The effect of climbing food prices is being felt across the world with several different staple foodstuffs reaching record levels and this is having a knock-on effect on consumer prices both in and out of home. These increases and occasional shortage of supply are being caused by a variety of reasons that may not always be clear-cut.
For example, the sharp increase in the price of Basmati rice is causing problems among the country's many Indian restaurants. The increase is caused by a worldwide shortage but while production is part of the problem demand is also an issue. Our diets are changing. Once Basmati rice was only available in specialist stores and good Indian restaurants but now it is much more in demand and accounts for half of all the rice sold in the UK.
In the US, wheat and rice pricing have reached record highs while soya beans are at their highest price since the early 1970s and corn is at its most expensive for more than a decade.
Soaring food costs have caused riots in Mexico, Morocco, Yemen and Senegal among others. Those on fixed incomes will suffer most and in the UK that means the elderly and those who are surviving on benefits.
Just like every other area of the world's economy the wheels of agriculture are greased with oil. The spiralling cost of oil has had an impact on farming, processing and transportation costs and is affecting every part of the food chain.
In our view demand is the main factor behind global food price inflation. Production of cereals is not an issue. In many cases it is at record levels despite a series of natural disasters around the world. But these record levels of grain production are being outstripped by rising world demand.
Demand has increased, particularly from China which is consuming vast quantities of food products. The growing middle class in China is eating much more meat than in the past, leading to greater demand for grain and cereals for animal feed. And cereals which were once only used for food production are being diverted into the production of bio-fuels such as ethanol.
This situation is not going to change in the short term because of two very important factors. The first is that world population is expected to top nine billion by 2050, giving us a lot of new mouths to feed, and the second factor will be the expected changes in our climate which is predicted to have an adverse effect on food production.
But what can the foodservice operator do about what seems to be an inevitable increase in their costs? Well the first thing to recognise is that while consumers are eating more meals out of home they are not necessarily spending more out of home. They are more discerning about the prices they are prepared to pay for a meal. So it is really important to engineer your menu and recipes to ensure that you recognise this.
Furthermore it is possible to increase the value of a consumers purchase by simply changing the range you stock. For instance, in a well known tourist venue it was possible to increase spend per visitor on confectionery by 150% simply by changing the range stocked from single bars to sharing bags.
In addition to creative ranging and menu planning we recommend a group of measures to enable businesses to cope with the current price inflation.
1. It is never a bad time to thoroughly review your business practices. Examine your financial controls, your product and market focus, your cost structures and how to improve quality and service versus your competitors.
2. Involve some core suppliers or service providers in strategic debate. Any slowdown in consumption because of price inflation is their issue as well as yours. Work with them to build regular initiatives to keep your business in the minds of your customers. Open debate with your key customers on those initiatives that could have the greatest impact on their own businesses.
3. Involve your staff in the business situation you are facing. Get their ideas and work together on how to create value and great service for your customers. Be visible with your teams - they will really appreciate you being around.
Pass the costs on? Sometimes it is actually correct to do exactly that, particularly when there appears to be an overwhelming tide of price inflation for all foodservice operators.
Do not, however, underestimate the competitive advantage that exists for those who address the issue with creativity and in collaboration with suppliers, staff and customers.
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