Question:
When planning a new menu for the summer, how do you plan for inflation? I know it is a guessing game, but what is the best guess?
– Ben Goldie, Owner, Cottage Café, Cle Elum, WA
Answer:
Commodity prices, which translate to the food prices you pay your purveyors, change daily, though with an upward trend overall. Because food prices are tied to weather, harvests, fuel prices, pests, wars and other factors, it is challenging to predict future prices.
It is true that prices often rise in the summer, typically caused by rising fuel prices and speculation about the upcoming harvest season and crop yields in the northern hemisphere. The particular food prices most affected by speculation vary, making menu pricing even more complicated. One year, beef may skyrocket and another year it may be wheat or tomatoes.
The good news is that for this year the USDA’s Economic Research Service (ERS) predicts a slow increase in the consumer price index (a good indicator for food prices in general) of 2.5 to 3.5 percent, which will translate to restaurant prices about 2 or 3 percent higher on average. Meat products, in particular, are expected to rise up to five percent over 2011 prices, with produce stable or even slightly down.
To translate this information to menu pricing, there are two strategies you can use. One option is to figure that if you can expect your costs to go up about three percent this year overall, then you should raise the prices of all menu items accordingly, rounding up or down as needed to appeal to consumer psychology. Your $12.99 item, then, three percent higher, becomes $13.38 or, more likely, $13.50. Another option is to look more closely at predicted pricing changes in the markets and tie that to specific menu items. So perhaps in light of this year’s expected prices, salad prices are left as is, while you increase center of plate prices by five percent rather than three.
In terms of summer inflation in particular, I’d encourage a longer-range view. While commodity prices may be higher in the summer and dip a bit in the winter months, your menu prices shouldn’t be so closely correlated to the markets. Slow price ticks upward will sit better with guests than prices that fluctuate with every seasonal menu.