The impacts of Brexit, a global pandemic and the war in Ukraine are far reaching: disruption of supply chains, skyrocketing energy and fuel prices, and labour shortages. All of these are placing unprecedented pressure on every business; the hospitality sector maybe even more so.
Whilst operators are doing their best to remain optimistic, market conditions are making it extremely difficult to see light at the end of the tunnel. During this time, operators must be do their best to control costs. Outsourcing procurement services is one way to manage food and beverage costs, maintain quality and add value to the business.
Below are some examples of current market conditions. Obviously, prices have increased and will continue to do so in most cases – at least for the short term. But if you plan accordingly and outsource your purchasing with a team of experts that will work with suppliers to obtain the best pricing and quality, your business will be in a strong position as it navigates the challenging road ahead.
Meat & Poultry
Our team has had numerous conversations with UK butchers and we have been informed that prices are on the move again as a direct result of the current situation in the Ukraine. Our sources tell us that the price increases and current levels of prices are unprecedented.
Chicken: Currently sourced from Ukraine & Poland not available. Prices are expected to increase in March by 20%+. Avian flu throughout Europe is also impacting the supply chain, which means availability of certain products will be an issue.
Beef: Brexit & Covid are increasing prices across all cuts. Farmers reduced herds 30 months ago (Brexit negotiation time) due to the uncertainty of possible tariffs. Feed prices have also increased (much of the feed used in UK farming comes from Ukraine).
Bacon/Pork: Pig slaughters are down 9% YoY; labour shortages are all contributing to pork & bacon prices remaining firm.
Lamb: 19% decline in throughput of lambs YoY. Liveweight prices continue to strengthen as well as deadweight prices keeping pricing high.
Fish & Seafood:
Demand globally on cod is up considerably due to strong markets such as the USA paying top prices, stock levels are down about 30%, fuel costs have soared and sea freight prices are six times what they were pre-pandemic. Also, a considerable amount of all fillets that are imported to the UK fish & chips sector are caught by Russian-owned trawlers. Suppliers are warning of high prices and severe delays until at least there is some certainty about Russian caught fish being available or not.
Salmon cost prices have increased by 25% in recent weeks and the current price level will stay high for the coming months.
Fruit & Veg
A shortage of workers has impacted availability and pricing of items such as broccoli, sprouts and cabbage over the winter and spring months. Improvement in availability is expected as supplies from Spanish and southern European producers arrive, but freight costs along with delays at ports will keep prices high.
Additionally, an export ban in Morocco and strikes in Spain are causing a tomato supply shortage, increasing prices by100%. The new 2022 tomato crop will also ensure higher prices due to the actual cost increase that farmers will have to sustain to plant tomatoes (fertilizers, seeds, packaging, energy and fuel), and the trend of huge price increases (compared to 2021) from other major tomato producing countries: Spain (+30%), Portugal (+25%) and California (+25%).
The UK potato crop in 2021 was also lower than expected – resulting in higher prices. New potatoes will become available later in the Spring, but operators should still anticipate (and budget for) higher prices. new tomato harvest (spring/summer of 2022)
Expect high demand for summer fruits to result in low supply and higher prices, especially if the UK is unable to recruit an adequate number of pickers once crops ripen in the early summer.
Increased farm gate prices, energy costs and global demand are driving up higher prices of some products including milk, cream, butter and cheeses. Egg supply is also at risk due to outbreaks of Avian flu.
Coffee prices have almost doubled in the past year, up by more than 90% – due mostly to the low output of crop in Brazil, the world’s largest coffee producer. The continued shortfall of crop will continue to drive higher prices.
Climate change is affecting global wine production and supply. As the second largest importer of wine in the world, the UK imports 99% of its wine. As distribution and transportation costs rise, so too will the price of wine. Recent data shows that wine prices are increasing faster than any other alcoholic drink. Office for National Statistics (ONS) figures show the price of wine has seen a 3.3% increase in the 12 months to January, 2022.
Extreme price hikes in cooking oils – mostly of the sunflower and cottonseed variety – can be attributed to Ukraine. Ukraine supplies 60% of the world’s sunflower oil, whilst Russia is the second largest producer – exporting about 23% of the world’s supply. With supply already low, prices will continue to soar as major establishments such as KFC and McDonalds purchase larger than normal volumes.
What you can do now:
• Source local and national products when possible.
• Lock in prices sooner rather than later.
• Adjust your menus with alternative, lower priced options i.e. plant-based.
• Flexibility is key! Be flexible and switch products if and when necessary.
• Purchase products with longer shelf life at the best price.
• Take advantage of supplier deals/specials.
• Enhance can help with all of the above! Contact Andy Morris to get started.