Has your restaurant fallen victim to the recent spike in dairy prices?
If not, consider yourself lucky. Small and large restaurant operations alike have felt the burn of the unusually high dairy pricing, including Chipotle, Panera Bread, and Hershey’s.
September 2014 reached an all-time high for domestic milk prices. The average price for a gallon of whole milk increased 5.7% over the course of a year to $3.65. Researchers blame the price hike mostly on shortened supply. While the United States’ milk production remained consistent with previous years, foreign milk production was down, resulting in a slight shortage that in turn rose the prices for dairy products like milk and cheese.
Large production companies, like Kraft, have had to raise their prices in order to cover their increased costs. Doing so resulted in a lesser sales volume for the Kraft Corporation, but the higher priced items led to a 1.6% revenue increase for the company. Restaurant chains have been less eager to raise their prices in fear of losing customer; however, they are feeling the pinch. Data shows that the Cheesecake Factory, whose primary ingredient is cream cheese, has experienced a significant increase in dairy costs of $4.6 million during the last quarter. Similarly, Panera Bread spent an additional $2.5 million this last quarter to cover heightened dairy prices.
There is GOOD NEWS, however.
[pullquote-left]According to researchers, dairy prices will level soon, relieving the financial strain on restaurants. [/pullquote-left] Analysts are projecting this dairy price spike to diminish come early 2015 due to an estimated supply increase that will better meet consumer demands. If your restaurant has been able to withstand this dairy item price increase without raising the price of your own menu items, you are probably in the clear. Stay positive. You’re almost over the hump!
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