Caterers eye food costs as average basket of food rises 6%

23 March 2011 by
Caterers eye food costs as average basket of food rises 6%

Hospitality operators will have to work even harder to monitor food costs and wastage - as well as being more flexible with menu creation, as it emerged that an average basket of food for caterers has risen almost 6%.

The news came in the same week that the Government's preferred measure of inflation, the Consumer Prices Index (CPI) rose to 4.4% in February, largely driven by food and fuel prices.

Food service analyst Peter Backman, managing director at Horizons, said the average basket of food for operators went up 5.6% in January compared with last year. "In 2010 there was an increase of just 1.2%, which means prices are rising four times faster. Butter, fish, soft drinks, lamb and tea are all up by more than 10% year on year," he said.

Meanwhile, figures from economists at UBS show a similar rise in general food inflation, which they calculate is up by 5% compared with last year (see right).

The rise in petrol and diesel prices, which have lately been pushed even higher by the crisis in Libya, as well as higher demand for meat and dairy in China and India, have contributed to the overall rise in food prices.

Meanwhile, the growing use of cereal in biofuel production is driving up both cereal and poultry costs. Packaging costs are also increasing, along with overhead increases and general volatility in global markets owing to world events and natural disasters such as the recent crisis in Libya and earthquake in Japan. And some commentators warned that the severe European winter could decrease wheat crops by up to 25%, which could push up food prices even further.

One industry expert at a major restaurant chain said: "Chinese demand is impacting across almost all the key commodity areas, especially as the Chinese diet is changing and they are increasingly eating more meat and dairy products. It will be very tough for smaller operators. We work in terms of long-term relationships with our suppliers but if you are a small independent the only real way to overcome this is to look at portion control or value-engineering products."

Stephen Minall, managing director of food consultancy Moving Food, said that food prices have been sneaking up steadily over the past 18 months and warned it would continue.

"Some suppliers are getting around this by decreasing the amount of food they package, while other operators have hidden behind the VAT increase and put up prices at the same time," he said. "None of this is a long-term solution and eventually the price increases will have to be passed on."

However, Paul Connelly, head of purchasing for purchasing consortium Beacon, cautioned that in a time of economic uncertainty and shrinking discretionary spend, it was proving very difficult for operators to pass on the full impact of food inflation to customers. "Operators most closely monitoring food costs and wastage, with the ability to flex menus away from highly volatile ingredients, will be best placed to mitigate the ongoing rises," he advised.

And Peter Martin, founder of hospitality consultancy firm Peach Factory, agreed, adding that both food prices and availability should be much higher up operators' agendas.

"Restaurateurs need to make sure that the basic foods needed to run their business are going to be available," he said. "Availability comes before price. Securing the supply line is the key thing."

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