Hospitality operators should scrutinise the prices they are paying
FOOD and drink buying specialists Lynx Purchasing has warned hospitality operators to take urgent action to tackle the impact of food and drink inflation on their business.
The North Yorkshire-based company said that January 2017will see a wake-up call delivered to many restaurants, pubs and hotels in the form of supplier invoices for products bought during the key trading month of December.
Lynx Purchasing Managing director Rachel Dobson said: “We know that a number of suppliers raised prices on key products during December – for example, dairy, especially butter – has seen sharp price rises and products imported from Europe have cost more as a consequence of the fall in the value of sterling.
“That will be a sobering thought for many operators as they face the quieter trading months of January and February and the expectation that food and drink inflation will continue to rise steadily throughout 2017.”
Dobson urged operators to plan their menus effectively, price their dishes profitably and work closely with suppliers to maintain purchasing discipline.
“Those who fail to act now could well find themselves struggling very soon.”
Lynx Purchasing works with more than 2,200 hospitality and catering operators to match them with the best suppliers and get the best possible prices on food and drink.
It’s Autumn 2016 market forecast revealed a reason behind some of the price rises.
UK inflation figures for August showed a sharp 12.8% uplift in the price of oils and fats. With all oil initially traded in Chicago, the cost has been affected by the weaker exchange rates. Both rapeseed and sunflower prices have jumped dramatically following the Brexit vote. With unpredictable weather patterns also playing a big part, the price of cooking oil is expected to remain high into 2017.
Prices over the last 18 months have been relatively low, due both to the removal of quotas and the Russian export ban. With many dairy farmers having exited the market, prices are now moving up. While the price of milk often hits the headlines, for caterers the sharp increase in the cost of butter, cream and cheese should also be a concern.
The combination of increased demand from Asia and fewer UK farmers producing pork has seen prices for bacon, sausage and other pork products rise, and the UK is likely to rely increasingly on imported products.
Availability of lemons has been extremely tight over the summer, with very high market prices in the wake of problems with both the Argentinean and South African crops. Demand is likely to remain very strong, and so prices high, across the autumn and winter.
Stocks of sugar are low in the EU, which has led to steady price rises since the start of the year. This is unlikely to ease until November 2017 when quotas are removed.
Prawns are in short supply after a sharp drop in the availability of warm water prawns. Severe weather conditions in Asia earlier this year have affected the volume of supplies from India, Bangladesh and Vietnam, inevitably pushing up prices.
With problems in Chile caused by an algal bloom that has killed millions of farmed fish and a fall in production in Norway, the supply of fresh, frozen and smoked salmon is unlikely to improve by the end of the year.
Spain supplies much of the UK’s leafy salads during autumn and winter but there are suggestions that some Spanish growers will be looking to reduce their exposure to the UK market this season. This is as much to do with the UK’s retail price wars as with concern over Brexit and the lower value of sterling. The low prices paid by supermarkets is also deterring growers.
As alternatives to salmon on winter menus, haddock from Norway and Iceland will be readily available, while supplies of farmed sea bass and sea bream are expected to be good value and quality. Most frozen fish is traded in dollars, so exchange rates will have an impact on prices.
Potatoes may be more challenging than some other produce, with most caterers relying on imported products for staples such as frozen chips, alongside home-grown supplies. The currency issue as well as wet weather in northern Europe is expected to have an impact, with both crop quality and quantity expected to be lower. The rain will also mean higher prices for other frozen vegetables from key growing areas in France, Belgium and Holland.
Global demand for avocados continues to increase by an estimated 30% annually, with the UK’s love of Mexican menus seeing our consumption grow even more rapidly, at around 35%. With global production only growing annually at around 3%, the supply gap will be wide at times.
Unsettled weather in Brazil, the world’s biggest exporter of coffee, as well as in Vietnam affected coffee production, pushing up prices on the commodities market. In the longer term, the International Coffee Organization has warned that with coffee growers around the world facing low revenues and rising costs, some farmers are switching to other crops.
Several hospitality wine specialists have contacted customers to say that prices will rise as a result of the pound’s weakness since the referendum result. This is likely to be compounded by an increase in the cost of European wines following bad weather at the end of the summer, with the Burgundy, Loire Valley and Champagne regions of France all reported to have had shortfalls in production.
Brazil’s problems with the weather have also affected its orange juice crop, while Florida, the number two supplier behind Brazil, has had crops devastated by a disease-spreading bug. As a result, prices on the commodities market have spiked.