Industry News | November 13, 2013

Chain Restaurant Food Costs to Ease in 2014

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The cost of food products that chain restaurants use will increase overall by 2 percent in 2014, according to the newly released purchasing cost outlook by SpenDiffeerence LLC, the growing chain-restaurant purchasing cooperative.

The increase is a slight improvement over this year’s costs. So far in 2013, overall food costs are up 2.6 percent. For the last five years, the total inflation rate has been 7.1 percent.

The price of corn is forecast to drop 20 percent in 2014, offering relief on poultry purchases, except for wings, which will experience a minimal increase of 2 to 3 percent. Expected decreases in breast meat are 5 to 9 percent. The cost of pork bellies, after achieving a record high this year, is expected to drop 13 percent in 2014. Other pork items will also see some relief, averaging about a 4 percent decrease compared to 2013.

Beef, due to the growth cycle, will not recover until mid-2015 at the earliest, with a modest increase of 2 percent in costs expected in 2014.

“Operators need to understand not only their raw material costs but also yields, shrink, labor, packaging, overhead and freight costs,” says SpenDifference CEO Maryanne Rose. She adds that chains which take advantage of SpenDifference’s buying power and contract negotiation expertise are forecast to see their food costs remain flat next year with exception of those customers who are heavy users of beef. Their overall food-cost inflation will be about 1 percent.

“Our analysis of food-cost inflation illustrates that menu mix is the critical element in controlling costs,” Rose says. “If chain restaurants have flexibility in their menu offerings, one way to combat increases in food cost is to focus on pork and poultry, except for wings.”

Rose also suggests operators look at breads and identify savings as the cost of wheat is expected to drop 10 percent in 2014. Both canola and soy oil are forecast to increase in 2014, operators can take coverage at today’s levels to add price protection. The cost of cheese is expected to come down 3.2 percent. Operators can take coverage in the front half of 2014 to protect from seasonal increases in the back half of the year. Lastly, operators can draft a food-cost purchasing forecast to identify areas of savings and potential cost increases.

“With many industry experts expecting another challenging year ahead, supply chain management will continue to be extremely important, even with food costs stabilizing,” Rose says.

Based in Denver, SpenDifference LLC, partners with emerging to mid-sized restaurant companies, providing full-service supply chain support. It currently works with about 20 national and regional chains that represent nearly $1 billion annually in purchasing.

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