For some chains, supplies of fresh ground beef shrink, and prices soar

Supply challenges have put some stress on Wendy’s and other chains that use fresh beef for burgers.
Photograph courtesy of Wendy's

Prices have soared this week for parts of beef popular with fast-food chains and other restaurants that use it to make their fresh burger patties, driving up costs and making it more difficult for some companies to get enough supplies.

Supply issues have been a particular problem for Wendy’s, which uses fresh beef for its burgers and has struggled to maintain enough supply this past week, sources told Restaurant Business.

Wendy’s, which has more than 5,800 locations in the U.S., says it is working to “minimize the impact to our consumers.”

“As you’ve likely read, there have been challenges among protein suppliers across North America,” Heidi Schauer, a Wendy’s spokesperson, said in an emailed statement. “We are working closely with our supplier partners and restaurant teams to minimize the impact to our customers and continue to monitor this closely.”

Beef output is down 25% from last year, said David Maloni, executive vice president of analytics for Arrowstream, amid plant closures and challenges that many plants are having getting employees to come into work.

While decreased demand from restaurants has enabled many concepts to be able to source enough product, that isn’t necessarily true for companies that serve fresh beef.

The problem, Maloni said, is with 50% beef trim. Many fast-food chains and other restaurants buy both 50% beef trim and 90% lean beef so they can better control the quality of their product to make it more consistent.

With the decline in beef output, coupled with higher demand as many fast-food chains continue to operate and sales at grocers have skyrocketed, the price for that 50% beef trim has soared.

Earlier this week, 50% beef trimmings were $1.93 per pound, Maloni said, the highest it’s been since May 2017. On April 1, he said, it was 25 cents.

For companies with never-frozen beef programs, he said, it can be “hard to find” those beef trimmings.

“If you’re in a never-frozen beef program, you can’t get ahead of this in any great way,” Maloni said. “It’s not just QSR. It’s casual dining or anybody who’s selling a lot of hamburgers.”

McDonald’s executives Thursday said thus far there has been “no break in supply” for any food or other supplies.

Similarly, executives with Burger King owner Restaurant Brands International (RBI) on Friday said the company doesn’t have any current issues with protein supplies. But they also acknowledged the challenge.

“It’s something we’re very acutely aware of,” said Jose Cil, CEO of RBI, on the company’s first quarter earnings call. “We’re monitoring on an hour and daily basis. Obviously, we’re working closely with suppliers to make sure we have our contingency plan.”

Fat Brands, which operates a number of chains that sell burgers, including Fatburger and Elevation Burger, said its “supply of fresh beef is currently not in jeopardy,” noting that its supplier has established sources that should not hurt the restaurants in the near-term.

President Trump earlier this week mandated that various protein production plants reopen, something that should help supplies over time.

Meat packing plants are taking steps to ease worker concerns. Employees in processing plants work close together, which has led to the spread of the coronavirus in numerous plants across the country.

To protect workers and stem that spread, plants are quarantining employees, spacing out the lines and even adding plexiglass.

Maloni said even with the president’s order, it could take some time to get those plants back to full capacity.

Prices should improve as early as mid-May, with plants at 90% capacity within 12 weeks. “The worst of it might be right now,” he said.

There are longer-term issues, too, regarding beef, and it could affect the entire product. Prices for cattle have fallen “considerably” in recent weeks, Maloni said. That could reduce the incentive for farmers to raise more cattle, resulting in tighter supplies.

The same could hold true for hogs and potentially dairy and cheese, as well as chicken. For beef, which takes longer to recover, the result could be long-term supply shortages that lead to higher overall prices.

“That’s something we’re concerned about longer-term,” Maloni said.

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