In light of the price of many foods hitting low records, Beacon explore supplier pricing. Allowing you to make savvy savings by working partnership with Britain's leading purchasing organisation. The following interview has been taken from the latest edition of The Caterer, where they asked Beacon's Head of Purchasing, Howard Ball some important questions.
According to the UN's Food and Agriculture Organisation (FAO), August 2015 saw the biggest drop in global prices in seven years. With a 5.2% fall across milk, vegetable oils falling by a massive 19% year on year, meat falling in price by as much as 15.1% and cereals down by 15.4%. So with such widely reported decreases, how is this impacting the hospitality, leisure and healthcare sectors?
Q - Are prices still going down – why and how long might it last?
A - Whilst we have seen a significant decrease in food pricing in the retail sector, with the rise of discount brands being a prominent factor on supermarket shelves, this isn’t necessarily a trend that has been reflected in the foodservice and hospitality sectors.
It is true that the price of products such as maize, rice, wheat and oil are in decline, however with pressure on businesses across the country to comply with the new National Living Wage by the 1st April, and other financial pressures on hospitality businesses in particular, we could soon see an increase in these costs. At Beacon, we have been urging the Government to support businesses in this sector in order to avoid the need for price rises that will inevitably be passed on to the customer.
To find out more about the National Living Wage, click here.
Q - Regarding the fall in food prices - How can operators make the most of the situation – which products will be good value coming up and which are going up in price?
A - Working with a purchasing company alleviates the need to monitor price changes on a day-to-day basis, allowing operators to focus on other important aspects of running a profitable business. We work closely with our expert suppliers in order to identify trends in the market and in the foodservice sector, allowing us to pass this insight onto our customers.
Coffee in particular is one product that we have seen decreasing in price at the start of 2016, which is a trend that we predict will continue over the next year due to the increase in consumer demand. However, analysts have predicted that if the imbalance between supply and demand continues, we could see a shortage in coffee beans, which would subsequently lead to inflation in price.
Wheat prices have seen a decrease recently, due to strong global supply in major producing regions, and milk prices across the EU have also been falling following the Russian agricultural ban on EU agricultural goods in August 2014, which has now been extended to August 2016.
Examples of products that are increasing in price due to a variety of global and industry issues include: sugar, salmon, palm oil, beef fillet and eggs.
Q - Any tips on how operators can ensure they are paying suppliers the right price for the produce – what questions should you ask your supplier etc – how do you know you are not being overcharged?
A - One of the strengths of working with a purchasing company is the confidence that a dedicated team of buyers has identified the best value for money for the produce. For operators that are not part of a larger purchasing group or organisation, the most important advice we can give is to ensure you are communicating regularly and effectively with your supply partners
Three key questions we at Beacon would always recommend businesses thinking about before making purchasing decisions on products or services are:
1. Are you looking at the total yield from a product and not just the headline price? Low cost doesn’t always mean good value for money and this is a very important factor to consider.
2. Are there similar products available, potentially from the same supplier that can be supplied at a lower cost?
3. How important is brand to your customer? Could you purchase the same product that is unbranded to save on cost? Or could you charge a premium because you are using branded items on your menus?
Q - Is there anything operators need to be aware of to shore up against inevitable price rises?
A- There are an array of variables and risks in the marketplace that can have an effect on food pricing in the foodservice sector. The most prominent that will come into effect very soon, is the introduction of the National Living Wage in April, which will inevitably lead to some businesses having to increase prices.
Long-term pricing contracts help operators to avoid falling victim to any sudden changes in pricing. Working with a purchasing company offers this stability and can alleviate the pressure on operators, allowing them to pass savings onto their customers and ultimately run a more profitable business.
If you would like to discuss your pricing in more detail and see how Beacon, Britain's leading purchasing organisation can help you. Contact Beacon on 01904 695588 or alternatively, if you are already a Beacon customer please call your Beacon Account Manager.