they are likely to face the same problems that supermarkets and other retailers are grappling with now.
The trend in the US is being echoed in the UK and most territories around the world. According to The Grocer magazine, the price of an average shopping basket has risen substantially over the last few years, and has been subject to wide fluctuations from month to month, creating uncertainty for shoppers.
As Peach Report has noted, rising commodity prices are also putting increasing pressure on restaurant and pub operators in the UK. Announcing its most recent results J D Wetherspoon said they would dent its full-year profits in 2011. “There are clear indications of increases in the cost of supplies across a wide range of goods, including food and bar purchases.”