According to the June 2022 Consumer Price Index from the United States Bureau of Labor Statistics, fruit and vegetable costs rose 10.4% from June 2021 to June 2022. While inflation and other economic factors have driven everything from gas to egg prices, the higher prices of almost all foods have created significant challenges for restaurants and grocery stores alike.
In light of these higher costs and price increases, it is now more important than ever for restaurant owners to keep their expenses as low as possible. To help you navigate the current economy's challenges, we'll explore the various factors driving food inflation before discussing four tips that you can use to keep your expenses low in the face of ongoing price increases.
Why Are Food Prices Increasing?
From supply chain disruption to labor shortages, there are a variety of reasons why the average price of everything from fresh fruit to Kraft cheese has risen so much compared to last year. Here are the top reasons why grocery prices continue to climb in 2022:
1) Supply Chain Disruption
The COVID-19 pandemic and all of the shutdowns it caused have wreaked havoc on the global supply chain, and the food supply chain has certainly felt the impact. It's something that most people never think about, but there are a lot of processes involved in getting food from the farm to the table. Disrupting even one of these processes can create significant delays and shortages.
Even though the worst of the pandemic is (hopefully) behind us, the supply chain disruption that it caused still continues to impact exports and imports all over the world. In fact, 38.8% of American small businesses experienced delays in July 2021 due to supply chain issues created by the pandemic. As countries such as China — the world's largest exporter of goods — continue to enforce strict lockdowns, these disruptions are still a long way from being a thing of the past.
2) Rising Energy Costs
When oil costs go up, so does the cost of just about every other product and commodity on the market. Producing, processing, and transporting food requires a lot of energy, and when energy costs go up, the expense of all these processes goes up as well.
If you've been paying attention to gas prices or your electric bill, then you already know that energy prices have been soaring lately. The war in Ukraine is the biggest factor behind these rising energy costs, but this isn't the only issue contributing to higher energy costs. In recent years, oil and natural gas investments have declined, leaving the world ill-prepared to deal with the extreme circumstances we now find ourselves in. While Western governments have promised to offset this decreased investment with clean energy sources, this is a promise that has largely not yet come to fruition.
3) Conflict in Ukraine
On February 24, 2022, Russian soldiers crossed the border into Ukraine and began what would become the largest European invasion since World War II. President Biden and other Western leaders quickly leveled harsh sanctions against Russia in response to this unprecedented attack.
While these sanctions have certainly had the desired effect of damaging the Russian economy and limiting the country's ability to wage war, they've also come at a high price to every other country in the world. In 2021, Russian crude oil made up 14% of the world's supply. With this supply no longer available, the world has seen rising energy costs.
Along with indirectly impacting the food supply chain by causing energy costs to soar,
Russia's invasion of Ukraine has also directly impacted food costs by causing food shortages. You only need to consider the fact that Russia and Ukraine combine to account for 30% of the world's wheat exports to see why this is the case.
According to S&P Global Market Intelligence, cargo exports from Ukraine have decreased a staggering 92% compared to the past year's levels. Until the flow of food, oil, natural gas, and other essential commodities from Russia and Ukraine resumes, food price increases will likely continue.
4) The Return of Bird Flu
If you thought bird flu was an issue of the past, then we hate to be the bearer of bad news: The pathogen has returned and is estimated to have infected 40,141,829 poultry in the United States alone. While there has only been one reported case of a human in the U.S. contracting this most recent outbreak of bird flu, we are still feeling the impact in the form of rising poultry and egg prices. As farmers across the U.S. and Europe deal with losing massive numbers of birds, raising prices has been the only way for them to stay in business.
Tips for Curbing Food Price Increases
There is obviously little that restaurant owners can do to directly address the various issues causing food prices to skyrocket. What you can do, however, is strive to keep your expenses as low as possible until these issues are eventually resolved. With that in mind, here are four effective tips that you can use to offset the rising cost of food and keep your restaurant profitable:
1) Limit Waste
When food costs are higher than ever, the last thing you want to do is throw food away. In a restaurant, food waste can occur both in the kitchen and in the dining room. In the dining room, food left uneaten represents wasted expenses even though the customer has already paid for it. If you notice that a lot of your patrons leave portions of certain meals uneaten, cutting back on your portion sizes might be a great way to combat rising food prices without harming customer satisfaction.
In the kitchen, food waste can occur in various forms, whether it's a burned pan of sauce, too much meat left on the bone, or any other mistakes. While there's no way to prevent these forms of waste entirely, making it a priority among your staff to limit food waste is sure to help lower your expenses.
2) Re-examine Your Menu
Nothing directly impacts your restaurant's food costs more than the menu you offer, and there are several ways you can optimize your menu to offset rising food prices.
The first and most obvious option is to eliminate menu items with a slim profit margin. Optimizing your menu can also help you limit food waste if you can eliminate rarely-ordered menu items with ingredients that frequently spoil before they are used.
Beyond simply eliminating dishes that aren't cutting it in terms of profitability, there are numerous other ways to optimize your menu to reduce food costs. Leveraging "nose-to-tail/root-to-leaf" cooking by offering a menu that allows you to sell every part of the animals and vegetables you purchase can ensure that none of the food you pay for goes to waste.
Featuring dishes that avoid ingredients that rising food costs have especially impacted is another option to consider.
Even the design of your menu can have an impact on your expenses. Presenting high-margin dishes in prominent places on your menu is an effective way to nudge customers toward your most profitable items while still offering a wide-ranging menu.
All of these menu strategies can be even more effective with the right technology. With INFI's self-ordering kiosks, restaurant owners can track a wealth of customer data regarding item profitability, the rate at which items are ordered, and more. This data is invaluable when it comes time to reexamine your menu and optimize it for profitability. INFI's self-ordering kiosks also enable you to fully customize how you display your menu to customers and create promotions and item recommendations that you can use to guide customers toward your high-margin items.
3) Track Your Costs on a Per-Item Basis
Fully understanding the impact that food prices have on your business and optimizing your menu to counter it requires you to understand your costs on a more granular level. Along with tracking your overall food expenses, it's also important to track how much you spend on each product you sell. Using a restaurant management system (RMS) is the best way to make this task a little less time-consuming. However, you can also track item costs manually using a spreadsheet.
4) Consider Alternative Cost-Cutting Opportunities
If you have done all that you can do to lower your food costs but still can't keep your expenses at a sustainable level, you may need to consider cutting costs from other areas of your business. Along with food costs, labor costs are the most substantial expense that restaurants incur.
For the past several years, automation has been the key to reducing labor costs in the restaurant industry. Self-ordering kiosks, in particular, have helped large chains and local restaurants alike keep their labor costs sustainable by reducing the number of hourly employees it takes to operate the business.
Keep Costs Down With INFI
Restaurant owners across the country have felt the pain of rising food costs. Between this ongoing challenge and the industry's massive labor shortage, there's no denying that these are difficult times for the restaurant industry.
At INFI, we help restaurant owners address these pressing challenges through our industry-leading self-ordering kiosks. With INFI kiosks, you can track customer data to optimize your menu for profitability and use powerful sales features to promote your high-margin items. INFI kiosks also help restaurant owners reduce their labor expenses and solve their labor shortage challenges by reducing the number of employees your restaurant needs to serve its customers.
To see if INFI's innovative self-ordering kiosks are the solution your restaurant needs to combat rising food costs, sign up for a free INFI demo today.