2022 has been a challenging year for hospitality to say the least. As the pandemic began to wind down, hopes were high that our industry would rebound quickly. And in many ways it did. But as the year progressed, new challenges have made it difficult for operators to grow business and profits.
The key challenges that will continue into 2023 include:
- The war in Ukraine. Regarded as the ‘breadbasket’ of Europe, Ukraine’s wheat exports account for 10% of the global total. The reduction of wheat commodity from the marketplace has driven wheat to record highs this year, with no sign of plateauing in 2023. Continued shortages of bread and pasta will raise prices to unprecedented levels.
- Inflation and economic uncertainty. Soaring costs on goods such as coffee, vegetable oils, poultry, seafood and just about everything else, has slowed production in many areas of the food and beverage sector. Additionally, the hike in interest rates in response to inflation is extremely concerning for the hospitality sector. New research from CGA by NielsenIQ reveals that 86% of leaders report significant inflation in the prices of both energy and food. While four in five leaders say their business is still operating at a profit, more than half report margins lower than they were before the COVID-19 pandemic.
- Extreme weather impacting food and beverage commodities. This year we were faced with the realities of global warming when flooding, fires and storms swept across the globe. These weather and natural disasters have restricted access to food and beverage commodities such as coffee, peas, potatoes and grain. The plummeting yield in crops due to these extreme conditions spells disaster for farmers around the globe and decreased supply of food and beverages will raise costs and limit product offerings for hospitality providers.
As disheartening as the current landscape may seem, there are things hospitality can do now to not only weather the storm but grow business in 2023. Here are just a few examples.
- Retain customers with meal deals. A recent report reveals that 89% of consumers intend to save money by eating out differently – choosing cheaper outlets or spending less. Operators will need to adjust to this new consumer behaviour through meal deals, loyalty schemes and special set menus.
- Increase prices on less costly dishes. Consumers are more willing to accept prices increases that cost less to start with. Operators can maintain overall margins by increasing prices on starters, sides and desserts versus main dishes. Upselling or encouraging trade-ups that include these less costly dishes can also help increase or stabilise profits.
- Offer alternative fresh products. With droughts, floods, transport and energy cost increases, supply of products such as certain produce is low and expensive. It makes sense to look at alternative products if your first choice isn’t available or not cost-effective. Switch to kale, cabbages and prepared options. Swap and save on tomatoes, mushrooms and a vast range of leaf.
- Look for special offers from suppliers. Offering daily boards, promotions and special pricing on select dishes can help improve your margins across the business. For example, if your fishmonger has a great daily deal then take just enough and challenge your staff to sell all of them.
- Partner with Enhance. We can’t guarantee that we can stop prices from increasing, but we can guarantee to secure the best pricing in the market. Our purchasing experts work with local and national suppliers to mitigate some of the increases the industry is facing. We will also save you time and resources procuring the products you need by designing a bespoke solution at no cost to you. Why not have a conversation with Andy Morris to see how Enhance will improve your purchasing operations and reduce spend.