The Chief Research & Development Officer for Revenue Management Solutions, Sebastián Fernandez has been looking into what actions companies in the hospitality industry can take in order to overcome the challenges faced by rising food and drink prices.
The latest figures released by the CGA Prestige Foodservice Price Index has shown that the food price inflation has risen by 9.3% in August. This figure is up by more than 2% in comparison to the previous month. The challenges seen to continue for operators in this industry, as the rise in food costs have been joined by an increase in costs from the introduction of a national living wage, brought in last year for over-25s. There is also the problem of rising business rates and mandatory pension contributions that have piled on the costs for businesses in the Hospitality industry.
With southern Europe experiencing some of the worst weather conditions in years, with flood in Spain and freezing conditions soon after across Italy as well, Spanish vegetable producers have suffered. Spain also saw their largest snowfall recorded in decades, and because of this it was made impossible to plant new crops. This means that the cost of food rose more, with the volume of commodities available decreasing. Spain provides the UK with over 25% of their vegetable imports and the weather has led to price fluctuations.
Prices have been changing frequently and this means that hospitality operators a needing to keep a close eye on food prices in order to make sure that their profits can be managed properly.
In order to cope with these challenges, the hospitality industry is advised to make sure that they know their customers and customer behaviour in order to develop smart menu engineering and working out how different products can trade with each other in order to promote products that offer operators higher profit levels.
It is also important to know when communicating with customers is helpful, and adjusting menu prices when needed. It is also helpful to know customer limits on these price increases and using promotions to draw customers to more profitable menu items.