As prices rise, eateries rethink how to buy food
Kai Ryssdal: Corn prices hit a 2.5-year high today, the highest they’ve been since the global food crisis back in the summer of 2008. Those rising prices are behind at least part of what’s been happening in the Middle East. They’re contributing to shortages in some developing countries.
Back here, though, it’s more of a business equation for the food industry — restaurants in particular. Chains are looking for ways to stock up on pricey ingredients without going broke.
Marketplace’s Alisa Roth reports.
Alisa Roth: You have to feel a little sorry for the restaurant business. During the recession, people ate out a lot less. But now, just as customers have started coming back, the prices of many ingredients — from flour to meat — are going way up.
David Donnan follows the food business at AT Kearney, which is a consulting firm. He says those rising prices have restaurants changing the way they shop.
David Donnan: If you’re buying hamburger, you may want to go out and buy actual extra frozen hamburger meat, and put it into storage so you can draw it down; rather than buying it on a monthly basis, you may actually buy three or four months at a time.
So the restaurant doesn’t have to worry, at least for a while, if ground beef gets more expensive.
Some chains are doing the opposite: Darden Foods, the company that owns Red Lobster, is working on a system that would let it buy only what it needs, when it needs it. Kind of like the sophisticated delivery networks carmakers and electronics producers use. Other restaurants are teaming up in buying cooperatives.
Dennis Lombardi is a restaurant consultant at a company called WD Partners. He says restaurants can’t pass on the additional costs to customers, for fear they’ll stop eating out again.
Dennis Lombardi: Most restaurants will strive to create a balance between recapturing some of their increased operating costs — both ingredients and labor, by the way — and yet try to offset it with either new menu items that maybe uses a less-expensive protein, or certainly a trend we’re seeing to smaller portions, which allows for a more attractive price point.
He says Togo’s, a California chain, recently introduced mini versions of some sandwiches, and Bob Evans family-style restaurants have started offering a ‘saver’ size.
I’m Alisa Roth for Marketplace.
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