The (Steep) Cost of Business


Food prices are going through the roof. What are restaurants doing about it?

There’s no getting away from it: Everyone from executive chefs to moms and grocery store purchasers are feeling the escalation we’re seeing in food prices.

There are increases across the board, and some of them are pretty hefty.

Earlier this month the Food Institute, Upper Saddle River, New Jersey, reported that February 2011 marked the largest one-month increase in 37 years for wholesale food prices, climbing by 3.9 percent.

Thirty-five year high

According to the institute, this is the greatest increase in wholesale food prices since November 1974 when prices jumped by 4.2 percent due to spiraling oil prices.

This latest increase in the Producer Price Index for finished consumer foods is driven by a 49 percent jump in fresh vegetable prices due to freezes and other crop issues in many farming areas, says the Food Institute.

Of the 17 categories the Food Institute tracks on a regular basis, 13 posted increases during February, led by fresh vegetables, and followed by a nearly 10 percent jump in shortening and cooking oil, a 7.6 percent jump in egg prices, a 4.1 percent gain in dairy prices and a 3.2 percent jump in coffee prices. 

In fact, global food prices rose for the eighth straight month in February, according a report this month from the United Nations Food and Agriculture Organization (FAO).

And unexpected spikes in oil prices could exacerbate this already precarious situation in food markets, it warned.

The FAO Food Price Index—a measure of basic food prices at the international level—averaged 236 points in February, up 2.2 percent from January, the highest record in real and nominal terms, since the Rome-based agency started monitoring prices in 1990.

The prices of all commodity groups monitored increases again last month, except for sugar.

It’s not just rising gas prices that are to blame. A dry winter in the wheat-growing region of northern China; an increase in demand for ethanol, meaning more demand for corn; increased export of cattle; frigid weather in Florida, followed by wildfires, affecting orange production. Need we go on?

No Optimism Yet

And things aren’t likely to get much better any time soon. According to Hudson Riele, senior vice president of research for the National Restaurant Association: “Certain conditions, including weather and higher energy prices, could certainly continue to affect wholesale food costs, and prices are expected to remain elevated this year. Fresh produce, butter, fats and oils, and flour have seen the largest price increases over the last year.”

Riele adds that we’re unlikely to see prices drop significantly in 2011.

Chefs and restaurant operators know about the food price increases as well as anyone, but what are they doing about them? Restaurant Management takes a look.

Raise prices and watch portion control

Scot Cosentino,
owner and founder, Goodfella’s Pizza, Staten Island, New York

“Food costs are affecting us on a daily basis. Commodities have gone out of control. We’ve seen spikes of 400 percent in some produce (especially peppers and lettuce).

“Right now we’re taking it on the chin, hoping it will readjust itself.

“You have to raise your prices every six months and either make new dishes that are more in line, or raise your prices. We’ll raise our prices because we offer a quality product. We do put out discount deals for people who look for those deals. People who look for quality don’t really care.

“I think the big spike in produce was temporary but commodities are really edging up and most key items are up 10 percent so we’ll have to raise our prices by 3 percent or 4 percent or we’re not making any money.

“You’ve also go to watch your portion control and watch your staff isn’t putting too much on a plate, to make sure you’re a proficient operator.

“Keep your inventory low—if kitchen staff think there’s a lot [of food] they’re more free with servings and how much they throw away.”


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