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Food Cost Reduction Strategies Are Suggested for 2014

Food-cost inflation is inevitable year to year, but it doesn't necessarily have to eat into the profit margins of full-service restaurant operators. The key is to understand all the components that affect food costs and the available options for controlling them through strategic purchasing programs.

The costs of products include more than the price of raw materials. Supply and demand are the key elements of price inflation; however, shrink, labor, packaging, overhead and freight also determine how finished goods are priced. Knowing what products to buy and when to buy them, and adding some flexibility to menu offerings, can negate a large percentage of the cost increases caused by inflationary factors.

During the last five years, food costs have risen a total of 7 percent. For 2014, we are forecasting that prices will increase 2 percent, slightly better than the 2.6-percent increase in 2013. While some products will fall in cost, others will rise. With the proper buying and menu strategies in place, however, restaurants can adapt easily and maintain profit margins without raising prices and driving customers away. Here’s how the New Year is shaping up.

Corn will decrease in price by 20 percent—welcome news for every restaurant operator. Always remember that “corn is king,” because it’s the main ingredient in animal feed and a key driver to inflation, affecting other commodity prices. We experienced an unprecedented drought in 2012 that hurt crop conditions and supply. Coupled with new government mandates on ethanol, this drove corn prices to a record high. But now, with the cost falling dramatically, we’ll see decreases in the cost of poultry—except for wings, always in high demand. The cost of chicken-breast meat will drop between 5 and 9 percent, while wings will rise in price by 2 to 3 percent. Beef, on the other hand, will actually increase 2 percent in cost due to its recovery cycle of two years or more.

Cheese prices will come down 3.2 percent, except for the usual seasonal increase late in the year. Pork prices also will decrease. One commodity to pay close attention to is shrimp, which is rising in cost. Shrimp farms in Southeast Asia and India were severely hurt by disease in 2013. Supply continues to be very tight, and will remain tight at least through the first half of 2014.

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