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Despite what some are saying, Food Inflation is not a hopeless challenge

By 11th July 2017 No Comments
Newspaper headlines on food inflation, with coins and rising graph

 

In a year with rising business rates and minimum wage increases, the last thing hoteliers needed was for inflation on their food prices. Sadly, the drop in the pound, weather related crop failures, low livestock yields and high overseas demand has fuelled ever higher food prices. As far as food is concerned, pricing is up by just under 10% year on year.

The good news is that such a level can be managed and in most cases mitigated without compromising quality or customer experience.

Our top tips:

  • Consider using a specialist food margin business such as PSL. Typical savings are 10-15% which will easily ensure you bring year on year costs back under control and they offer a self-financing model which means they only get paid on delivery of improved margins.
  • Speak to your suppliers and ask them for suggestions to help reduce your food costs – they will be delighted to help.
  • Consider alternative products on your key product lines.
  • Consider changing your menus replacing dishes most affected by inflation with dishes with more stable costs.
  • Tackle food wastage by reducing production or portion size – e.g. a one ounce reduction on key proteins replaced with additional carbohydrates or vegetables will deliver the same plate weight for 10% less.
  • Compare your menu tariffs to ensure you are in line with the market/competitors.
  • Ensure good stock rotation to minimise waste.

The key drivers of food inflation are as follows:

Fruit and vegetables are up YOY approx. 11% – a contributory factor to this was the well-publicised shortage of salad crops and citrus fruits in the Spring due to flooding in the Mediterranean growing areas. Droughts are now affecting pricing though we are at least in the Summer growing season which is softening the impact of this.

Dairy is up YOY+20.82% but the previous year’s pricing hit rock bottom as the market was flooded with product due to EU quotas ending on production of many fat based products. Butter and cream is suffering from a very severe shortage of milk due to a dry Spring across Europe.

Seafood is up YOY +10.71% – this is being driven by imported product being hit hard by currency movements. Salmon pricing is also a key factor as the low pricing during the summer of 2015 created a ‘false market’ which processors reacted too by reducing production. This had the net effect of driving pricing up to exceptional highs.

Meat and poultry pricing is indeed rising due to high demand and low supply and we have had to accept a YOY 4.9% increase to date – a position which is again mitigated against the open market. However, there is more to come in this area with upward pressure on beef, lamb and pork and to a lesser extent poultry which we will be working to mitigate over the coming months.

Looking for more advice and support, contact the team at PSL today on:

01926 477635 [email protected] or yourpsl.com