Why You Should Consider Raising Your Prices
- Bonji Family
- Dec 6, 2021
- 3 min read
Food Aficionado Smart Brief: Volume 6
Welcome back to another edition of The Food Aficionado Smart Brief. Although there are many reasons why we should be optimistic heading into 2022, cost of goods have continued to rise. Consumers are acclimating to the “new norm.” Restaurants, on average, increased their sales by 20% from 2020. With folks gaining more comfort getting back to socializing with friends and dining out, restaurant sales are projected to continue to rise at least an additional 10% through 2022. With that in mind, some costs are expected to negatively impact the restaurant industry as well. We created a list for you to review of which products, services and commodities are expected to continue to rise. We understand it can be challenging to increase prices to your customers. We hope to provide you with an understanding where you can expect to see increases so you aren’t taken by surprise and can justify, if necessary, to your customers why you’ve increased your menu items if you so choose to do so.
Reasons Why You Should Consider Raising Your Menu Prices
1. Cost of Milk/Dairy Products Expected to Continue Rising Dairy is currently up 4% from a year ago, 26% from 2018, and expected to continue to rise into 2022. Regardless of reasoning, the number of dairy cows is reducing rapidly. The Canadian Dairy Commission has stated they will be increasing the price of milk and other dairy products by 8.4% heading in 2022 and European dairy production is facing the lowest output in the past 5 years. This TIME article provides a deep dive into the topic of rising dairy products.
Prices of Dairy Products Are Skyrocketing
Rise in Dairy-Free Options
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2. Wheat Production Struggling, Causing High Prices
The Department of Agriculture predicts U.S. wheat production to fall 10% during 2022 which would be the smallest crop harvest in almost 20 years. Unfortunately, droughts have played a major role in the Northwestern United States, while winter regions known for producing wheat like Ukraine, the Middle East, and Southwestern U.S. have also all faced painfully long droughts reducing the overall yield. With global demand at all time highs and supply shorting out, prices are only on their way up.
Wheat Production Falling Dramatically
Demand For Wheat is Near Record Breaking Volumes
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3. Don't Expect High Gas Prices To Drop Oil producers are uncertain about the demand in 2022. Because of their uncertainty they are hesitant to increase production and ultimately lower the costs to consumers. You can find various oil producers and investors weigh in here:
Many in the supply chain have tried their best to absorb these prices. But with no promising signs of a decrease in oil and energy prices, expect to see slight increases in prices from distributors and manufacturers alike due to the increase in raw materials. The Global Supply Chain has also seen its fair share of struggles recently, but that's a whole other topic for another time.
Uncertainty Surrounding Oil Will Keep Prices High
Supply Chain Issues Are Becoming a Major Factor
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To Summarize: It’s always a challenge when faced with having to make the decision to raise prices or not. However, we hope you understand if you have felt some of the price increases from this past year and have gone through the items above you feel comfortable to make the best professional decision to protect your restaurant and employees without asking too much from your customer base. As restaurant owners and operators, it’s natural to feel a sense of duty to carry the entire burden yourself. Building a community that breeds trust, will allow you as an owner to make a financially sound decision without upsetting your beloved customers. Overall, your customers will appreciate your honesty, however, make an attempt to show you care about them too. Final Tip: If you choose to adjust pricing make sure you take time to explain to your team why that decision was made and prepare them to speak with any customers if anyone has questions.
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