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Starbucks Corp. wants to team up with other companies to buy milk, sugar and other essential food items. Darden Restaurants Inc., owner of the Red Lobster and Olive Garden chains, is moving to a system where it buys only what it knows it needs.
Such strategies, which are new to the restaurant business, come as chains are seeking ways to blunt the impact of higher prices for grains, meat, sugar and other essential ingredients. "We're seeing a level of sophistication in supply-chain management that didn't exist five years ago," says Dave Donnan, a partner in the consumer-products practice at consulting firm A.T. Kearney. "The separation of those that will succeed and those that will fail will be based on attention to detail."
Rising global demand for protein, unfriendly weather in key growing regions, government mandates to turn corn into ethanol, and speculative investors have helped boost the price of many food commodities in recent months. At the same time, high unemployment, weak home values and skittish consumers in the U.S. have made raising prices risky for restaurants.
Some restaurant companies are using commodity-price hedging to try to guard against large swings up or down. But they tend to be large companies like Starbucks and McDonald's Corp., which have the capital to hedge effectively even if they don't always place the correct bets.
Darden faces similar risks with its plan to automate its supply chain so that it buys and ships only what it needs when it's needed, as automotive, retail and some consumer-product companies have long done. For instance, it might buy and store only the amount of biscuit mix its Red Lobster restaurants are expected to use in a given month.