Wholesale food prices pinch bottom line at local eateries

Business Today
May 1, 2011

By V. Tom Gardner

If you’ve bought food lately, you’ll notice your wallet feeling a little lighter. For restaurant owners, their bottom line is lighter.

According to the U.S. Labor Department, wholesale food prices rose 3.9 percent in February, the biggest monthly increase since 1974.

In addition, the U.S. Department of Agriculture is forecasting retail beef prices could jump up to 8 percent and pork by up to 7.5 percent. Not to mention that fresh vegetables are also expected to increase around 5 percent this year.

Normally, consumers can adjust to this by changing their shopping lists. But, local restaurant owners have a much more difficult task.

By increasing their prices, they could lose customers. If they don’t increase prices, worse can happen.

According to Galway Hooker owner Chris Boukedes, the price of food inflation is just part of the restaurant business. But over the past year, he has seen prices “go up substantially.”

When it comes to price increases, Boukedes says that he has to absorb the higher prices and claims that he hasn’t raised the prices on his menu in four years.

However, according to Boukedes, the hardest thing to account for is the drastic price fluctuations, “You learn how to take the highs and lows (of the prices),” he said.

Tony Stafford, owner of Ferrrucci’s Olde Tyme Italian Market, knows all about price fluctuations.

Since he places orders with his suppliers about four days a week, he can see the changes happen almost over night. Earlier this year, he saw the price of a case of tomatoes increase from $29 to almost $70 in the time of a couple weeks.

But when confronted with these types of price fluctuations, Stafford said “I try to hold back with (increasing) the price as much as I can,” and insisted that he tries to ride the fluctuation until it gets back to its normal level.

But even while managing price fluctuations, he’s seen the overall prices from his suppliers go up approximately 15 percent to 25 percent over the past year.

Double-digit price increases from suppliers is something that Al Updike, the owner and chef of Alton’s Kitchen, knows all too well.

During the past year, Updike has seen food prices increase by 15 percent to 20 percent. In addition, he has had to deal with increased surcharges on things like delivery fees.

However, when it comes to passing those increases along to customers, “I don’t think we’re in the position at the moment to increase prices,” he said; adding that small restaurants like his tend to feel the burden more than other larger restaurants that have an established market share.

As a relatively new restaurant — Alton’s has been around 16 months — Updike believes that price increases will reduce the incoming customers while he’s still trying to gain market share. “If I raise my prices, that means less people will come in.”

So, to keep his customers happy, Updike has had to absorb the higher costs, and not pass the increased prices along to his customers.

He’s been able to do this by constantly comparing prices from suppliers, finding greater efficiencies in his business and adding new dishes like pasta entrees and flat-bread appetizers.

Updike pointed out that due to price increases, many restaurants around the country have added the hanger steak to their menus. Because this cut of beef is cheaper than other cuts like prime rib or rib-eye, restaurants now serve it. Though it is cheaper, chefs have learned to prepare it so it’s still acceptable to customers.

However, Updike claims that the only thing on his menu that has changed, due to the increase in prices, is the Peninsula Special: A prix fixe menu that offers a salad, an entrée and a scoop of ice cream, for $14.

After the earthquake in New Zealand this February, Updike saw the prices of lamb skyrocket. So, he had to remove the braised lamb shank from the Peninsula Special, while keeping the prime rib, Idaho trout and chicken and rib entrees.


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