Rising cost of kitchens compounded by food and drink inflation for operators

Foodservice operators face the prospect of new kitchens costing more this year following price hikes across the catering equipment supply chain, but they are also being advised to take “urgent action” to tackle the impact of food and drink inflation on their business.

Buying specialist Lynx Purchasing expects January to deliver a wake-up call to many restaurants, pubs and hotels in the form of supplier invoices for products bought during the key trading month of December.

Rachel Dobson, managing director of Lynx Purchasing, says that most operators had set menus in place for much of December, taking them up to Christmas and through to the New Year weekend. And with no choice other than to buy the products on the menu, and with trading brisk and money in the till, some may not have been looking too closely at the prices they were paying.

“They may now find that much of the profit margin they were forecasting from December sales has been eroded by lower GPs. That will be a sobering thought for many operators as they face the prospect of the quiet trading months of January and February and the expectation that food and drink inflation will continue to rise steadily throughout 2017,” she said.

“We know that a number of suppliers had to raise prices on key products during December – for example, dairy, and especially butter, has seen sharp price rises, and products imported from Europe have cost more as a consequence of the fall in the value of sterling. We’ve been able to negotiate on behalf of our customers to mitigate the impact, but many operators without access to specialist purchasing support will have seen significant increases in their buying costs, with more to come.”

Peach Pubs, operator of 18 acclaimed food-led pubs, is one chain that has been closely scrutinising its operational costs. It works with Lynx Purchasing and will benefit from the work the company has done with suppliers to limit price increases on new menus being introduced this month.

Founder Hamish Stoddart said that while its wholesalers have imposed price rises in some areas of the menu, it hasn’t been on the most important lines. “This, along with Lynx’s expert negotiation, has got the increase down to something approaching OK, and in almost all areas of the menu, there won’t be any more increases until later in the year. I’m not celebrating, but I do believe it gives us a reasonable base for the first half of 2017.”

Stoddart acknowledged that many suppliers remain under immense pressure and said he expects more challenges later this year.

Dobson, meanwhile, said it is now more essential than ever for operators to plan their menus effectively, price their dishes profitably, and work closely with suppliers to maintain purchasing discipline. “Those who fail to act now could well find themselves struggling very soon,” she warned.




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