Nearly Everybody Is Raising Prices This Year
Chipotle got a lot of publicity, and something of a freak-out among investors, when it said this spring that it plans to raise prices this year. But the fast-growing burrito chain is hardly alone.
According to a survey by the food purchasing co-op SpenDifference, some 93 percent of restaurant chains plan to raise prices during the second half of this year.
The reason is simple: Food costs are going up. In a year when many restaurant owners expected food prices to ease, higher prices for pork, in particular, are driving up the prices for other proteins. A virus has hammered the pig population in 23 states, cutting production and increasing prices. The cost of pork for sausage has increased 21 percent since the same time a year ago. We spoke with one barbecue chain CEO not long ago who said the price of his pork butts are up 45 percent.
Beef prices are also up—15 percent this year so far, according to SpenDifference. And that's on top of already inflated prices.
Higher beef and pork prices are driving more consumers to poultry, especially chicken, and those prices are higher, too.
Cheese and butter prices, meanwhile, are up 15 percent. And liquid eggs, of all things, are up 57 percent over last year due to high demand. Apparently, consumers are jumping aboard the liquid egg bandwagon.
These higher prices are forcing restaurateurs to raise menu prices. While most chains held the line on prices so far this year, most expect to raise prices in the second half of the year. Higher labor costs are also likely contributing to the decision to raise prices at restaurants.
One real benefit this year is falling corn prices, which should help poultry producers increase supplies and ease those prices. Still, it seems that 2014 isn't turning out as good as many restaurateurs hoped for on the cost front.