Restaurant diners may feel a little heartburn when the bill comes in 2012. Experts predict restaurant food and beverage prices to increase 5 percent or more this year. From fine dining to fast food, the restaurant industry will find it hard to absorb increased food prices without passing those additional costs on to consumers.
In 2011, restaurants mostly held the line. Despite marked increases in commodity food costs, menu prices rose only 1.2 percent, according to Intellaprice, a restaurant pricing consulting firm that maintains a database of 32,000 menu prices. Intense pressure from customers to keep down prices caused restaurants to think creatively about how to cope with higher food costs. Things like dollar menus, smaller portion sizes and working with lower-priced ingredients allowed restaurants to keep prices from skyrocketing last year.
But the future looks expensive. The latest USDA commodity price forecast predicts 2012 beef and chicken prices to increase by 9 percent and 5 percent, respectively (and this comes on the heels of double-digit price increases for many food items in 2011). Fitch Ratings, a global market credit opinion, research and data agency, predicts food inflation pressures will be driven strongly by rising protein prices.
But there are many other arenas in which food prices are expected to rise. The USDA recently predicted a 13 percent total drop in peanut production from last year, due to heat and drought. Chocolate and coffee prices also are anticipated to rise dramatically: A sharp decline in cocoa production in Ghana and Cote D'Ivoire could drive up prices; and severe weather, changing rainfall patterns and new pests have impacted coffee production. And in California, scientists are predicting that rising temperatures could render 50 percent of the state's winegrowing country inhospitable for current vines by 2040. This may prompt rethinking and replanting — costs that will be passed along to consumers.
"There's no way around it," says Frank Chivas, co-owner of Salt Rock Grill, Island Way Grill, Marlin Darlin' and Rumba Island Bar and Grill. "Menu prices are going to go up. I'll give you an example: Red Alaskan king crab — last year I was paying $12 for 12-14 count (12 to 14 legs per 10 pounds); the year before it was $9.50, and the year before that it cost me $8. This year I'm paying $21."
Still, some local restaurateurs will continue to try to keep a lid on prices.
"Independent restaurants have no buying power, and I know it's going to be hard for everyone," says Kathleen LaRoche, longtime owner of Black Pearl in Dunedin. "We haven't raised prices in years and, unless something drastic happens, we don't plan on it."
But, she adds with a touch of gallows humor, "I don't want to hear from my accountant."
Other trends to watch for in 2012:
Bringing it in house
Increased food costs may cause chefs to think more creatively, experimenting with more "rustic" cuts of meat and expending more time in curing, preserving and prepping dishes from scratch rather than buying in more expensive finished foods from purveyors. Makes sense: An average Hereford cow weighs around 1,300 pounds at slaughter weight, only 4 to 6 pounds of which is tenderloin. That leaves a lot of other beef, much of it affordable and tasty, in the right hands.
With food costs rising and labor costs fairly steady, it's easy to do the math. It's cheaper to pay kitchen staff extra hours to craft more home-style menu items (stews, braises and slow-simmered bean dishes) than to buy premium quick-cook proteins and other ingredients.
Chivas predicts, "You're going to see more kebabs and medallions and smaller shrimp — less expensive ingredients. And when you've got Walmart buying up choice beef, that means there's going to be a lot of select beef on the market. I think we're going to see a lot of changes."
Social networking and mobile apps
Consumers will increasingly use Yelp, Serious Eats, Open Table and so forth to share their thoughts (and to reward or punish for meals both good and bad), just as restaurants will rely even more heavily on Twitter and Facebook to give up-to-the-minute news about menu specials and discounts.
But in 2011 many restaurants fatigued of discount programs such as Groupon — while programs like these promise restaurateurs new customers who will convert to full-price payment after the first visit, it promises consumers that "they'll never pay retail again." This sets up a fundamental disconnect between host and diner. The future holds more creative ways to lure new customers in.
Concerned eaters are increasingly demanding a more transparent and efficient supply chain. This will play out in seeing more farmers and purveyors getting named billing on menus. Nebulous terms like "artisan" and "heirloom" will be replaced with more concrete source information. Be careful, though: Just because your pork has a fancy farm name, it doesn't mean much. Have you seen White Marble Farms pork on a menu? Certainly no boutique local farm, it's a product from Sysco, North America's largest food services distributor. Or seen IBP (that's Iowa Beef Processors) steaks on a menu? That's Tyson. And it's from Nebraska.
Another year of high fuel prices will mean foods with lengthy commutes have added transportation costs already in the price (diesel prices jumped 28.7 percent in 2011, and experts expect more of the same for 2012). Despite economies of scale, the neighborhood farmstand may start being competitively priced with Big Ag products because of the latter's supply chain costs.
The RNC and us
Traditionally in a presidential election year restaurants across the country see a bump in business. More parties and business dinners, more eating out, even more grabbing a bite and watching the drama unfold on the television over the bar. For the cities that host one of the conventions, this goes double.
The Republican National Convention will draw an estimated 45,000 people to the Tampa Bay area, including 15,000 journalists, 6,000 delegates, 10,500 volunteers and staffers and another 10,000 additional visitors. That's a lot of hungry people. More than a thousand parties are scheduled for the week of Aug. 27. In addition to that, Tampa area restaurants will be inundated. Rumors are swirling about a number of new restaurant projects swooping in to scoop up some of that bounty. That will play out over the coming months.
Laura Reiley can be reached at [email protected] or (727) 892-2293.