Food Inflation is Spiking: How Can Your Restaurant Survive and Maintain Its Profit Margins 

In an article published at the beginning of 2022, we pointed out that there was no end in sight for rising food prices. Unfortunately, we were right. 2022 has been a particularly worrisome year when it comes to inflation across the board. With less purchasing power and less access to essential goods and services, people all around the world are struggling to navigate this difficult situation.

The ever-growing inflation puts a lot of pressure on the food industry. A recent government report points to grocery food prices increasing by 13% compared with a year ago. The same report shows that the price index for restaurant/foodservice meals has gone up by 8.5% this year.

It’s not just consumers that struggle with the ongoing food price spikes. Restaurants also find it hard to deal with the rising levels of inflation and are looking for ways to optimize their spendings, adjust their prices, continue to attract new customers and save their business.

What is causing food prices to spike?

There’s no shortage of reasons that are making food prices go rampant. First of all, the world is still dealing with the aftermath of COVID-19 lockdowns. The lasting economic impacts of these lockdowns translate to product and labor shortages, supply chain disruptions and reduced purchasing power.

The Russian invasion of Ukraine in February 2022 greatly exacerbated the situation, leading to global financial insecurity and causing price tags for essential agricultural commodities such as wheat, barley and vegetable oils to spike even further. Both countries play a huge role in the global trade of such commodities. Adding to this, local government policies and export restrictions are also leading to supply shortages, causing prices to rise.

Finally, there is the issue of extreme weather. The food industry has always been at the mercy of Mother Nature. In 2022, hurricanes and heatwaves coupled with the existing pressures in the industry are pushing food prices to new record highs.

Which foods are most affected by food inflation in 2022?

Based on the most recent data collected by the Bureau of Labor Statistics, prices for all food items are significantly higher compared to September 2021. Prices continue to rise on a monthly basis.

• Fresh produce prices have gone up by 10.2% since September 2021.
• Cereal and bakery products cost 16.2% more than they did a year ago.
• Meat, poultry, fish and eggs prices have also climbed by 9% since September last year.

How is food inflation affecting restaurants?

As we’ve mentioned, food businesses are also having a hard time dealing with the rampant food inflation. For restaurants, this translates to higher input costs and lower profit margins. Restaurant owners are forced to spend more on wholesale supplies, staffing and maintenance costs. On the other hand, as consumer purchasing power becomes limited, food venues are struggling to attract new customers and protect their profits.

Strategies to help your restaurant deal with food inflation

Faced with the current economic challenges, restaurants need to adjust their business strategy in order to maintain a healthy profit margin. Here’s how you can help your restaurant fight back on food inflation:

• Adjust menu prices. The most obvious way to compensate for the rising food inflation is to increase your food menu prices. Many restaurateurs might be hesitant to do this for fear of losing customers, but if you do it wisely and gradually you can protect your profit margins without too many risks. It pays to have a look at your competition, see how they are adjusting their restaurant prices to balance out inflation and start from there.
• Find wholesale suppliers that offer competitive prices. While trying to secure the finest quality food items for your restaurant, it’s crucial to work with wholesalers who provide the best value for money. Experienced food distributors such as Riviera can make a real difference when it comes to lowering food costs for your restaurant without compromising on product quality.
• Focus on seasonal items. When you’re trying to reduce input costs for your food business, every “bargain” matters. Luckily, seasonal items can provide some relief. These items usually come at a cheaper price during their peak growing season, with the added benefit that they also look and taste better. Seasonal produce can also inspire seasonal menu items, which will help you attract more customers and increase your bottom line.
• Reduce menu size. In order to reduce unnecessary spending, you first need to evaluate which menu items and ingredients are most popular with your customers. Then, start eliminating items that you rarely ever use or are menu items that are not very profitable.
• Rethink specials and limited-time offers. If you regularly launch menu specials and limited-time offers, this might be the time to evaluate their profitability. Consider increasing their price or spacing them out so they don’t make a huge dent in your restaurant’s budget.

Food inflation continues to be a huge concern for consumers and food venue owners alike. To make sure you do everything in your power to navigate this challenging situation, partner up with Riviera Produce. We provide the finest quality produce at competitive wholesale prices so you can keep your food costs down and continue to deliver the best dining experience for your guests.