Soaring food prices leave restaurants fighting for profit

By Luke Nicholls

- Last updated on GMT

Related tags: Cost

Balancing act: The rising cost of food has left restaurants reassessing their supply chain
Balancing act: The rising cost of food has left restaurants reassessing their supply chain
Food prices have overtaken rent and business rates in the list of major overheads facing UK restaurants and are now second only to staff wages, according to a new industry-wide report by reservations company Livebookings.

The fourth Livebookings European Dining Index found that 74 per cent of restaurants cite food costs as the factor that has most impacted menu prices in the last six months, followed by tighter consumer budgets and staff costs.

Nearly all of the restaurateurs interviewed (90 per cent) reported a rise in their food bill over the last two quarters, and said that in the last six months food costs were the single biggest expenditure to increase.

“They have survived the recent economic decline, and are seeing improvement in the number of customers through the door, but many restaurants operating today are still facing a daily mission to maintain a sustainable profit margin,” said Livebookings’ chief executive Colin Tenwick.

“The rising cost of produce creates a need to constantly reassess their supply chain, and what they offer to customers. No doubt the industry will show its characteristic resilience and creativity to overcome the challenge, and it’s likely we’ll see a rise in things like single concept restaurants as restaurant owners aim to tightly control their cost centres, and protect their margin.”

Food-prices-rise

Extreme weather conditions followed by low harvest yields, which for over a year have been impacting the global price of wheat, dairy and meat, have also impacted the UK hospitality industry of late.

Knock-on effects reported by UK restaurants include changing their menus more frequently as they react to price changes; increasing their efforts to source locally as a way to control costs; re-structuring relationships with suppliers to protect against price changes where possible; and an increased need for communicating changes to customers.

Case Study: The Table Café

Shaun Alpine-Crabtree, the co-owner of The Table Café in Southwark in London, confirmed the Index’s findings. “At the moment, we’re reacting to food prices every single week,” he said. “If we didn’t, we wouldn't be here.

The-Table-Cafe
The Table Café in Southwark is reacting to food prices every week

“It means having policies in place about sourcing more locally, procuring only seasonal food, using lesser-known fish and different cuts of meat. We’ve also built much closer relationships with suppliers, who help us keep an eye on seasonal food and best prices.

“Wheat and dairy prices represent a challenge as, without constantly changing suppliers, you do feel at the mercy of the markets. On the whole, though, we’re finding that despite the challenges food prices are creating, several beneficial changes have taken place as a result.

“We have even started making our own bread and offering customers new options, such as giving them a greater choice of coffee cup sizes.”

And the problems are unlikely to go away. John Dyson, food adviser at the British Hospitality Association, added: “The cost of food is unlikely to stop rising. The hospitality industry is widely aware of the need to constantly scrutinise their menus to find ways to cut out waste and reduce the costs of the raw materials.

“It’s important to improve training and skills across the industry so that businesses can manage these challenges.  Businesses will also need to understand better the expectations of their customers about quality and quantity so that they can deliver a great guest experience at the right price point.”

How to control costs

These latest figures are in stark contrast with the results of H2 2012 Livebookings European Dining Index, in which fewer than one in five restaurateurs (17 per cent) noted a rise in their food bill in the preceding two quarters.

But, as Alpine-Crabtree from The Table Café concluded, consistency remains the key to success throughout such challenging trading conditions.

“Overall, we've found that as long as you offer great value and keep customers informed about what you are doing and why, the impact of prices rises can be controlled. For example, we've actually reduced the number of fish options on our menu, but have yet to find diners complaining.

“Communication has been key, as has the fact that consumers recognise the problem of food costs as something that is outside of our control – they face the same issue when they do the weekly shop in the supermarket."

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