created 9 months ago | Tagged:
The restaurant industry has taken quite a beating over the past several years as cost-conscious, recession-weary consumers pulled back on dining out. Now, after regaining some steam as the economy improves, restaurateurs face another challenge, this time from Mother Nature.
Scorching temperatures and scarce rain have scarred the plains, damaging crops and driving up prices for everything from soy beans to corn. Increases are gaining speed, with prices on track to jump 3 percent this year on top of a more than 8 percent uptick last year. Not surprisingly, food costs rank as the second biggest challenge for restaurateurs, according to the National Restaurant Association, primarily because roughly one third of the typical restaurant sales dollar is allocated toward food and beverage purchases.
"The cattle producers have lost all their grazing land, [and] feed prices have gotten so high. That combined with when creeks dry up and they have trouble watering their cattle, and a lot of these guys are selling off their stock," says John Barone, president and commodity analyst at Market Vision Inc. While the influx of livestock sold for slaughter now and in coming months will mute some of the price increases for the next few months, it's bad news going into next year, especially given the declining herd sizes.
For the time being, it looks like consumers will dodge a bullet, especially since restaurateurs are loath to raise prices in such an ultra-competitive environment. Owners usually look to every other option when it comes to cost reductions before dinging consumers with higher prices. "We're biting our tongue right now," Martinez says, adding that he's currently working on several versions of new menus that could eliminate pricier food options to keep the core food offerings at affordable prices.