Food Crisis: How it is affecting Southeast Food Service Operators

During this past fiscal quarter, the cost of food and food-related goods has hit an all time high. As a result, many food service operators in the southeast are examining and adjusting their operating costs.
Many southeast food service operators are finding their budgets lean and the fact that consumers have less cash does not help the situation. With products such as rice, flour, cheese, meat, and milk hitting new highs every week, operators are rethinking how to use these items in their daily operations. In addition to use, waste is also being examined and aggressively reduced.
So, what are food service operators doing to combat these challenges? Some are reducing their portion sizes while others are utilizing alternative products to reduce overall cost.

Understanding and Reacting to the Crisis

There are many reasons for the sudden cost increase. According to a 2008 report from the United Nations, food prices have risen 40 percent in the past nine months, and reserves are at a four-decade low. An exploding population, rising fuel costs, rising energy costs, climate change and lower than expected crop amounts are all cited as factors. It also states that this trend is expected to continue well into 2015.
“The price of crude oil; the rising demand, globally, for staple products, plus speculation from trader’s are all factors,” William F. Sullivan, a veteran Wall Street trader explains.
The price of a basic ingredient such as flour has risen from $11 for a fifty pound bag to approximately $50 dollars; and it keeps rising.
Sebastian Mazzota, Executive Chef at the Naples Tomato in Naples, Fla. explains that, “The price for our flour has risen three times in the past six months. We had a sit down with our purveyor and started a buying group -- buying in bulk with other restaurants in the area. Because of this new buying arrangement, we can now pass the savings onto our customers.”
Mazzota adds that he has not seen a change in the type of items that his guests are ordering at the restaurant, but he has seen the volume increase in their market. (The Naples Tomato also has a market in addition to the restaurant). He attributes this to the fact that people want gourmet food, but they want to enjoy it at home and it cost less than eating out. They are concentrating more of their current efforts on the market. Currently, they offer a wide array of prepared meals and items from their menu to take home and enjoy.
Anna Hsu, owner of Silk, Pacific Rim and Hsu Gourmet, three Asian restaurants in Atlanta discusses how she is dealing with the crisis.
“I spoke with one of my chefs about the cost of our jasmine rice used at one of our restaurants and he said three weeks ago the price was $28 for fifty pounds and now its $40.”
Hsu says that they are not downsizing portions. She believes that you have to give quality plus the right quantity for the price point. However, they are working on beefing up business.
“We’re doing more marketing in these tough economic times,” Hsu said.
She is hoping that with more marketing they will be able to ride out these tough economic times.
“You have to take care of your customer base, otherwise they won’t come back,” she explained.
Other food service operators are offering discounts and smaller sizes. Dwight Butner of Asheville, NC, a premier Italian restaurant and bistro in downtown is doing just that.
“We’re offering our customers the opportunity to dine in our bistro and get the same dishes that are served in our restaurant; the only difference is the portion is smaller and, therefore, less money. It offers our customer the chance to dine lighter and save money,” he said. (Full-sized entrees are still available.)

Tips for Cost Saving

So, while there is no one set answer to this serious, yet manageable problem, there are a few things food service operators can do to lessen the blow:

• Reduce waste; eliminate as much waste as you can by using items in soups and daily specials.
• Offer alternative cuts of less expensive meats such as a hangar steak or teras major instead of a filet or sirloin. Offer seafood at the right price point -- for example, catfish for the budget minded. You’ll be able to have a larger portion at less cost.
• Order in a group.

Whatever you decide to incorporate, remember to keep the customers coming back for more; they are the ones responsible for your success.

Elliott Fischer is the Marketing Director for Southeast Food Service News, a leading food service publication in the southeast. He has also worked on the manufacturing side of the food service industry with Oscar Mayer, Greenwich Mills Co - a large regional coffee and tea company, and Best Foods which is now Unilever.

email address: efischer@sfsn.com
web site: www.sfsn.com