Has the Pandemic Changed Food Costing Structures?
3 Min Read
This edition of MRM's "Ask the Expert” features advice from Buyers Edge Platform. Please send questions to Modern Restaurant Management (MRM) magazine Executive Editor Barbara Castiglia at firstname.lastname@example.org.
The increase in demand and ongoing supply chain issues have contributed greatly to changes in food costing structures in recent months – and restaurants have been hit the hardest. With pandemic related challenges and roadblocks, rising food costs have hit restaurant operators across country and don’t look to be stopping anytime soon.
Market uncertainty continues to persist as COVID restrictions are lifted. This has left many questions unanswered as extenuating factors are adding to the industry’s uncertainty. Will foodservice demand be back to pre-COVID numbers? How quickly will demand return and will retail demand remain at higher levels?
Here’s a look at several key questions and what’s in store throughout the remainder of the year.
Have there been changes in what comes from imports vs. domestic?
With imported products being backed up right now, lead times are long. The surge in activity is being driven by imports and pandemic-induced, Internet-fueled consumer spending. Now, container ships still need to anchor before unloading and while wait times are less than what they were in March 2020, products continue to take longer to be approved for import.
Did forecasted demand decreases result in lower supplies of certain products?
It’s hard for anyone to forecast right now, let alone restaurant operators. Some geographies are opening dining rooms without much notice to distributors or suppliers, which is causing additional strain on the supply chain. Most suppliers are dealing with not having enough employees to manufacture products, so those suppliers are shorting PO’s due into distributors. Distributors are also dealing with a lack of employees to deliver products to customers. Decreased employment is a huge issue all the way around. The best solution for restaurant operators is to focus on what’s readily available while waiting out short-term supply shortages.
Were there more or less closures in certain areas based on COVID outbreaks that have resulted in uncertainty in the supply chain?
Restaurants across the country were impacted in similar ways as mass closures forced many chains to rethink their operators moving forward. As states lift pandemic-based restrictions based on their own timelines, it’s early to tell how closures – and re-openings – have impacted the supply chain. This is especially true as restaurants, manufacturers and distributors adjust to market changes.
Are meat packing plants still seeing impacts from the pandemic?
The quick answer to this question is yes. Meat packers are dealing with a shortage of employees to work in their plants, resulting in less product production overall. Meanwhile, demand continues to rise as restaurants begin to reopen more locations and consumers re-engage with their everyday life. For restaurant operators of large, multi-unit locations, this could be seen as time when the focus needs to shift to alternative menu options or limiting the number of meat-based offerings. While this solution isn’t ideal for the long-term, it could help operators ride out any temporary lull in meat-based supplies.
Is the industry seeing any difficulty in keeping up with the demand for disposables and packaging? Have there been cost increases?
The accessibility to disposable products are particularly challenging right now. Imports are backed up by several weeks to a month and resin prices keep rising, pushing up the price of disposables as demand continues to be very high. Operators should look for local sources in the meantime while keeping an eye on import trends. Packaging for to-go will continue to be on the forefront of operators’ radar as consumers continue to order for takeout and delivery. This may require a shift in cost structures overall; however, each brand should determine how much to allocate for costs in this area.
At this point in time, and in our economy, there is no one-best solution for restaurant operators. The industry is at a critical turning point and what is right for one concept may not apply to all. The best solution is to evaluate where your brand is in terms of menu, supply and demand, and operational cost structures, and then make adjustments from there. While it can be difficult to keep up with the current rate of change, if given the right amount of time and flexibility, operators will have the opportunity to come out ahead.