Cost Reduction

Produce Prices Rising in the Wake of Irma

The South has been battered by hurricanes over the last few weeks. There are many ways restaurants in the area have been affected; be it physical damage or loss of income. What still remains to be seen is how the storms will affect crops and therefore crop prices across the country in the coming months and possibly years to come.

Combined, Hurricane Harvey and Irma are estimated to have caused an excess of $150 billion in damage which is on par with the cost of Katrina. Florida is the second-biggest produce producer in the United States with approximately 10% of the nation’s farmland. According to Bloomberg, Florida is “the top U.S. grower of fresh tomatoes, oranges, green beans, cucumbers, squash and sugarcane.”

While Florida’s agriculture business was not as impacted as initially feared because the storm veered off to the west; the $8 billion a year business still suffered damage. Moody’s (is) estimating a roughly 12 percent drop in citrus production and a 10 percent falloff in the sugarcane crop.

Brian Borowski, Director of Procurement & Produce Sales at Consolidated Concepts points out “As consumers and purchasers alike, we need to keep in mind that we are not dealing widgets. Produce is a perishable product, that is subject to Mother Nature’s wrath. Unfortunately, we have no control over her impact; and as a result, as consumers, we experience the full effect via pricing and quality.” Hurricanes are currently at the top of our minds but Borowski reminds us that every year there is something; between freezes, drought, strikes, hurricanes, etc. Preparing for these spikes is imperative to controlling your food cost over time.

As a restaurateur there are a few steps you can take to try to insulate yourself from these spikes:

Use Different Varietals – Round Tomato prices will spike in the coming months so consider if your tomato application could accommodate a varietal like Plum Tomatoes that were not affected by the hurricanes.

Use Product from a Different Growing Region – Florida produce will spike in price however, there are other growing areas that will be less affected. For example, Greenhouse grown tomatoes out of Canada will be a great option.  

Get on a Produce Contract – Fresh Concepts, a third party produce management company, assists thousands of restaurant chains with their food cost through aggressive contractual programs. Under these agreements, specifics are determined at the onset to help limit the overall impact of such events. Also through their vast procurement efforts, they can help guide you to alternate varietals, growing regions, shippers, etc. to help limit your exposure. In other words, having a produce contract in place, is almost like a mini insurance policy.

Use Canned/Frozen – While this doesn’t work for all menu items, it can help alleviate some of the cost. Fresh salsa can be replaced with canned. Fresh avocado on sandwiches could be substituted with frozen.

Pass the Cost to Consumers – Raising prices are never popular with consumers but they can be necessary. You can change your base menu prices or consider adding an additional fee for the affected crop. Put up a table tent discussing the spike in tomato prices and explaining your small upcharge.

Take it Off the Menu –You may not be able to take tomatoes off your sandwiches, but consider substituting another vegetable for them on your salads. Cutting the affected crop where possible can help control costs and your customers may not even notice!

Produce prices are volatile, easily affected by any number of natural occurrences. Preparing your restaurant for these changes is essential to absorbing them and maintaining your food costs.

 

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