This post is not in relation to January’s redundant gym membership. The focus this week is a hurdle our industry has experienced over the previous years in a volatile political environment, which has filtered through to putting restaurants under pressure. We are talking about food price inflation.
Analysing one of the main causes – the Brexit (buzzword – sigh) vote caused a seismic shock in the currency markets, weakening the pound. This currency shift caused imports to be expensive (and a spike in exports due to British products considered cheap in other currencies). Coinciding an increase in the prices of imported goods, with a rise in demand for UK goods and services. The combination has filtered through to cause a rise in price levels (some items more so than others). The main concern to this is that whilst there is a rise in inflation, it is squeezing disposable incomes as wage growth-inflation has stagnated.
Now, consumer confidence has been high over the previous few years as consumers (especially younger generations/Millennials) have been willing to spend their earnings on experiences. This is opposed to the traditional norm of buttoning down the war chest and stowing their earnings away for a rainy day or in their pensions (as people are now entitled to opt out of their pension scheme). Taking all of the above into consideration it appears that some belt-tightening may be needed in the near future.
Food Price Inflation
How have we seen the impact of this in the Hospitality sector? Exotic ingredients from overseas have been impacted. However, more worryingly, a couple of food staples that have experienced a rise in price, which has put chefs under increasing pressure (as highlighted in a Big Hospitality Article), include seafood and butter. In some situations, chefs have to look for alternatives for ingredients they would normally use in their recipes. The issue is that when suppliers are raising their prices, it is difficult to continue increasing prices on the menu/bottom line, as it will have an impact on demand. People would rather find an alternative place to eat due to the wide range of options available, or even cook at home.
The importance of live price supplier controls
The worst of food price inflation is said to be over as we have experienced the worst of the GBP movements (down more than 10%!) on the 23rd June 2016. Nevertheless, the continued pressure of other variables such as property costs, business rates and wage inflation are all things that a business needs to sidestep in their pursuit of success. Therefore, it is imperative that you take control of your purchasing (through transparency and live supplier price control) to ensure that you maximise your margins and can focus on how best to react to these geopolitical and economic events. Our success is your success, and we specialise in providing all of the tools to help you take control of your purchasing procedure so you can save time and money, allowing you to increase your focus on the strategic direction of your business. We will continue to keep a watchful eye on some of the variables that will influence your business, and if you have any questions please do not hesitate to get in touch.